PERDAMAN CHEMICALS AND FERTILISERS PTY LTD -v- THE GRIFFIN COAL MINING COMPANY PTY LTD [No 7] [2012] WASC 502 (21 December 2012)

Supreme Court of WA|2013-01-02|Before: Edelman J

1 This judgment concerns two significant interlocutory disputes in the context of Titanomachic litigation in which the parties have so far left few stones unturned, and few issues undisputed. Considerably more than 200 affidavits have already been filed in interlocutory disputes between the parties to this litigation. These two applications, each in separate actions, are considered together in these reasons because of the significant overlap in the issues presented and the urgent need for judgment. The applications illustrate the nature of this litigation as fast becoming an epic saga. A glimmer of hope may exist in that a third, related, application which was before the Court on 18 December 2012 and 19 December 2012, culminated in orders made on 19 December 2012 which were mostly agreed by the parties.

2 The brief introduction which follows is a broad summary or overview of these applications and of my reasons for decision. It is not a substitute for the detailed reasons for decision which follow the introduction and it cannot capture the detail of all the issues involved.

4 The Bluewaters Power Stations are owned and operated by two entities: the Griffin Power Entities. The Griffin Power Entities are in administration. The administrator has been negotiating their sale for more than a year. That sale, which I describe below as the Bluewaters transaction, is said to be imminent. The transaction is very large. The stamp duty alone is likely to exceed $20 million.

5 The Bluewaters transaction has a long stop date which has recently been extended only to today, 21 December 2012. If the transaction does not proceed there is a real possibility that Griffin Coal will cease supply of coal to the Griffin Power Entities which could cause them to cease operating. Evidence filed by the State of Western Australia is that a cessation of the operation of the Bluewaters Power Stations could potentially affect the reliability of supply and the cost of electricity services to customers of these services located in areas of the South West of Western Australia that receive electricity through the South West Interconnected System.

6 The Bluewaters transaction is also of immense significance to Griffin Coal which will obtain significant benefits from it. The evidence currently before the Court shows that without the support of companies in the group, particularly its ultimate parent, Griffin Coal would be in a parlous financial position. The Bluewaters transaction together with other developments may provide the ability for Griffin Coal to operate as a viable standalone entity.

7 The Bluewaters transaction is dependent upon the grant to the buyers of secured stepin rights over Griffin Coal to ensure continuity of supply to those buyers. Although the terms promised in exchange provide significant benefits to Griffin Coal, Griffin Coal cannot grant those rights without the consent of ICICI Bank (and a Syndicate of lenders) to whom it has granted a Negative Pledge. ICICI Bank will not consent without various terms including the grant of security to it from Griffin Coal.

8 Perdaman does not want the security to be provided to ICICI Bank. First, it seeks an injunction to prevent the Bluewaters transaction. Secondly, it seeks the appointment of a provisional liquidator to Griffin Coal. A third interlocutory application concerning caveats that Perdaman lodged over mining licences held by Griffin Coal was resolved by orders made, almost by consent, after a short hearing on 18 and 19 December 2012.

9 A key reason why Perdaman does not want the security provided to ICICI Bank is because Perdaman has sued Griffin Coal and others for damages arising from the loss of the Perdaman Project. Amongst Perdaman's claims are claims for damages for alleged losses of $3.387 billion. It also claims damages, described as exemplary or aggravated damages, based on alleged wrongful gains to other defendants of $2.4 billion. The effect of the grant of security to the ICICI Bank is that if Perdaman succeeds in the litigation in such an amount that Griffin Coal becomes insolvent then the secured lenders will take priority over Perdaman.

10 Perdaman's current applications, in two of the substantive actions, are considered together in these reasons. They are an application for an interlocutory injunction to restrain the proposed Bluewaters transaction and an application for the appointment of a provisional liquidator. Both applications are refused.

11 In these applications the parties have relied upon more than 30 affidavits involving thousands of pages of evidence. The affidavits were sworn or affirmed over several weeks. The applications were heard over two days on 30 November 2012 and 13 December 2012. Submissions were, in some parts, necessarily abbreviated, although both written and oral submissions from all counsel were extremely helpful and I acknowledge my debt to counsel and their instructors for their assistance which made possible the preparation of these reasons in the short time available.

12 Unlike the focussed submissions in this matter, the evidence was not abbreviated. Perdaman filed evidence, particularly evidence concerning the financial affairs of Griffin Coal and its ultimate parent, which descended to factual issues in considerable detail. Griffin Coal responded. The level of evidence that is appropriate for interlocutory hearings of this nature is a matter of degree. The hearing must not descend into a minitrial. Although I have discussed much of that evidence below to place it in context, the course adopted by the parties in filing of evidence came close to treating the applications as if they were minitrials.

13 The applications were considered as a matter of extreme urgency. In a hearing on 30 November 2012 I was told that satisfaction of the conditions precedent to the Bluewaters transaction was imminent. The long stop date for the Bluewaters transaction was extended only until 21 December 2012. The buyers in the Bluewaters transaction sought leave to file evidence including evidence asserting that the transaction might not complete if the sale agreement did not occur on or shortly after 30 November 2012. But most of the conditions precedent still had not been satisfied by the hearing on 13 December 2012.

14 It is unclear how many of the conditions precedent to the transaction been satisfied as at today's date, 21 December 2012. Nor is it possible to assess conclusively the accuracy of the assumption by Griffin Coal of extreme urgency. But these reasons are provided by 21 December on the basis of the assumption. They are necessarily less considered than would otherwise have been the case.

15 Counsel for Perdaman boldly suggested, apparently against interest, that there is a preliminary issue whether the Bluewaters transaction warrants the grant of injunctive relief when it remains subject to a number of conditions precedent and in circumstances, addressed below, in which the terms of the transaction are said to have changed between the 30 November 2012 hearing and the 13 December 2012 hearing.[1] I do not accept this submission. It is sufficient to say that there is substantial evidence that suggests that the Bluewaters transaction might indeed go ahead. It is appropriate that Perdaman's applications be heard and decided.

16 Perhaps underlying this submission, and also in the final sentence of the final set of submissions filed by Perdaman on 19 December 2012, is a controversial assumption. The assumption appears to be that the undertaking about notice given by Griffin Coal, which I describe below, requires a further 10 days notice of any transaction from being undertaken which is, in any material respect, different from the transaction about which notice has already been given to Perdaman. It is not necessary to decide this point but there must be doubt concerning whether the intention of the undertaking (objectively construed) could be that parties negotiating a transaction would be required to issue a fresh notice every time any of the terms of the transaction changed in some material detail and then wait for 10 days while another injunction application is considered by Perdaman. It may even be that the force of the undertaking is already spent by this application and by the terms of this decision on the substance of the proposed application.

17 The applications are treated together in these reasons. They raise overlapping issues. In numerous instances, the parties relied upon affidavits filed in one matter in support of submissions in another. There was, sensibly, no objection to this course. I have followed the same approach.

18 The application in CIV 1925 of 2011 is for an interlocutory injunction. Perdaman seeks the injunction against the first to seventh and ninth defendants in that action. The central defendant is Griffin Coal. The other corporate defendants are members of a (Lanco) group with the ultimate holding company described, as in previous decisions in this matter, as Lanco India. For the sake of simplicity and clarity, the latter being something to which in the very short time available these reasons can only desperately aspire, I have referred to Griffin Coal as the relevant defendant in CIV 1925 of 2011 although the reasons apply to all the defendants and the submissions and appearances were also on behalf of the others except the eighth defendant.

19 The application by Perdaman in COR 190 of 2012 is for the appointment of a provisional liquidator to Griffin Coal. The defendant is Griffin Coal.

20 Perdaman's applications for an injunction and for appointment of a provisional liquidator were listed to be heard on 30 November 2012. In submissions filed on 29 November 2012, Perdaman foreshadowed an application to adjourn its applications as a matter of natural justice to it to allow it a fair opportunity to respond to evidence against it.[2] Perdaman pointed to (i) unexplained failures by Griffin Coal to comply with the timetable for provision of evidence for the applications; (ii) the inability of Perdaman to provide complete submissions in time. Substantial further evidence and submissions, including proposed submissions and evidence from third parties, was also filed shortly before the hearing on 30 November 2012, some of it only minutes beforehand.

21 At the hearing on 30 November 2012, Perdaman made the foreshadowed application to adjourn. The application was initially, and vigorously, opposed by Griffin Coal. But the hearing of the matter could not be completed in a single day in any event. Indeed, as I explain below, it was only completed in two days because neither Perdaman nor Griffin Coal made submissions concerning the arguability or strength of Perdaman's case in the primary proceedings in CIV 1925 of 2011. And once it became apparent that Perdaman did not seek any interim relief, Griffin Coal accepted that there was no prejudice to the matter being heard on 30 November 2012 and then adjourned until 13 December 2012 to allow Perdaman the opportunity to respond to evidence and to make further responsive submissions. As it turned out, there was substantial additional evidence from both Griffin Coal and Perdaman prior to the 13 December 2012 hearing.

The prelitigation transaction: sale of the shares in Griffin Coal

22 Griffin Coal produces 3.5 million tonnes of coal annually from its Collie mines and is one of the largest coal suppliers in Western Australia. On 3 January 2010, Griffin Coal and other companies in the Griffin Energy Group were placed into voluntary administration.

23 On 28 February 2011, the administrators finalised the sale of Griffin Coal and Carpenter Mine Management Pty Limited (CMM).

24 The purchaser of the shares in Griffin Coal and CMM was the third defendant, Lanco Resources Australia Pty Ltd (Lanco Australia). The shares in Lanco Australia are held by the eighth defendant, Lanco Resources International Pte Ltd (Lanco Singapore). And the parent of Lanco Singapore is Lanco Infratech Limited (Lanco India). Lanco India is a major infrastructure developer in India.

25 The purchase price for the shares in Griffin Coal and CMM was $740 million. An upfront payment of $490 million was made as required. A second payment was deferred by the sale agreement until the earlier of (i) the date that Griffin Coal receives approvals for the development and operation of a railway line from the mining operations of Griffin Coal to the Bunbury export facility; and (ii) two years from the acquisition date (being February 2013). A final payment is due on the earlier of (i) the date of first export from the newly constructed Bunbury export facility, or (ii) four years from the acquisition date (being February 2015).

26 The remainder of this section deals with the relevant provisions of the transaction documents from the sale of the shares in Griffin Coal to Lanco Australia and the relevant posttransaction contracts.

27 Lanco Australia obtained the finance for the purchase of the shares in Griffin Coal and CMM from an $800 million Facility Agreement. The Facility Agreement was provided by ICICI Bank Ltd, Singapore Branch (ICICI Bank). The deferred payments were secured by letters of credit provided under the Facility Agreement. After the sale, on 21 June 2011, and in circumstances which are controversial, Griffin Coal executed a Negative Pledge Deed in favour of ICICI Bank (as agent for the Syndicate).

28 As I have explained, Lanco India is the parent company of Lanco Singapore which, in turn, is the parent company of Lanco Australia. On 28 February 2011, Lanco Australia acquired all the shares of Griffin Coal and CMM. Lanco India is therefore the great grandparent company of Griffin Coal.

29 The funding for Lanco Australia's purchase of the shares in Griffin Coal and CMM was provided by a US$800 million bank facility from ICICI Bank as mandated lead arranger (the Facility Agreement). The Facility Agreement is dated 9 February 2011. The facility borrowers are Lanco Singapore and Lanco Australia. The guarantor is Lanco India. ICICI Bank has sold down part of the loan to a syndicate of banks (the Syndicate).

30 In accordance with an ICICI Bank credit sanction letter dated 17 October 2010 and with the Facility Agreement, Griffin Coal and CMM subsequently became additional guarantors.

31 Clause 3.1 of the Facility Agreement is entitled 'Purpose'. It provides as follows:

A Borrower shall apply all Loans borrowed by it under the Facility only towards:

(a) the Acquisition;

(b) equity infusion (whether direct or indirect) in the Targets to be utilised by the Targets towards: (a) meeting their working capital requirements, (b) meeting their capital expenditure requirements, or (c) scheduled repayment of their existing indebtedness; and

(c) payment of Ancillary Costs.

32 The definitions section of the Facility Agreement (cl 1.1) defines 'Target' as Griffin Coal and CMM.

33 On 21 June 2011, after litigation had commenced between Perdaman and Griffin Coal and others, Griffin Coal and CMM executed a Negative Pledge Deed with ICICI (as agent for the Syndicate). Perdaman amended its pleading to plead that the entry into the Negative Pledge Deed by Griffin Coal was a breach of the Coal Supply Agreement between it and Griffin Coal.

34 The Negative Pledge Deed includes a clause as follows:

2.3.1 Each Obligor shall (and each Obligator shall ensure that each member of the Group will) grant equal ranking Security for the benefit of the Finance Parties as security for all amounts outstanding under the Finance Documents on substantially the same terms and in all respects in form and substance acceptable to the Agent (in its discretion) as any Security (Proposed Security) granted in connection with any Financial Indebtedness provided to or for the benefit of any Obligor or member of the Group (Proposed Financing) and be subject to an Intercreditor Agreement in form and substance acceptable to the Agent (in its discretion). For the avoidance of doubt, all such Security must rank equally in terms of priority and payment.

2.3.2 The amount outstanding under any Proposed Financing must not exceed:

(a) US$300,000,000 for the period from the date of this document to the third anniversary of the first Utilisation under the Facility Agreement; and

(b) US$800,000,000 for the period from the third anniversary of the first Utilisation under the Facility Agreement to the Final Maturity Date.

35 The Obligors as defined in cl 1.1 include Griffin Coal and CMM. The Finance Parties as defined include ICICI Bank Ltd (as Agent), a Lender (as defined in the Facility Agreement) and any other Finance Party (as defined in the Facility Agreement). Financial Indebtedness is defined in the Facility Agreement in very broad terms, encompassing any indebtedness for or in respect of moneys borrowed and numerous other matters (cl 1.1). The definitions from the Facility Agreement are picked up in the Negative Pledge (cl 1.4).

36 One effect of cl 2.3.1 is that once any Security is granted in connection with any 'Financial Indebtedness' provided to Griffin Coal then Griffin Coal is required to grant equal ranking Security for the benefit of the Finance Parties as security for all amounts outstanding under the Finance Documents (which include the Facility Agreement and extends to, at least, the borrowing of $490 million which has been drawn down).

37 The effect of cl 2.3.2 of the Negative Pledge Deed quoted above, to which I return later in these reasons, is therefore that Griffin Coal is restricted from obtaining more than US$300 million in finance from 21 June 2011 until 28 February 2014 (the third anniversary of the first Utilisation under the Facility Agreement) and prevented from obtaining more than US$800 million in finance from 28 February 2014 until 28 February 2016.

Perdaman's claims against Griffin Coal A broad overview of the claims by Perdaman

38 It is not necessary for the purposes of this application to engage in any detailed examination of the nature of Perdaman's claim against Griffin Coal or any of the other defendants. As I explain below, neither party made any submissions concerning the substance or strength of Perdaman's claim in the main proceedings. A very broad overview of the claim will suffice.

39 Perdaman's claim for damages is for loss suffered as a result of the conduct of the defendants.

40 The corporate defendants, with the descriptions which I explain in more detail below, are Griffin Coal, its parent (Lanco Australia), its grandparent (Lanco Singapore) and its great grandparent, the ultimate holding company (Lanco India). Perdaman pleads that Lanco India has a market capitalisation of over US$2 billion and an annual income in the financial year 2009 2010 of approximately US$2.05 billion.[3]

41 The individual defendants at relevant times were (i) the Chief Executive Officer of Griffin Coal (Mr Conley); (ii) the Chief Operating Officer - Business Development, of Lanco India, a director of Lanco Australia and Griffin Coal (Mr Agarwal); (iii) a director of Griffin Coal (Mr Prasad); (iv) the Executive Chairman and Director of Lanco India and Director of Lanco Singapore (Mr Rao); (v) the directorfinance of Lanco India and DirectorCommercial of Griffin Coal (Mr Amarendran).

42 Perdaman is the promoter of a proposed project involving the planned construction of a urea plant using coal as feedstock. The urea plant, and 'Perdaman Project' is located a short distance east of Collie in southwest Western Australia. Perdaman entered a Coal Supply Agreement with Griffin Coal. Perdaman claims that by April 2011 it was on the cusp of achieving Financial Close the achievement of which by 28 August 2011 is a condition precedent to the operation of some of the provisions in the Coal Supply Agreement. Perdaman pleads that conduct by Griffin Coal and other defendants from May 2011 caused Perdaman to fail to obtain the finance necessary to enable the establishment of the urea plant, with the result that Perdaman was unable to achieve the requirement of Financial Close by 28 August 2011. Perdaman says that it would otherwise have achieved Financial Close, alternatively that it lost the opportunity of doing so by the defendants' wrongful conduct.

43 The wrongful conduct pleaded by Perdaman is (i) breach of the Coal Supply Agreement by Griffin Coal; (ii) conduct by Griffin Coal and (separately) the other defendants which was unconscionable within the meaning of s 20, s 21(1) and s 22(1) of the Australian Consumer Law; and (iii) tortious interference by the defendants other than Griffin Coal in Griffin Coal's performance of the Coal Supply Agreement.

44 Perdaman claims damages which include damages for its loss of the Perdaman Project of $3.387 billion.

45 Perdaman also claims aggravated or exemplary damages based on the claim that Lanco India, and Lanco India's related entities, derived a substantial commercial advantage by their wrongful conduct. Their advantage is pleaded to be the ability to procure coal from the Griffin Coal Mines for supply to power stations they operate and propose to operate. That advantage is quantified at $2.4 billion.

The Coal Supply Agreement (the CSA) generally[4]

46 Perdaman and Griffin Coal entered the CSA on 21 December 2010.

47 Clause 1.1, the CSA provides that the contract has a term of 25 years, or as extended.

48 Clause 2.11 of the CSA requires Griffin Coal to maintain Marketable Reserves (as defined) within the Griffin Mine to meet its coal supply obligations. The obligation includes maintaining those reserves at no less than (i) 44 million tonnes of coal as at the date of Financial Close; (ii) 59 million tonnes of coal as at the date 12 months after the date of Financial Close; (iii) 74 million tonnes of coal as at the date 24 months after the date of Financial Close; (iv) 88.5 million tonnes of coal as at the Supply Commencement Date which is defined by cl 1.3, subject to various provisos, as 42 months after the date of Financial Close.

49 The Griffin Mine, within which the reserves must be maintained by Griffin Coal, is defined in cl 1.6 by cross reference from the definition clause, cl 25. Relevantly, cl 1.6 is not confined to Griffin Coal's Ewington mines. It contemplates the need for Griffin Coal to develop its Muja (including Muja South) deposits.

50 The effect of the increasing obligations in relation to reserves, coupled with the definition of Griffin Mine, makes clear that the CSA was enacted against an intention that Griffin Coal would undertake significant expansion.

51 Clause 16 of the CSA is concerned with default. Clause 16.5 is entitled 'Remedies for Default by the Seller [Griffin Coal]'. Defaults are divided into Financial Defaults and Nonfinancial Defaults. The definition section (cl 25) relevantly defines a Nonfinancial Default as a party's 'failure to observe or perform any Nonfinancial Obligation required to be performed by that Party under this Agreement but does not include [Griffin Coal] not meeting its coal delivery obligations' (emphasis added). A Nonfinancial Obligation is negatively defined as anything which is not a Financial Obligation, which is 'an obligation to pay or cause to be paid an amount of money'.

52 If the default is a Financial Default, Perdaman may terminate the CSA if, after five working days' notice to Griffin Coal stating its intention to terminate, the default is not cured.

53 If the default is a Nonfinancial Default, there is provision in cl 16.5(b) for damages and legal and equitable remedies. But, apart from a failure to pay damages for breach of a Nonfinancial Obligation, there is no provision for termination for breach of a Nonfinancial Obligation.

54 Clause 16.6 is entitled 'Coal delivery obligations'. Clause 16.6(f) provides as follows:

If:

(i) the Seller does not meet its coal delivery obligations due to an Insolvency Event;

(ii) the Seller does not provide an Cure Plan within the time specified in Clause 4.6;

(iii) in the ICE's opinion (acting reasonably), the Seller is not (other than due to Force Majeure) Implementing the Cure Plan In accordance with Clause 4.6; or

(iv) the Seller does not pay liquidated damages to the Buyer within the time set out in Clause 12.4 or paragraph (c) as applicable,

then the Buyer will, subject to paragraph (g), have a right to stepin to the Seller's operations to the extent, and for so long as, necessary to ensure deliveries from the Griffin Mine have been restored and maintained in accordance with the terms of this Agreement and the Buyer's Stockpile contains no less than 100,000 tonnes of coal and provided that in exercising any such step-in right, the Buyer:

(i) ensures the Griffin Mine is operated in a manner consistent with Good Industry Practices and according to all legislative requirements applicable to the Griffin Mine;

(ii) ensures that the operations are conducted so as to meet the contractual obligations owed by the Seller to all customers, Including the Buyer, supplied from the Griffin Mine and, to the extent not otherwise provided, on the basis that all such contracts rank equally. Both Parties agree to use reasonable endeavours to give effect to the Buyer's stepin right, including In negotiations and documentation with financiers (the Buyer acknowledging that its interests and rights in this regard will rank after those of the Sellers financiers); and

(iii) act in good faith in regard to the Seller's Interests,

and the Seller must pay liquidated damages in accordance with paragraph (c) until restoration of coal deliveries by the Seller in fact occurs or the maximum amount recoverable under paragraph (c) is paid, whichever is the earlier. For clarity, where the Buyer stepsin on the occurrence of one or more of the events set out In paragraph (d), paragraph (e) or subparagraphs (f) (i) to (e) (iv) inclusive, such step-in does not result in a change of ownership. Rather, stepin allows the Buyer to take management and control of the Seller's coal delivery operations as they relate to the Buyer so that delivery of coal to the Buyer can be restored and maintained.

55 The reference in (f)(ii) above to the acknowledgement by Perdaman that its interests and rights will rank after those of Griffin Coal's financiers directs attention to the financing provisions in cl 24.6 and cl 24.7. Those clauses provide as follows:

24.6 Financing for the Seller

To the extent requested by [Griffin Coal], [Perdaman] agrees to use reasonable endeavours to assist [Griffin Coal] in obtaining finance necessary to fund the expenditure required by [Griffin Coal] to enable it to meet its delivery obligations under this Agreement. However, nothing in this clause will oblige [Perdaman] to expend any sum of money to assist [Griffin Coal] to obtain the necessary finance.

24.7 Financing

(a) The Parties acknowledge that the Plant[5] and the Griffin Mine will be funded by project finance from [Perdaman's] Financiers (in the case of the Plant) and [Griffin Coal's] financiers (in the case of the Griffin Mine). Each Party will cooperate to satisfy all reasonable requirements of the financiers of either Party. Each Party acknowledges and agrees that either Party, and their Affiliates, may finance all or part of their interest in the Griffin Mine (in the case of [Griffin Coal]) or the Plant (in the case of [Perdaman]) and agrees that either Party may finance all or part of their interest in the Griffin Mine (in the case of [Griffin Coal]) or the Plant (in the case of [Perdaman]) on a limited recourse or nonrecourse basis.

(b) The Parties also acknowledge that where all or part of the Plant or Griffin Mine is financed, then the Parties will enter into a tripartite deed which will:

(i) in the case of the Plant, be in the form attached at Schedule 5 to this Agreement; and

(ii) in the case of the Griffin Mine, in a form reasonably required by [Griffin Coal's] financiers.

56 Griffin Coal's financiers, after whom Perdaman acknowledges that its interests and rights will rank, are those financiers which it was contemplated would be needed to finance the development of the Griffin Mine which, as I have explained, includes financing for Griffin Coal to develop its Muja (including Muja South) deposits.

57 Clause 24 is central to the dispute in the main action. It provides for the conditionality of clauses in the agreement subject to various exceptions. By cl 24.1(a), the clauses of the CSA other than those excepted, are conditional on

(i) Financial Close; and

(ii) execution of an intercreditor deed in the form of Schedule 6, a Deed of Charge in the form of Schedule 7 and a Mortgage of Mining Licence in the form of Schedule 8,

occurring on or before the Condition Precedent Date.

58 The 'Condition Precedent Date' is defined to mean 30 June 2011, unless extended in accordance with cl 24.1(b).

59 Clause 24.1(b) provides that Perdaman requires six months from the date when Griffin Coal exits administration to enable Perdaman to achieve Financial Close. Because Griffin's administration ended on 28 February 2011, cl 24.1(b) means that the Condition Precedent Date is 28 August 2011.

(i) use reasonable endeavours to satisfy the condition precedent set out in Clause 24.1(a)(i) by the Condition Precedent Date; and

(ii) report to [Griffin] promptly after any event which is material to satisfaction of the condition precedent set out in Clause 24.1 and provide detailed updates every Month or at such other intervals as may reasonably be requested by the [Griffin].

(b) [Griffin] must cooperate and use all reasonable endeavours to assist [Perdaman] with any due diligence obligations relating to achieving Financial Close.

(c) The Parties must use reasonable endeavours to satisfy the condition precedent in Clause 24.1(a)(ii) by the Condition Precedent Date.

61 Clause 24.3 provides that if the condition precedent in cl 24.1 has not been waived or satisfied by the Condition Precedent Date, then either party may, while the condition precedent remains unsatisfied and not waived, terminate the agreement immediately.

62 Clause 24.4(a) and cl 24.4(b) provide as follows:

(a) If an event occurs which indicates or is likely to indicate that [Perdaman] will be unable to reach Financial Close by the Condition Precedent Date, [Perdaman] must inform [Griffin Coal], within 1 week of such event occurring, of the details and likely impact of such event on [Perdaman] reaching Financial Close.

(b) As soon as reasonably practicable and in any event by no later than 2 weeks after [Griffin Coal] is informed of an event referred to in paragraph (a), [Perdaman] and [Griffin Coal] must meet to discuss such event and the possible steps and actions which can be taken by [Perdaman] and [Griffin Coal] to mitigate the effect of such event on [Perdaman] reaching Financial Close.

63 The Perdaman CSA provides rights to secure a consistent coal supply for Perdaman in various circumstances. Clause 16.6 of the CSA provides that in certain circumstances, and in the event of certain breaches by Griffin Coal, Perdaman is given the right to step in to Griffin's operations to take over management and control so that delivery of coal to Perdaman can be restored and maintained. See cl 16.6(d)(ii), cl 16.6(e)(ii) and cl 16.6(f) (the stepin provisions).

64 Those stepin provisions are secured by a Deed of Charge (sch 7 of the CSA) and a Mortgage of Mining Licence (sch 8 of the CSA), as described in cl 24.1(a)(ii).

65 Perdaman pleads, and Griffin Coal generally admits,[6] that on 26 August 2011, Griffin Coal advised Perdaman in writing that, among other things, it had executed the Deed of Charge and Mortgage of Mining Licence referred to in cl 24 of the CSA and that those documents were available for inspection at its solicitor's offices. Although Perdaman pleads that Griffin Coal wrongfully failed to deliver to it the Deed of Charge and Mortgage of Mining Licence at relevant times, it is clear from discovery that those securities have been executed.[7]

66 By the Mortgage of Mining Licence in sch 8, Griffin Coal mortgaged various mining tenements in favour of Perdaman to secure Griffin Coal's obligations under the stepin provisions of the CSA. Clause 2.2 of the Mortgage of Mining Licence provides that the mortgage is collateral to the Deed of Charge and secures the same obligations.

67 By cl 2.1 of the Deed of Charge, Griffin Coal charged all of its interest in the Charged Property (which included the mining tenements and other commercial assets of Griffin Coal), to Perdaman for the due and punctual performance of the Secured Obligations. The Secured Obligations were defined as being the stepin rights (ie cl 16.6(d)(ii), cl 16(e)(ii) and cl 16(f) of the CSA).

68 Clause 2.2 of the Deed of Charge provides that the intention of the parties is that in respect of Griffin Coal's present and future undertaking, asset and rights relating to the operation of the Griffin mine necessary to meet Griffin Coal's coal delivery obligations under the CSA, the charge takes priority over all other encumbrances of Griffin Coal other than a Finance Security or any other Encumbrance mandatorily preferred by law.

69 'Finance Security' is defined to have the meaning given to that term in the Intercreditor Deed. In the Intercreditor Deed, Finance Security is defined to mean the security interests (of the Security Trustee) described in sch 1 which is a pro forma for security interests to be inserted.

70 The proposed Intercreditor Deed described in cl 24.1(a)(ii) is sch 6 of the CSA. It was to be between Griffin Coal, Perdaman and the Security Trustee for Griffin Coal's financiers. The purpose of the proposed Intercreditor Deed was to regulate the priorities between Perdaman's security under the CSA created by the Deed of Charge and Mortgage of Mining Licence and the finance securities held by the Security Trustee for Griffin Coal's financiers. The intended effect was to give priority to Perdaman's stepin rights under cl 16 of the CSA, and otherwise to give priority to the Security Trustee's rights: cl 3.2 and cl 3.3 of the Intercreditor Deed.

71 It appears that Griffin Coal had no secured financier creditors. Thus, there was no need for execution of the Intercreditor Deed.[8] It was common ground that the Intercreditor Deed was not executed.

72 Clause 18 of the CSA provides that, subject to par (b), each party will only be liable for direct and foreseeable loss incurred by any other party as a result of its default under the agreement. It further provides that in no event will any party have any liability for any Consequential Loss (as defined) suffered by the other party.

Griffin Coal's purported termination of the Coal Supply Agreement

73 On 5 May 2011, Griffin Coal wrote to the Griffin Power Entities, to which reference is made below, and to Perdaman raising matters concerning coal supply agreements with those persons.

74 Although matters surrounding the 5 May 2011 letter, and some of the events described in it, are in dispute, some of the words used in the 5 May 2011 letter from Griffin Coal to Perdaman are pleaded in Perdaman's amended statement of claim, and admitted by Griffin Coal.[9]

As you know Griffin Coal was acquired by Lanco Resources Australia Pty Ltd from the administrators of Griffin Group of companies on 28 February 2011.

We wish to raise two matters with you concerning the CSA. We feel it is important to raise them with you now so that you (and your stakeholders) remain fully informed.

The first concerns the requirement the parties use reasonable endeavours to achieve execution on or prior to the CSA's Condition Precedent Date of an Intercreditor Deed, a Deed of Charge and a Mortgage of Mining Licence as contemplated in the CSA. The acquisition of Griffin Coal was agreed on terms prior to Lanco being provided with a copy of the final CSA (including the final terms of those three security documents). The acquisition was financed by ICICI Bank Limited, under the financing terms ICICI has certain rights as regards securities over Griffin Coal. Pursuant to our obligations under the CSA we have attempted to procure ICICI's consent to the grant of securities by Griffin Coal for the purposes of the CSA. ICICI has so far refused to grant that consent. We will however continue to endeavour to procure its consent and to bring about the execution of the CSA securities.

The second matter is that since completion of the acquisition, we have commenced a review of our operations and customer arrangements. The review so far has raised serious concerns that our operations may not be financially sustainable in their present form. We may need to make changes to the business of Griffin Coal and its operations in order to make its operations sustainable. We believe it is not in either party's interests that there be a recurrence of the recent financial difficulties. In light of the close business relationship between us, we would like to give you more information about our operations and to discuss our future business plans.

75 On 30 August 2011, Griffin Coal gave notice to Perdaman, which was said to be under cl 24.3 of the CSA and without prejudice to any other right or remedy which Griffin Coal may have, purporting to terminate the CSA.[10]

76 Griffin Coal's evidence in these proceedings[11] is that subsequently on 30 August 2011 Griffin Coal offered to withdraw the termination notice and to extend the condition precedent date (as defined in the CSA) subject to certain conditions. Griffin Coal said that upon satisfaction of those conditions it would provide securities to Perdaman under the CSA.[12] On 6 September 2011, Perdaman formally rejected this offer.[13]

The proposed sale of the Griffin Power Entities: the Bluewaters transaction Background to the Bluewaters transaction

77 Griffin Power Pty Ltd and Griffin Power 2 Pty Ltd (the Griffin Power Entities) own and operate the Bluewaters 1 and 2 power stations (the Bluewaters Power Stations). The Bluewaters Power Stations generate a material part of the electricity generation capacity for the South West of Western Australia. They also supply one of Western Australia's major energy retailers, Synergy.

78 On 17 October 2006, Griffin Coal had entered into two Coal Supply Agreements (the Bluewaters CSAs) with the Griffin Power Entities. At that time, Griffin Coal and the Griffin Power Entities were under common control, as part of the Griffin Energy Group.

79 The period of the Bluewaters CSAs was 30 years, with a 30 year option to renew at the election of the respective Griffin Power Entity. The sale price for the coal was fixed.

80 On 3 January 2010, the Griffin Power Entities were placed in voluntary administration, together with Griffin Coal.

81 On 8 April 2011, a little more than a month after the administrators had completed the sale of the shares in Griffin Coal, the Administrators announced that they had agreed terms for the sale of the Griffin Power Entities. They announced that the buyers were the Australian subsidiaries of The Kansai Electric Power Company Inc (Kansai) and Sumitomo Corporation (Sumitomo).

82 However, on 5 May 2011, Griffin Coal sent letters to the Griffin Power Entities. Griffin Coal explained that since the completion of the purchase of its shares there had been a review of operations and customer arrangements. A concern was expressed that 'our operations may not be financially sustainable in their present form'. Griffin Coal explained that its review 'indicated that we may need to make certain changes to our business and operations in order to secure our financial sustainability and to avoid a recurrence of our recent financial difficulties'.

83 The evidence of Mr Prasad is that the price of coal supplied by Griffin Coal to the Griffin Power Entities, fixed pursuant to the Bluewaters CSAs, is less than the cost of Griffin Coal producing the coal and is currently resulting in a loss to Griffin Coal.[14]

84 Griffin Coal subsequently withdrew its suspension letters and entered discussions with the Griffin Power Entities and representatives from the potential buyers of the Griffin Power Entities, Kansai and Sumitomo. During the discussions, Kansai and Sumitomo said that in order to complete the acquisition of the Griffin Power Entities they required certainty of the supply of coal from Griffin Coal. Hence, they required the Bluewaters CSAs to be revised and a grant of security over Griffin Coal's mines to secure stepin rights for the Griffin Power Entities in the event of certain defaults.

85 In late 2011, Griffin Coal and the Griffin Power Entities, and Kansai and Sumitomo, reached an agreement in principle that the Bluewaters CSAs would be amended to include:

(i) a payment by the Griffin Power Entities of a lump sum to Griffin Coal;

(ii) an increase in the sale price of coal under the Bluewaters CSAs in order to meet Griffin Coal's cost of producing coal;

(iii) a payment by Griffin Power of a catch up amount to Griffin Coal in respect of coal supplied from 1 July 2011 reflecting the price of coal agreed between the parties; and

(iv) the removal of a cap relating to the recovery of liquidated damages.

86 Griffin Coal agreed, in principle, to provide the Griffin Power Entities with stepin rights in the event of various defaults by Griffin Coal such as becoming insolvent, defaults in supply of coal. Upon a default by Griffin Coal the stepin rights would permit the Griffin Power Entities to take possession of Griffin Coal's Ewington I and Ewington II mines in Collie and to operate those mines through a receiver.

87 A transaction, incorporating these matters, has been under negotiation between Griffin Coal and the Griffin Power Entities, and Kansai and Sumitomo. It is now said to be very close to completion.

Notice of the Bluewaters transaction is given to Perdaman

88 On 29 September 2011, following the decision of the Court of Appeal in relation to an appeal from a decision concerning a freezing order application by Perdaman,[15] Griffin Coal gave an undertaking to the Court in terms of order 3 of the orders made by the Court of Appeal.[16] The undertaking was as follows:

[3(i)] [Griffin Coal] will not enter into any charge, pledge or other security other than as stipulated [in 3(ii)] to secure obligations pursuant to the Negative Pledge Deed without first giving 10 prior business days' written notice to the appellant care of its solicitors Bennett + Co; and

[3 (ii)] the undertaking referred to in paragraph 3(i) shall not apply to any security arising under any retention of title, hire purchase or conditional sale arrangement or arrangements having similar effect in respect of goods supplied to the respondent in the ordinary course of trading and on the supplier's standard or usual terms (or on terms more favourable to the respondent) and not arising as a result of any default or omission by the respondent so long as the debt it secures is paid when due or contested in good faith and sufficient reserves or liquid assets have been set aside by the respondent to pay the debt if the contest is unsuccessful.

89 On 7, 13 and 14 November 2012, Griffin Coal communicated matters to Perdaman which concerned its intention to enter into the Bluewaters transaction.[17] It is not necessary to determine when that notice became effective because it is common ground that (i) at the latest, it was effective by 14 November 2012 and (ii) Griffin Coal did not enter into the Bluewaters transaction for 10 business days after that date. On 7 and 13 November 2012, Griffin Coal told Perdaman that before it granted security to ICICI Bank (on behalf of the Syndicate) which ICICI Bank sought as a condition to its consent to the Bluewaters transaction, Griffin Coal would seek to obtain agreement from ICICI Bank as to the following:

(i) ICICI Bank (on behalf of the Syndicate) agree to a limit of $150 million on the amount recoverable on the enforcement of the proposed security;

(iii) ICICI Bank agree a moratorium on enforcement of the securities for a period of 12 months unless Griffin Power exercises the stepin rights to Griffin Coal (which the amendments to the CSA will provide) during that period.

90 On 13 November 2012, Griffin Coal said to Perdaman that Griffin Coal 'would only give security to ICICI Bank' if (ii) and (iii) were agreed but that if Griffin Coal failed to obtain consent to the $150 million limit then a fresh notice would be issued.

91 On 5 December 2012 a fresh notice was provided to Perdaman concerning a change in the conditions to the consent of ICICI Bank on behalf of the Syndicate in relation to the Bluewaters transaction.[18] The Syndicate would not agree to the moratorium in (iii) above.

92 The 5 December 2012 notice was provided by Griffin Coal although Griffin Coal asserted that it was not a requirement of the undertaking given to the Court of Appeal that 'further notice' (by which I take to mean notice of subsequent amendments to the transaction) would be given to Perdaman. I do not need to decide, and do not decide, whether the additional notice was required. On the assumption that it was required, the postnotice period expired on 18 December 2012. As I have explained, the longstop date for the Bluewaters transaction has been extended to 21 December 2012.

93 The Bluewaters transaction involves various confidential documents which are annexed to the 46th affidavit of Mr Banda.[19] It does not merely involve the sale of shares in the Griffin Power Entities. One reason for this is that requirements of the potential buyers of the Griffin Power Entities, Kansai and Sumitomo, include strong certainty of coal supply and an alignment of the terms on which coal is supplied and the terms on which electricity is sold. The need for certainty of coal supply led them to seek secured stepin rights from Griffin Coal.

94 In broad terms, the Bluewaters transaction, as outlined in the various notices, involves the following elements.

(i) Griffin Coal will give secured stepin rights to the Griffin Power Entities. The stepin rights arise if there is a default in supply under the CSAs, if an insolvency event occurs in relation to Griffin Coal, or if the delivered coal does not meet certain key specifications. The grant of these secured stepin rights is not an event which requires notification under the terms of the undertaking.

(ii) In order to grant security to the Griffin Power Entities, the Negative Pledge Deed requires that Griffin Coal obtain the consent of its financiers, including ICICI Bank as agent for the Syndicate.

(iii) ICICI Bank and the Syndicate will not consent to the grant of security by Griffin Coal unless they also obtain security.

(iv) The structure of the provision of security involves a grant of security by Griffin Coal over its undertakings and assets and mining mortgages in favour of a security trustee. The security trustee will hold any security (cl 2.1(b)) for beneficiaries. The parties to the Security Trust Deed are Griffin Coal, the Griffin Power Entities, ICICI Bank and the Security Trustee.

An Intercreditor Deed is executed, to which the same persons are some of the parties. The provisions of the Intercreditor Deed prevail over the Security Trust Deed in the event of conflict: see Security Trust Deed cl 1.5(b). The beneficiaries are defined as the Senior Beneficiaries (the Security Trustee, any ICICI Finance Party), the Griffin Power Entities and any new beneficiary.

Clause 13 of the Intercreditor Deed permits Griffin Coal to give notice to the Security Trustee naming a new Beneficiary or Senior Beneficiary. By allowing for new lenders to become beneficiaries Griffin Coal is able to give new financiers (such as project finance banks) security over its assets to support Griffin Coal's plans for expansion. As explained above, the CSA was enacted against an intention that Griffin Coal would undertake significant expansion and that expansion would be financed by security which would rank in preference to the security provided to Perdaman under the CSA.

(v) Since the Griffin Power Entities are Beneficiaries, but not Senior Beneficiaries, no money owed to the Griffin Power Entities under the CSAs will be secured by the Bluewaters transaction other than certain enforcement costs funded by the Griffin Power Entities.

(vi) The Bluewaters CSAs will be amended by Deeds of Amendment and Restatement, Stockpile Plans and Side Letters. I discuss the benefits to Griffin Coal by the amendments to the Bluewaters CSAs below in considering the balance of convenience in relation to the grant of an injunction.

The protection of any Perdaman security by the Bluewaters transaction

95 There was some oral argument during the hearing concerning the construction of provisions of the proposed Intercreditor Deed, in particular: (i) the definition of 'Permitted Security Interest' (which includes 'the Perdaman Security'); (ii) cl 5.5 in which the Griffin Power Entities agreed and acknowledged particular rights of Perdaman in relation to the Perdaman Security; and (iii) cl 2.4 (Ranking) of the Security Trust Deed (read with cl 1.7). The parties found themselves in the position, perhaps unique in this litigation, where Griffin Coal was arguing in favour of a broad interpretation which protected any purported rights of Perdaman and Perdaman argued that the narrow interpretation might be adopted.

96 Ultimately it is not necessary to resolve this point. The terms of an injunction proposed by Griffin Coal adequately address the protection of any security right which Perdaman has as a mortgagee or chargee. They are considered below.

The applications brought by Perdaman and Griffin Coal The two applications

97 There are two, and only two, applications before me.

98 The first application is in CIV 1925 of 2011 in which Perdaman seeks an interlocutory injunction restraining Griffin Coal until an unspecified date in December 2012 from entering into the Bluewaters transaction.[20]

99 The second application is an interlocutory process which is part of the originating process in COR 190 of 2012. The originating process seeks orders including orders under s 459P of the Corporations Act 2001 (Cth) that Griffin Coal be wound up in insolvency, and orders under s 461(1)(k) of the Corporations Act that it is just and equitable that Griffin Coal be wound up. The second application is within that originating process. It is principally for an order under s 472(2) of the Corporations Act that Mr Francis of Taylor Woodings be appointed as the provisional liquidator in respect of Griffin Coal.

The application by third persons to be heard as amici curiae

100 At the start of the hearing of the applications for an interlocutory injunction and appointment of a provisional liquidator I received applications from Summit Southern Cross Power Holdings Pty Ltd (Summit), KPIC Netherlands BV (KPIC) and the Griffin Energy Group Pty Ltd (Griffin Energy) to appear as amici curiae (friends of the Court). The applications were opposed by Perdaman in so far as evidence was sought to be filed by them.[21]

101 Summit and KPIC are wholly owned subsidiaries of Sumitomo and Kansai, the potential buyers of the Griffin Power Entities.

102 Griffin Energy also seeks leave to be heard as amicus curiae in this proceeding, and to rely on an affidavit filed in this action, without becoming a party. Griffin Energy is in administration. As I have explained, the shares in the Griffin Power Entities which are the subject of the proposed sale are held by Griffin Energy. Griffin Energy seeks leave to be heard limited to the question of the risk of injustice to Griffin Energy and to certain creditors (including creditors of Griffin Coal whose claims were assumed by Griffin Energy in February 2011) if injunctive relief is granted restraining Griffin Coal from entering into the transaction.

103 On 30 November 2012, I heard some of the submissions in relation to the applications for injunctive relief and appointment of a provisional liquidator. The remainder of the submissions, and proposed evidence, was adjourned until 13 December 2012. At the start of the hearing on 30 November 2012, I told counsel for each of Summit, KPIC and Griffin Energy that I had doubts concerning whether they should be given leave to appear as amici curiae, especially in circumstances in which they wished to adduce affidavit evidence. I gave Summit, KPIC and Griffin Energy the opportunity to consider their position and, in particular, whether they wished to be joined as interveners in the proceedings on a limited basis.

104 In contrast with the position of Summit, KPIC and Griffin Energy, the State of Western Australia sought leave to appear as an intervener. It was given leave on that basis. The State made submissions and filed affidavit evidence in these proceedings. One concern of the State is that the grant of an injunction or appointment of a provisional liquidator might (depending upon a number of contingencies) result in the cessation of the operations of the Bluewaters Power Stations. The evidence filed by the State includes evidence that a cessation of the operation of the Bluewaters Power Stations could potentially affect the reliability of supply and cost of electricity services to customers of these services located in areas of the South West of Western Australia that receive electricity through the South West Interconnected System.

105 Although I indicated to Summit, KPIC and Griffin Energy that I had doubt about their power to be heard as amici curie, in contrast with the position of the State none of those entities sought leave to be joined as interveners. They wish only to be heard as amici curiae.

106 The Latin, amicus curiae, emphasises the nature of the appearance only as a friend of the Court. No party has a right to be heard as amicus curiae. The amicus curie appears to assist the Court. The common circumstance in which a Court will grant leave to a person to address as amicus curiae is where one of the parties is unable or unwilling to arrange for legal representation, or where they may be no contradictor to bring a particular argument to the attention of the Court.[22] An amicus curiae does not become a party to the proceedings and may not appeal.[23]

107 For the three reasons below, I reached the conclusion that none of the parties seeking leave to appear as amicus curiae should be granted that leave, and leave was refused. This conclusion was unfortunate. Each of Summit, KPIC and Griffin Energy has significant interests in the outcome of these proceedings. Each would have useful evidence to present to the Court about why their interests should be protected. But each is denied a direct voice without leave to appear. But, as I indicated at the hearing, the appropriate manner for them to be heard was as an intervener, even in the very limited capacity akin to that in which the State of Western Australia intervened.

108 First, one reason why leave should not be given to Summit, KPIC and Griffin Energy to intervene as amici curiae is because their circumstances are not consistent with the nature of the role of amicus. The traditional conception of an amicus curiae was a disinterested observer who has an interest in assisting the Court to reach a complete understanding of the issues. Even accepting that an amicus curiae will often have interests of their own to advance which motivates their assistance to the Court, the essence of an amicus curiae is that he or she is a stranger to litigation. It is this nature of an amicus curiae as a stranger to litigation which is the source of the Court's reluctance to allow a person to appear in this capacity as an interloper in the resolution of disputes between individuals. Sir Owen Dixon was a proponent of this view, although, at the level of an ultimate appellate Court, Sir Anthony Mason considered that Sir Owen Dixon's approach was fashioned to meet the High Court's adjudicative function, not its lawmaking function.[24]

109 In Re Medical Assessment Panel; Ex Parte Symons,[25] EM Heenan J compared the position of a person who appears as an intervener, with the role of an amicus curiae which his Honour described as 'markedly different':[26]

The amicus curiae does not have any rights or interests affected by the litigation which would be sufficient for the amicus to be joined as a party or, if the AttorneyGeneral, which would justify intervention. The role of the amicus, as his name suggests, is to assist the court by ensuring that the court is properly informed of matters which should be taken into account in reaching its decision and this may well be of assistance to the court where the litigation involves an important question of law affecting persons other than the parties, especially disadvantaged persons. (emphasis added)

110 As I have explained, each of Summit, KPIC and Griffin Energy is a private party, with private interests directly affected by the applications. Each wishes to protect its private interests. They should not be amici curiae. They are all persons who should be interveners.

111 Secondly, if leave were granted the effect of the position taken by Summit, KPIC and Griffin Energy would have been to permit each party to arrogate to itself the choice of the capacity in which it appears. The assumption by Summit, KPIC and Griffin Energy may have been that as amici curiae each would not be liable for any costs order. Whether or not this assumption is correct, and it can be seriously doubted, matters concerning costs should not dictate the exercise of discretion concerning the appropriate status of a person in litigation. It is the status of a person in litigation which can affect a costs discretion, not the other way around.

112 Thirdly, the essence of each person's application to appear was in order to rely upon evidence which each wished to file. In relation to Griffin Energy, the application for leave to appear as amicus curiae was inextricably connected with making submissions on substantial affidavit evidence, in relation to which confidentiality orders were sought. Summit and KPIC also sought to adduce evidence which they described as 'noncomplex matters of fact'. Although the factual matters may not have been complex, their assertions in submissions that, for example, there is a risk that the buyers will terminate the sale transaction if it is not completed very soon may be controversial.

113 One of the leading discussions and comparisons of the roles of an intervener with that of amicus curiae is the decision of the Full Court of the Federal Court of Australia in United States Tobacco Company v Minister for Consumer Affairs.[27] The Full Court (Davies, Wilcox and Gummow JJ) thoroughly examined the cases and writing in relation to intervention on each basis before concluding that the party concerned had an interest which justified it being joined in the proceedings as a party. The Court quoted[28] from Hutley JA in Corporate Affairs Commission v Bradley (Commonwealth Intervener)[29] in which his Honour referred to the position in some United States jurisdictions where 'an amicus curiae may, on leave, file briefs, argue the case, and introduce evidence'. His Honour rejected that position as not consistent with the law of New South Wales where 'there is no provision for an amicus curiae making any contribution to the record'.[30]

114 Even if this absolute position is no longer maintained, it will be very rare for an amicus curiae to lead evidence particularly in circumstances where that evidence may be controversial. In Re Robert Bropho v Robert Tickner and Bluegate Nominees Pty Ltd,[31] Wilcox J accepted that 'it may sometimes be appropriate to allow an amicus curiae to complete the evidentiary mosaic by tendering an item of non-controversial evidence', although his Honour reserved his opinion on whether this should be permitted to be done over the objection of one or more of the parties. However, his Honour emphasised that the tender of proposed evidence which is complex and controversial may be 'to allow the amicus curiae effectively to hijack the parties' case, taking it off into new factual issues which may greatly extend its length and thereby impose significant additional costs and disadvantages upon the parties. Rarely, if ever, should this course be permitted'.

115 For these reasons I declined leave to each of each of Summit, KPIC and Griffin Energy to appear as amici curiae. As I indicated to them, I would have granted leave for them to intervene. But each of them specifically declined to seek leave to intervene.

There is no application for an asset preservation order

116 The written submissions from Griffin Coal initially addressed the issue of an asset preservation order on the basis that it was 'unclear whether [Perdaman] seeks to invoke the jurisdiction of the Court to grant an asset preservation order pursuant to O 52A [of the Rules of the Supreme Court]'.[32]

117 Griffin Coal submitted that no claim for an asset preservation order could succeed because the purpose of an asset preservation order is not to protect the interests of Perdaman, nor is it given as a form of security for any judgment which may ultimately be awarded. Rather, it is given to prevent an abuse of the Court's processes in relation to the enforcement of its orders.[33]

118 There would have been further obstacles to a claim for an asset preservation order which Perdaman would need to have addressed. In a passage from Mason P, Sheller JA and Sheppard AJA in Frigo v Culhaci,[34] quoted with approval by Gaudron, McHugh, Gummow and Callinan JJ in Cardile v Led Builders Pty Ltd[35] their Honours said

A [Mareva order] is a drastic remedy which should not be granted lightly ... A [Mareva order] is an interlocutory order which, if granted, imposes a severe restriction upon a defendant's right to deal with his or her assets. It is granted at the suit of a plaintiff whose status as a creditor is in dispute and who need not be a secured creditor. Its purpose is to preserve the status quo, not to change it in favour of the plaintiff. The function of the order is not to ... 'provide a plaintiff with security in advance for a judgment that he hopes to obtain and that he fears might not be satisfied; nor is it to improve the position of the plaintiff in the event of the defendant's insolvency'. ... Many authorities attest to the care with which courts are required to scrutinise applications for [Mareva orders]. (footnotes omitted)

119 In Cardile, Gaudron, McHugh, Gummow and Callinan JJ added that another reason for care in exercising the power to grant a Mareva order is that there may be difficulties associated with the quantification and recovery of damages pursuant to the undertaking if it should turn out that the order should not have been granted.[36]

120 At no stage did Perdaman expressly advance any claim for an asset preservation order. At no stage did it address any of these matters. It did not mention O 52A, Rules of the Supreme Court 1971 (WA).

121 Perdaman also did not address whether it had a good arguable case that it has an accrued or prospective cause of action: O 52 r 5(1)(b)(i). Nor were any submissions made about the manner in which the Court should weigh the strength of Perdaman's case, the danger of frustration of a prospective judgment, the balance of convenience and any other relevant discretionary factors.[37] Towards the conclusion of the hearing I confirmed with all counsel that there was no issue before the Court concerning the strength of Perdaman's case for damages in the main litigation.[38]

The significance of the lack of an application for an asset preservation order

122 The significance of the absence of any claim by Perdaman for an asset preservation order is that, unlike an asset preservation order, an interlocutory injunction requires Perdaman to demonstrate 'sufficient colour' of a particular legal or equitable right upon which it relies. The interlocutory injunction issues to protect that right (or disputed right). As Gummow and Hayne JJ said in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd:[39]

The basic proposition remains that where interlocutory injunctive relief is sought in a Judicature system court, it is necessary to identify the legal (which may be statutory) or equitable rights which are to be determined at trial and in respect of which there is sought final relief which may or may not be injunctive in nature. (emphasis added) (footnotes omitted)

123 Similarly, Gleeson CJ spoke of the need to show 'sufficient colour of right to the final relief, in aid of which interlocutory relief is sought'.[40]

124 In its written submissions, Perdaman's position was initially that it brought the application for an interlocutory injunction 'as a litigant in circumstances where its ability to execute on any judgment for damages or for costs will be imperilled by the steps taken by Griffin [Coal] (and in this regard [Griffin Coal's] submissions as to asset preservation order are relevant)'.[41] Perdaman never fully abandoned this position. However, it presents numerous problems.

125 First, although it is now recognised that an injunction can be awarded in the absence of a proprietary right, is Perdaman's claim for damages, and its asserted position as a contingent creditor based upon a decision at trial, a sufficient existing right which could support an injunction? If it were, would it displace the need for asset preservation orders in many cases?

126 Secondly, even if it were to be assumed that the Bluewaters transaction would dissipate the assets of Griffin Coal in a manner which would reduce Perdaman's prospects of recovery as a contingent unsecured creditor, would that amount to an interference with Perdaman's contingent right such as could support an injunction?

127 Thirdly, how can the Court balance Perdaman's 'rights' as a contingent creditor against the balance of convenience in granting an injunction in circumstances in which no submissions at all were made concerning the strength of Perdaman's case (and, hence, the likelihood of the contingency upon which its 'rights' depend)? At the very highest, all that could be assumed by the Court is that Perdaman's case is barely arguable. Although, in earlier proceedings, Beech J held that Perdaman had established a good arguable case, and although these findings were upheld on appeal,[42] no submissions were made concerning whether the many developments in the facts and in the pleadings since that decision affected the arguability or strength of Perdaman's case.

128 Fourthly, even if it were to be assumed that Perdaman's contingent 'right' to damages is sufficient to support an injunction, and even if the effect of the Bluewaters transaction were to reduce the assets available for satisfaction of Perdaman's judgment, how could the extent of that interference be measured and weighed against the balance of convenience without an assessment of the likely quantum of any recovery? This is particularly the case since the amendments to Perdaman's pleadings have introduced a plea based upon loss of opportunity.

129 It is not ultimately necessary to attempt to address any of these questions. Indeed, in the complete absence of submissions about the strength of Perdaman's case it would be inappropriate to engage upon that exercise. For the reasons I explain below, even if it is assumed that Perdaman's contingent 'right' to damages is sufficient to support a claim for an injunction, and even if it is assumed, without submissions, that Perdaman has an arguable case, the balance of convenience is sufficiently strongly in favour of the transaction that an injunction must be refused.

130 The first application brought by Perdaman is for an interlocutory injunction restraining Griffin Coal 'from entering into the finance transaction the subject of the first defendant's notice to the plaintiff dated 7 November 2012'. The minute of proposed orders seeks restraint until an unspecified date in December 2012.

The applicable principles concerning the grant of an interlocutory injunction

131 The submissions of the parties proceeded on the basis that the relevant approach to the grant of an interlocutory injunction was to ask (i) whether there is a serious question to be tried, and (ii) whether the balance of convenience favours the grant of the interlocutory injunction.

132 Some authorities treat, as an independent question to be considered in relation to the grant of an interlocutory injunction, the issue of whether damages would be adequate.[43] However, the requirement for damages to be an inadequate remedy was not mentioned as a separate requirement in Beecham Group Ltd v Bristol Laboratories Pty Ltd[44] or by Gummow and Hayne JJ in Australian Broadcasting Corporation v O'Neill.[45]

133 As I explained in Emeco International Pty Ltd v O'Shea,[46] there is a line of authority which attempts to reconcile the various authorities on this point by treating the question of adequacy of damages as a matter which is relevant to the broader question of the balance of convenience.[47] Consistently with the approach of counsel in this case, it is appropriate to treat the question of adequacy of damages as part of the balance of convenience.

134 Perhaps due to the difficulties in Perdaman's submission that an injunction should be awarded to support its 'right' as a contingent creditor, in oral submissions Perdaman changed its primary focus. Perdaman asserted that it had extant rights as a mortgagee and chargee under the CSA and that the Bluewaters transaction would interfere with those rights. Perdaman accepted that if the CSA has been terminated then the deed of charge and deed of mortgage will 'fall away'.[48]

135 For its part, Griffin Coal did not dispute that rights arose under the mortgage and charge. There was no submission concerning the nature of those rights and whether they are properly treated as legal rights or equitable rights. I have referred to the alleged rights of Perdaman in these reasons simply as rights held as mortgagee or chargee without the need for consideration of their likely nature as rights enforceable in equity.

136 Griffin Coal made no submissions concerning the strength of its claim in the primary proceedings that it had lawfully terminated the CSA on 30 August 2011 under cl 24.3 of the CSA.[49] If Griffin Coal had lawfully terminated then the CSA would be at an end and Perdaman could have no extant rights as a mortgagee or chargee.

Does Perdaman have extant rights as a mortgagee and chargee?

137 Griffin Coal's submissions were based on the assumption that Perdaman had an arguable case that Griffin Coal's purported termination on 30 August 2011 was invalid. However, Griffin Coal initially submitted that the application could be determined on the basis that Perdaman had elected to treat the CSA as being at an end. Perdaman denied that it had treated the CSA as being at an end by its conduct.

138 In Sargent v ASL Developments Ltd,[50] Stephen J explained that

[t]he words or conduct ordinarily required to constitute an election must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other; thus for a lessor to continue to receive rent under a lease will be consistent only with his rights as lessor and inconsistent with the exercise of a right to determine the lease ... However, less unequivocal conduct, only providing some evidence of an election, may suffice if coupled with actual knowledge of the right of election ...

139 An election is judged objectively, by Perdaman's words and conduct.[51] The election is 'complete' or 'final', at the latest, when made and communicated to the other party.[52]

140 In Janos v Chama Motors Pty Ltd,[53] Handley AJA said that it is well established that the service of an appropriate pleading can be an unequivocal act amounting to termination or rescission of a contract.

141 Griffin Coal relied upon the decision in Kangaroo Island Trading Co Pty Ltd v Kangaroo Island Dairies Pty Ltd.[54] In that case, Boehm J considered an application to enforce a negative covenant in a contract. The plaintiff's claim for an interlocutory injunction was refused because there was no serious question to be tried. The lack of a serious question to be tried arose because the commencement of the proceedings for damages by the plaintiff was 'an overt act which can in no way be said to be equivocal'. His Honour emphasised that the claim for damages was only 'consistent with an acceptance of the repudiation of the agreement by the defendant and an unmistakeable communication of that acceptance to the defendant'. The context in which the claim for damages was brought was explained as follows:

If one looks at the context in which the plaintiff makes its claim in the substantive proceedings one sees immediately acclaim for damages that embraces not only past expenses but also, and much more significantly, a claim for future expenses and losses that can only be consistent with an acceptance of the defendant's repudiation of the agreement. There is the claim for 'Director's time' covering a period that extends beyond the date on which the proceedings were commenced and, of course, there is the claim for 'Anticipated losses' over the whole of the initial five year period provided for in the agreement. There is also the claim for punitive and exemplary damages.

142 An election could potentially have legal effect to terminate a contract if it amounts to (i) clear acceptance of a renunciation by the other party, (ii) an unequivocal exercise of a power otherwise to terminate at law or under the agreement, or (iii) part of a mutual treatment by the parties of the contract being at an end.

143 However, no submission was made by Griffin Coal concerning the manner in which the conduct of Perdaman might have brought the CSA to an end. Supplementary submissions on this point were invited by the Court. In supplementary submissions from Griffin Coal, filed on 17 December 2012 and clarified on 18 December 2012, Griffin Coal submitted that the Court need not finally determine whether Perdaman had elected by the filing of its pleadings to terminate the CSA.

144 Griffin Coal's abandonment of its argument that there was no serious question to be tried because of Perdaman's alleged election was apparently based upon comments of Gummow, Hayne and Kiefel JJ in Agricultural and Rural Finance Pty Limited v Gardiner,[55] that in many cases about election, 'the central issue is whether an election has been made or only foreshadowed. So, for example, an election between alternative remedies in contract and in tort is not made merely by bringing one claim rather than the other. An election is not made at least until entry of judgment' (emphasis added).

145 This decision is not inconsistent with Kangaroo Island Trading Co Pty Ltd, nor with the established position that a pleading can amount to an election.

146 First, in the quotation from Agricultural and Rural Finance Pty Limited their Honours said that merely by bringing one claim rather than another will not amount to an election to terminate a contract.

147 Secondly, their Honours spoke of alternative remedies. Their Honours cited two cases, including United Australia Ltd v Barclays Bank Ltd.[56] The decision in United Australia Ltd causes some difficulty in relation to the law relating to waiver of tort, partly due to the different senses in which their Lordships use the terms 'right' and 'remedy'. Perhaps the clearest expression of the principles in relation to election is the submission in that case of A T Denning KC, reflected in the speech of Lord Atkin, that[57]

[e]lection at common law may be either between inconsistent rights or between alternative remedies. In the former case any unequivocal act done with full knowledge is final against everyone; in the latter case nothing short of judgment or satisfaction is final as against third parties ... Instances of election between inconsistent rights are: to avoid a lease under a proviso for reentry or to affirm it ... Instances of election between alternative remedies are: in the old law when a chattel was wrongfully taken and converted there were alternative remedies in trover or trespass.

148 But, it is not necessary conclusively to determine this point and, in any event, in the absence of submissions concerning the manner in which any election could be said to have caused termination of the CSA it would not be appropriate to do so.

149 Griffin Coal relied only upon the conduct and pleadings of Griffin Coal in relation to the question of the balance of convenience and, in particular, whether the Court would grant specific performance of any rights Perdaman has in relation to the Deed of Charge and Mortgage of Mining Licence. I consider this issue below. It is not necessary to determine conclusively whether Perdaman's conduct in relation to its pleadings effected termination of the CSA by one of the means of termination described above.

150 I have annexed to these reasons a chronology of the proceedings helpfully provided by Perdaman. As that chronology shows, Perdaman's writ of summons was filed on 31 May 2011. In broad summary, the indorsement to the writ explained that Perdaman's claim arises in respect of:

1.2 Griffin Coal's obligation under cl 24.2 (the cooperation clause set out above in the section of these reasons dealing with the CSA);

1.3 the conduct of Griffin Coal by its officers Conley and others in May 2011 in breach of cl 24.2;

1.4 loss and damage thereby suffered by Perdaman being direct and foreseeable loss for the purposes of cl 18.1 of the CSA of not less than AU$180 million.

1.5 the conduct of the third, fourth and fifth defendants interfering in and disrupting due diligence of financiers to Perdaman whilst Perdaman was seeking to achieve Financial Close pursuant to the CSA, which conduct was contrary to:

(i) s 21 and s 22 of the Australian Consumer Law as applied by the Competition and Consumer Act 2010 (Cth) s 131;

(ii) the Australian Consumer Law as applied by the Fair Trading Act (WA) s 24; and

(iii) tortious interference with Perdaman's CSA, which conduct has caused Perdaman loss and damage pursuant to s 236 of the Australian Consumer Law of not less than US$3.5 billion.

At a glance

Court

Decision date

Before

Source

Judgment (640 paragraphs)

Does Perdaman have extant rights as a mortgagee and chargee?

Does the Bluewaters transaction interfere with Perdaman's rights?

The strength of Perdaman's claim for interference with its rights

The benefits of the Bluewaters transaction for Griffin Coal

(3) The security transaction will assist in obtaining project finance

(4) Griffin Coal's ability to operate without Lanco India's support

The effect of the Bluewaters transaction on Perdaman

The effect of the Bluewaters transaction on the financial position of Griffin Coal

Perdaman's claims of prejudice to its position as a contingent creditor

Legislation Cited (4)

Cases Cited (27)