Consolidated by orders dated 18 August 2011 & 14 November 2011

BETWEEN : PERDAMAN CHEMICALS & FERTILISERS PTY LTD

Practice and procedure - Orders to be made following compromise of proceedings - Whether proceedings should be dismissed or discontinued - Construction of terms of contract of compromise - Terms upon which proceedings should be discontinued

First Defendant : Mr B D Luscombe (13 June 2013) & Mr N J Landis (25 June 2013)

Second Defendant : Mr B D Luscombe (13 June 2013) & Mr N J Landis (25 June 2013)

Third Defendant : Mr B D Luscombe (13 June 2013) & Mr N J Landis (25 June 2013)

Fourth Defendant : Mr B D Luscombe (13 June 2013) & Mr N J Landis (25 June 2013)

Fifth Defendant : Mr B D Luscombe (13 June 2013) & Mr N J Landis (25 June 2013)

Sixth Defendant : Mr B D Luscombe (13 June 2013) & Mr N J Landis (25 June 2013)

Seventh Defendant : Mr B D Luscombe (13 June 2013) & Mr N J Landis (25 June 2013)

Eighth Defendant : Mr B D Luscombe (13 June 2013) & Mr N J Landis (25 June 2013)

Ninth Defendant : Mr B D Luscombe (13 June 2013) & Mr N J Landis (25 June 2013)

(These reasons were delivered orally at the conclusion of the hearing and have been edited for minor typographical and grammatical corrections).

1 On 26 April 2013, Perdaman accepted an O 24A offer from the defendants in this matter. The matter was compromised by agreement. One small, but potentially significant, issue remains between the parties. The issue concerns the manner in which the litigation should be terminated by the Court. The question is whether it should be dismissed or discontinued. If it is discontinued there is dispute about the terms upon which that should occur.

2 The defendants submit, correctly, that the compromise was intended to resolve finally all matters in dispute in this litigation. The initial position of the defendants was that the only appropriate order was that the action be dismissed. During the hearing, I identified difficulties with that course as well as a number of consequential issues. There had also been no conferral between the parties concerning any appropriate terms for discontinuance. The parties subsequently made submissions concerning the terms upon which any discontinuance should be ordered if, contrary to the defendants' primary submission, it was not appropriate to dismiss the action.

3 The appropriate order is that the action should be discontinued, upon Perdaman giving an undertaking in the terms sought by the defendants. The undertaking proposed by Perdaman will not achieve sufficient finality for a just order. Nor is it consistent with the terms of the compromise agreement although the difference between the parties might not ultimately be a matter of practical significance.

4 The terms upon which this matter was compromised were as follows:[1]

Pursuant to Order 24A of the Rules of the Supreme Court, the defendants offer to compromise the whole of the claim brought by the plaintiff on the following basis:

1. The defendants pay to the plaintiff the sum of AUD7.5 million.
2. The amount in paragraph 1 above is inclusive of interest.
3. The defendants pay the plaintiff's costs of the action to the date of acceptance of the offer to be taxed if not agreed.

5 Crucially, the key promise by Perdaman in exchange for the defendant's promises was to compromise 'the whole of the claim brought by the plaintiff'.

6 The terms of the compromise mean that if Perdaman were to bring fresh litigation which sought to reagitate any part of its 'claim' then it would be in breach of the compromise agreement. I do not accept that the words of the compromise agreement could be construed objectively in a manner which would permit Perdaman subsequently to bring litigation concerning any matter in dispute in its claim in circumstances of the substantial compromise described above. A relitigation which is in breach of the compromise agreement could also give rise to difficult questions concerning the remedial regime following breach of a compromise agreement which is governed by O 24A of the Rules of the Supreme Court 1971 (WA).

7 The terms of the compromise agreement also require Perdaman to cooperate with the defendants in order to enable the defendants to achieve the benefit of the agreement. Such an implied term is well established and satisfies all the requirements for an implied term in this case.[2] Perdaman is required to cooperate to bring the litigation to a conclusion. A failure to do so would put Perdaman in breach of the compromise agreement.

8 Consistently with its obligations, Perdaman applied to discontinue its claim against the defendants. The defendants submitted that this was not sufficient. They submitted that Perdaman was required to consent to proposed orders dismissing the action. A significant difference between the two courses of action is that discontinuance, by itself, does not prevent Perdaman from relitigating the issues in the proceedings. Dismissal creates a res judicata ('a thing decided') which is a bar to further proceedings. An order for discontinuance, on the other hand, if made without terms as to future proceedings, is not a defence to a subsequent action.[3] But the compromise agreement might be.

9 If the defendants were correct that the compromise agreement, on its proper construction, required Perdaman to consent to proposed orders for dismissal then further issues might arise. Is there a power to dismiss a proceeding by consent where one party contractually agrees to consent to proposed orders for dismissal but does not subsequently do so? Could specific performance of that term be ordered? How are remedies based on a contract of compromise affected by O 24A of the Rules of the Supreme Court when the contract of compromise is made in reference to that order?

10 It is not necessary to examine any of these questions, which were not argued before me. The reason it is not necessary is because I do not accept the defendants' submission that a term should be implied into the compromise agreement requiring Perdaman to consent to proposed orders that the Court dismiss the action. Although it would have been open to Perdaman to consent to dismissal of the action in order to fulfil its obligations under the compromise agreement, there is nothing in the express terms of the compromise which requires this course of action. Nor is there any need for implication. The finality which is intended by the compromise can be achieved by Perdaman discontinuing the action, with leave, and giving an undertaking as to terms that may be just. As the Lord Chancellor said in a different context in The Kron Prinz,[4] it would have been easy for two solicitors to agree that they would propose orders that 'this action should be dismissed'.

Terms upon which discontinuance should be ordered

11 Order 23 rule 2(3) of the Rules of the Supreme Court provides that:

Save as in this Rule otherwise provided, it shall not be competent for the plaintiff to withdraw the record or discontinue the action without leave of the Court, but the Court may before, or at, or after the hearing or trial, upon such terms as to costs, and as to any other action, and otherwise, as may be just, order the action to be discontinued, or any part of the alleged cause of complaint to be struck out.

12 As Dr Kendall and Judge Curthoys explain, the reason why it is important that a court consider whether to impose a condition that a plaintiff should not be at liberty to bring another action is 'because it is undesirable that the parties should be left in an uncertain state as to what further litigation concerning the same subject matter may be brought in the future'.[5]

13 After the issue of an undertaking was raised, the parties each proposed the terms of appropriate undertakings which should be required as terms of an order that the proceedings be discontinued. The differences between the parties can be expressed as follows, with Perdaman's addition in bold and removal in strikeout:

The Plaintiff hereby undertakes to this Honourable Court that it will not bring any action in this Court or in any other Court (tribunal or forum) against any of the First to Ninth Defendants in respect of any claims pleaded in its Fourth Amended Statement of Claim dated 28 September 2012 in CIV 1925 of 2011 (consolidated with ClV 2422 of 2011, CIV 2423 of 2011 and CIV 3201 of 2011) including any action challenging the validity of Griffin Coal's termination of the Coal Supply Agreement between Perdaman and Griffin Coal dated 21 December 2010 by letter dated 30 August 2011.

14 There are three reasons why I consider that it is just that the undertaking required as a condition of discontinuance should not include the words in bold which Perdaman seeks.

15 First, although the terms of the contract of compromise do not dictate the terms of an undertaking which should be required, the terms of a contract of compromise are a significant consideration in deciding what further litigation it would be just to permit. In this case, the compromise concerned the 'whole of the claim brought by the plaintiff'. It was not, in its terms, confined to the fourth amended statement of claim. Nor could the agreement, in its context, be construed as manifesting an intention so narrowly expressed. The words 'the whole of the claim brought by the plaintiff' should not be limited only to those matters agitated in the fourth amended statement of claim. The words 'the whole of the claim brought by the plaintiff' include any additional matters agitated in

(ii) previous versions of its statement of claim, or

(iii) the Federal Court application which was the originating process in CIV 3201 of 2011.

16 A narrower compromise which was apparently confined to causes of action in a statement of claim was considered in Vita Pacific Ltd & GIO General Ltd v Heather.[6] In that case the plaintiff's claim was for compensation for various actions at common law. The terms of the O 24A compromise were 'to compromise all causes of action pleaded by the Plaintiff against the Defendant in the Plaintiff's Statement of Claim dated 24 November 1994' for a cash sum and costs. No claim for compensation under the Workers Rehabilitation and Compensation Act 1988 (Tas) was pleaded. That Act effectively provided, in s 133(2) and s 133(3), that a further claim for compensation is extinguished in circumstances including

(i) the award of a judgment for damages in respect of an injury, or

(ii) a settlement containing an agreement that further claims to compensation in respect of that injury are extinguished.

In settling the claim prior to judgment the plaintiff did not obtain the benefit of a judgment. Nor was there express agreement in the settlement that further claims to compensation for the injuries were to be extinguished.

17 By the time the matter reached the Full Court it was accepted that an accepted O 24A offer of compromise could comprise a contract at common law. A question on appeal was whether a term should be implied that the plaintiff's future entitlements to compensation were extinguished by the compromise. Slicer J held that it could, 'by reference to the terms of the written offer and the terms of the pleadings of the respondent'.[7] Crawford J (as the former Chief Justice was then) also held that there should be implied into the contract a term that all of the plaintiff's claims to compensation under the Act were extinguished. For different reasons from Slicer J, his Honour said that he found it impossible to believe that neither party would have intended (by which he must have meant objectively intended) that the compromise would not affect the plaintiff's right to compensation.[8] Evans J considered that it was the 'actual intention' of the parties that their compromise would have the same effect as a judicial decision, and therefore held that it was 'a term of the compromise agreement that the respondent's right to any further payments by way of compensation be extinguished'.[9]

18 The decision in Vita Pacific Ltd concerned a narrower contract of compromise, entered in different circumstances from those of the present case. But the approach of the Tasmanian Full Court illustrates, with respect, the need for construction and implication of terms in contracts of compromise to proceed against an obvious commercial intention of the parties to achieve finality in the resolution of their disputes.

19 Secondly, the significance of the difference between the parties, as the defendants perceived it, is that confining the terms to the fourth amended statement of claim may leave a possibility of a related future claim for a subsequent breach of a different clause of the Coal Supply Agreement. I do need to speculate on whether this is a realistic possibility. An example postulated by counsel for the defendants was an allegation of breach of the requirement to maintain and set aside certain levels of provable reserves of coal.

20 At first glance, it might appear surprising that Perdaman could submit that the Coal Supply Agreement was still on foot and allege that Griffin Coal could be in breach of obligations under that agreement. Perdaman's claim was for $3.4 billion of damages for loss as well as $2.4 billion exemplary damages. The very basis of the claim for loss was the premise of the loss of the benefit of the Coal Supply Agreement which Griffin Coal had purported to terminate.

21 The apprehension of the defendants that Perdaman might later claim that the Coal Supply Agreement was still on foot arises because there was no acceptance by Perdaman that the Coal Supply Agreement had been terminated.

22 In Perdaman Chemicals and Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd (No 7),[10] Perdaman submitted that the Coal Supply Agreement had not been terminated, at least in relation to particular identified obligations of Griffin Coal. The significance of this matter generated considerable, and detailed, submissions at that hearing concerning the proper construction and history of the pleadings. Griffin Coal ultimately conceded that this point was arguable. One basis upon which the point was conceded to be arguable must have been the possibility that Perdaman could prove all of the following:

(i) the purported termination of the Coal Supply Agreement was a wrongful renunciation of the contract;

(ii) that renunciation had not been accepted by Perdaman;

(iii) the effect of the unaccepted renunciation was that the Coal Supply Agreement remained on foot;

(iv) the Coal Supply Agreement had not otherwise been terminated.

23 The third point recently divided the Supreme Court of the United Kingdom.[11]

24 The other points may have been of different strength.

25 There was an extant and pleaded issue between the parties concerning whether the Coal Supply Agreement had been terminated. In the counterclaim brought by the defendants they had sought a declaration that the Coal Supply Agreement was validly terminated on 30 August 2011.[12] The counterclaim was subsequently discontinued but Perdaman maintained a prayer for relief that 'the purported notice of termination is invalid and of no effect'.[13]

26 The defendants' defence of the action asserted that termination had occurred on 30 August 2011 and that the effect of termination was that none of the terms of the Coal Supply Agreement had survived other than confidentiality restrictions and a clause related to government charges and GST.[14] In reply, Perdaman pleaded that Griffin Coal purported to terminate the Coal Supply Agreement by written notice on 30 August 2011, but otherwise denied Griffin Coal's defence and alleged that Griffin Coal was not legally entitled to issue a notice of termination and that the purported notice was therefore of no effect.[15]

27 A central issue in the proceedings was therefore whether the Coal Supply Agreement had been properly terminated by the defendants.

28 In the context of pleadings in which a central issue in dispute between the parties was the validity of termination of the Coal Supply Agreement, and in the context in which Perdaman had argued that its pleadings should be construed as consistent with an allegation that the Coal Supply Agreement was still on foot, the words the 'whole of the claim brought by the plaintiff' should be interpreted as including that part of the basis for Perdaman's claim which was that the Coal Supply Agreement had not been validly terminated,[16] and should preclude further allegations based upon the same premise that the Coal Supply Agreement had not been validly terminated.

29 Thirdly, and independently of the first two points which concern the particular detail of construction of the contract of compromise, I consider that it would be unjust to confine the plaintiff to an undertaking that it will not bring any action against the defendants only in respect of any claims pleaded in its fourth amended statement of claim. These proceedings were protracted with almost everything that passed between the parties in dispute. Considerable legal expense was incurred. A condition upon the discontinuance of the defendants' counterclaim was that they undertake not to raise any cause of action pleaded in their counterclaim against the first, second or third defendants by counterclaim other than those raised in the principal proceedings. This included the declaration which had been sought that the Coal Supply Agreement was validly terminated on 30 August 2011. It would be unjust to the defendants to allow the possibility that Perdaman might subsequently re-litigate issues based upon an assertion of the validity of the Coal Supply Agreement.

30 The appropriate order is that subject to the plaintiff filing an undertaking that it will not bring any action in this Court or in any other Court, tribunal or forum against any of the first to ninth defendants, in respect of any claims pleaded in CIV 1925 of 2011 (consolidated with ClV 2422 of 2011, CIV 2423 of 2011 and CIV 3201 of 2011), including any action challenging the validity of Griffin Coal's termination of the Coal Supply Agreement between Perdaman and Griffin Coal dated 21 December 2010 by letter dated 30 August 2011, these proceedings be discontinued.

[1] Affidavit of Mr Landis sworn 12 June 2013, NJL1.

[2] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283 (Lord Simon of Glaisdale, Viscount Dilhorne & Lord Keith of Kinkel); Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 605 - 606 (Mason J).

[3] C Kendall and J Curthoys (eds) Civil Procedure in Western Australia [23.2.9]; The Kron Prinz (1887) 12 App Cas 256, 259, 262 (Lord Herschell).

[4] The Kron Prinz (1887) 12 App Cas 256, 259 (Lord Halsbury LC).

[5] C Kendall and J Curthoys (eds) Civil Procedure in Western Australia [23.2.9].

[6] Vita Pacific Ltd & GIO General Ltd v Heather [2001] TASSC 137; (2001) 10 Tas R 334.

[7] Vita Pacific Ltd & GIO General Ltd v Heather [2001] TASSC 137; (2001) 10 Tas R 334, 356 [59].

[8] Vita Pacific Ltd & GIO General Ltd v Heather [2001] TASSC 137; (2001) 10 Tas R 334, 342 [18].

[9] Vita Pacific Ltd & GIO General Ltd v Heather [2001] TASSC 137; (2001) 10 Tas R 334, 360 [69].

[10] Perdaman Chemicals and Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd (No 7) [2012] WASC 502 [137] - [164].

[11] Societe Generale, London Branch v Geys [2012] UKSC 63.

[12] Re-amended Substituted Defence and Counterclaim, 7 January 2013.

[13] Fourth Amended Statement of Claim, 28 September 2012, primary prayer for relief.

[14] Second Substituted Defence, 21 February 2013, at [23].

[15] Second Substituted Defence, 21 February 2013, at [23]. Amended Reply to Defence, 18 March 2013, at [12].

[16] Second Substituted Defence, 21 February 2013, at [23].