PAC LNG International Ltd v SPI (208) Ltd [2014] PGNC 29; N5681 (22 April 2014)

N5681

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

OS 177 of 2014

BETWEEN:

PAC LNG INTERNATIONAL LIMITED
First Plaintiff

AND:

PAC LNG INVESTMENTS LIMITED
Second Plaintiff

AND:

PAC LNG ASSETS LIMITED
Third Plaintiff

AND:

PAC LNG OVERSEAS LIMITED
Fourth Plaintiff

AND:

PAC LNG HOLDINGS LIMITED
Fifth Plaintiff

AND:

SPI (208) LIMITED
First Defendant

AND:

SPI (200) LIMITED
Second Defendant

AND:

SPI SECURITY HOLDINGS LIMITED
Third Defendant

Waigani: Hartshorn J.
2014: April 16th and 22nd,

Application for interlocutory injunction

Cases cited:
Papua New Guinea Cases

Employers Federation of Papua New Guinea v. Papua New Guinea Waterside Workers and Seaman's Union and Arbitration Tribunal (1982) N393
Robinson v. National Airlines Commission [1983] PNGLR 478
Markscal Ltd v. MRDC [1996] PNGLR 419
Craftworks Nuigini Pty Ltd v. Allan Mott (1997) SC 525
John Momis v. Attorney General [2000] PNGLR 109, N1951
NCDC v. Yama Security Services Pty Ltd (2003) SC707
William Duma v. Eric Meier (2007) SC898
Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853
Ramu Nico Management (MCC) Limited and Ors v Tarsie and Ors [2010] SC 1075 Airlines of PNG v. Air Niugini Ltd (2010) N4047
PNG Deep Sea Fishing Ltd v. Luke Critten (2010) SC1126

Overseas Cases

American Cyanamid Company v. Ethicon Limited [1975] UKHL 1; (1975) AC 396

Counsel:

Mr. C. Scerri QC and Mr. G. Gileng, for the Plaintiffs
Mr. D. H. Katter and Mr. E. G. Andersen, for the First Defendant
Mr. M. M. Varitimos QC and Mr. J. Brooks, for the Second Defendant

22nd April 2014:

1. HARTSHORN J: This is an application for an interlocutory injunction for 14 days.

2. This proceeding concerns Petroleum Retention Licence 15 (PRL 15), the Elk/Antelope Joint Venture relating to PRL 15 which is governed by a Joint Venture Operating Agreement (JVOA) and the participating interests in PRL 15 and the Joint Venture.

3. The injunctive relief sought by the plaintiffs (PAC LNG Companies), seeks to restrain the defendants from taking any steps without the written consent of the PAC LNG Companies, in relation to certain matters that were considered in a meeting of the Operating Committee of the Joint Venture in respect of PRL 15 held on 28th March 2014.

Introduction

4. The holding company of the PAC LNG Companies is Oil Search Ltd. Oil Search Ltd acquired all of the shares in the PAC LNG companies on 27th February 2014. At that time the PAC LNG Companies held a 22.835% participating interest in PRL 15 and in the Joint Venture. Also at that time the first defendant (SPI 208), the holding company of which is InterOil Corporation, held a 75.6114% participating interest in PRL 15 and in the Joint Venture.

5. The PAC LNG Companies claim that between on or about 26th February 2014 and on or about 25th March 2014, InterOil Corporation and Total Holdings International BV undertook various steps to transfer a 40.127529% interest in PRL 15 and the Joint Venture to the Total Group (Total Transaction).

6. At the core of this proceeding, the PAC LNG Companies claim, is the conduct of SPI 208 and the second defendant (SPI 200). The PAC LNG Companies claim that in collaboration with each other and through their respective holding companies, SPI 208 and SPI 200 entered into a transaction designed to circumvent the PAC LNG Companies pre-emption rights in the Joint Venture.

7. The dispute concerning the Total Transaction has been referred to arbitration by a Notice to Dispute issued by the PAC LNG Companies.

This proceeding

8. The PAC LNG Companies by Originating Summons in essence seek the following:

a) An injunction restraining the defendants from taking steps in furtherance of the matters referred to in Agenda items 2, 3 and 4 as recorded in the Minutes of a meeting of the Operating Committee of the Elk/Antelope Joint Venture in respect of Petroleum Retention Licence 15 held on 28 March 2014 pending the hearing of an Arbitration to be conducted in London; and

b) An injunction restraining the defendants from taking steps in furtherance of the matters in Agenda items 2, 3 and 4 as recorded in the Minutes of a meeting of the Operating Committee of the Elk/Antelope Joint Venture in respect of Petroleum Retention Licence 15 held on 28 March 2014 pending the determination of this proceeding.

Notice of Motion

Preliminary

9. Counsel for SPI 200 submits that, amongst others, the Notice of Motion seeking the injunctive relief is an abuse of process of this court as it seeks interim relief which is materially the same as that sought in the Originating Summons. From a perusal of the documentation, the Notice of Motion seeks at order 3 an interlocutory injunction pending the determination of the Originating Summons and the Originating Summons seeks injunctive relief pending the resolution of the substantive dispute and pending the determination of this proceeding. The relief sought in both documents is materially the same.

10. Counsel for the PAC LNG Companies submits that the parties to the JVOA have agreed pursuant to clause 19.2 (c)(x) of the JVOA that any party to a Dispute may apply to a court for interim measures prior to the constitution of an arbitral tribunal and that is what has occurred by this proceeding.

11. This submission does not address the issue of whether relief that is materially the same as that sought in the Originating Summons can be sought in a motion filed in the proceeding.

12. Order 4 Rule 49(9) National Court Rules is as follows:

"Except as otherwise expressly provided in the National Court Rules, Motions shall be for relief on interlocutory matters only and not for the substantive relief claimed in the originating process."

13. This rule mirrors the position taken by the Supreme Court in NCDC v. Yama Security Services Pty Ltd (2003) SC707 and William Duma v. Eric Meier (2007) SC898 which approved the National Court decision in John Momis v. Attorney General [2000] PNGLR 109, N1951.

14. As the PAC LNG Companies are seeking in their Motion relief that is materially the same as that sought in the Originating Summons, they are seeking the substantive relief claimed in the originating process, in contravention of Order 4 Rule 49(9) National Court Rules. Consequently the Notice of Motion of the PAC LNG Companies should be dismissed.

15. If the Notice of Motion is not dismissed on the above basis, the next step is a consideration of the application for interlocutory injunctive relief.

Application for interlocutory injunctive relief
16. The principles upon which the court can grant an interlocutory injunction are well settled. The leading authority is a decision of the House of Lords in American Cyanamid Company v. Ethicon Limited [1975] UKHL 1; (1975) AC 396. This case has been followed on many occasions in this jurisdiction and cited with approval by the Supreme Court in Craftworks Nuigini Pty Ltd v. Allan Mott (1997) SC 525. These principles have been reaffirmed by the Supreme Court in Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853.

17. In Chief Collector of Taxes v. Bougainville Copper Limited [2007] SC 853, the Supreme Court said at 31:

"In our jurisdiction the principles relevant to injunctive reliefs (sic) are well settled. In Golobadana No. 35 v. Bank of South Pacific, Kandakasi J. ... concluded as follows:

"A reading of these authorities shows consistency or agreement in all of the authorities that the grant of an injunctive relief is an equitable remedy and it is a discretionary matter. The authorities also agree that before there can be a grant of such a relief, the Court must be satisfied that there is a serious question to be determined on the substantive proceedings. This is to ensure that such a relief is granted only in cases where the Court is satisfied that there is a serious question of law or fact raised in the substantive claim. The authorities also agree that the balance of convenience must favour a grant or continuity of such a relief to maintain the status quo. Further, the authorities agree that, if damages could adequately compensate the applicant then an injunctive order should not be granted"."

18. Similarly, in Ramu Nico Management (MCC) Limited and Ors v Tarsie and Ors [2010] SC 1075 at 53, in a decision in which I dissented on matters not currently relevant, I said:

"The law on injunctions is settled in this jurisdiction. Injunction is an equitable remedy. It is a matter for the discretion of the Court to refuse or grant the relief sought. In order for an injunction to be granted, the applicant must demonstrate to the Court that there is a serious case to be tried on the substantive proceedings. The leading authority is a decision of the House of Lords in "American Cyanamid Company v Ethicon Limited (1975) 1 All ER 594. This case has been followed on many occasions in this jurisdiction and cited with approval by the Supreme Court in Craftworks Niugini Pty Ltd v Allan Mott (1997) SC525 and Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853."

19. The first consideration is whether the PAC LNG Companies have a serious question to be tried. A serious question to be tried has been interpreted to mean:

"What the plaintiff must prove is that he has a serious, not a speculative case which has a real possibility of ultimate success....": Robinson v. National Airlines Commission [1983] PNGLR 478 and

"..... a strong case which, on the evidence presented would support a permanent injunction" :Markscal Ltd v. MRDC [1996] PNGLR 419.

20. The parties have filed affidavits in support of their respective positions. As to the court's consideration of that evidence at this stage, I am mindful of the words of Lord Diplock in American Cyanamid (supra):

It is not part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations.

21. The PAC LNG Companies submit that they have serious questions to be tried as to whether:

a) the Total Transaction is void and of no effect by reason of the failure by SPI 208 to comply with clause 13.2 (f) of the JVOA and to give the PAC LNG Companies the opportunity to acquire the 40.127529% participating interest;

b) the PAC LNG Companies acquired an equitable interest in the 40.127529% interest transferred to SPI 200;

c) SPI 208 failed to comply with the requirements in clause 13.2 (d) of the JVOA such that the transfer to SPI 200 was invalid and ineffective;

d) SPI 208 should have sought the consent of the PAC LNG Companies pursuant to clause 13.2 (d) (ii) of the JVOA but did not;

e) there were failures by SPI 208 and SPI 200 to comply with the Oil and Gas Act such that the transfer was not effective;

f) the resolutions purportedly passed at the Operating Committee Meeting on 28th March 2014 were invalid.

22. The defendants submit that the PAC LNG Companies do not have a serious question to be tried as amongst others:

a) the Notice of Dispute issued by the PAC LNG Companies provides the permissible ambit of the injunctive relief which can be sought in the proceeding. The relief sought in this proceeding however, concerns matters which are outside the ambit of the Dispute before the arbitral tribunal and cannot constitute interim measures. A serious question to be tried must be a serious question in the arbitration;

b) from a perusal of the JVOA, the relevant provisions have been complied with. The transactions which the defendants undertook are expressly permitted by the JVOA. Specifically, the first transaction was a transfer of an interest in PRL 15 and the JVOA to an "Affiliate" as defined by the JVOA and the JVOA expressly provides that such a transaction does not trigger any pre-emptive rights. The second transaction was a sale of the shares in that "Affiliate" and the JVOA expressly provides that such a transaction does not trigger any pre-emptive rights.

23. Given amongst others, the necessity to deliver a quick ruling on this application, I will not consider and determine whether the PAC LNG Companies have established that they have a serious question to be tried. I will presume for present purposes only, that they have. This is not in any way to be taken though that I have formed a view either way on this issue.

24. On the presumption that the PAC LNG Companies have a serious question to be tried, the next consideration is whether they would be adequately compensated in damages. If damages would be an adequate remedy then even if there is a serious question to be tried interlocutory injunctive relief should be refused: Airlines of PNG v. Air Niugini Ltd (2010) N4047 at 22 and 23 and PNG Deep Sea Fishing Ltd v. Luke Critten (2010) SC1126 at 30.

25. Counsel for SPI 200 submits that the rationale for the court considering whether damages would be an adequate remedy was explained by Lord Diplock in American Cyamamid (supra) at 408:

"[t]he court should go on to consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages... would be an adequate remedy and the defendant would be in a financial position to pay them, no interim injunction should normally be granted, however strong the claimant's claim appeared to be at that stage."

26. The consideration is whether damages would compensate the applicant should it be found that their legal rights have been infringed by the party they are seeking to enjoin: Employers Federation of Papua New Guinea v. Papua New Guinea Waterside Workers and Seaman's Union and Arbitration Tribunal (1982) N393, 3-4.

27. In Airlines PNG v. Air Niugini (supra), I refused to grant injunctive relief as I was satisfied that any loss suffered by Airlines PNG would be able to be quantified and that it had not been shown that damages would not be an adequate remedy.

28. Counsel for SPI 200 also referred to Ramu Nico v. Tarsie (supra) in which I said at 53:

"The authorities also agree that once it has been determined that there is a serious question to be tried, if damages could adequately compensate the applicant, the injunction should not be granted: Golobadana No. 35 Ltd v Bank of South Pacific Ltd (2002) N2309, Ewassa Landowners Association Incorporated v Hargy Oil Palms Limited (2005) N2878, Gobe Hongu Limited v The National Executive Council & Ors (1999) N1920."

29. Counsel for the PAC LNG Companies made the submission that damages are not an adequate remedy. This is because this claim and the arbitral proceedings are not presently concerned with issues as to loss and damage and that the enforcement of the PAC LNG Companies' valuable contractual rights in the JVOA is the focus of the proceedings. In reply, counsel submitted that it was obvious that damages are not an adequate remedy as they would be difficult to quantify, particularly if there were safety issues or delays.

30. Counsel for SPI 208 and SPI 200 submitted that damages would be an adequate remedy. Counsel for SPI 208 submitted that the Notice of Dispute of the PAC LNG Companies is founded upon breaches of contract and damages are the appropriate remedy in contract. The Notice of Dispute requests damages at paragraph 4.1(e) for the alleged breach of the JVOA. Further, under clause 4.2(b)(iv) of the JVOA, SPI 208 as Operator is required to maintain financial records of expenditure incurred in the conduct of joint venture operations, and is also required to maintain records for audit and taxation purposes. Accordingly, in the very unlikely event that it was subsequently determined that the Operator had undertaken work that it was not authorised to undertake or incurs expense as a result of conduct which was not in accordance with its obligations under the JVOA, those costs will be readily able to be ascertained and recovered from the Operator.

31. Counsel for SPI 200 submitted that the evidence demonstrates that damages would be an adequate remedy for essentially a breach of contract claim. Mr Oliver Heurtin deposes at paragraph 40:

"SPI 208 as Operator under clause 4.2(b)(iv) the JVOA is required to maintain financial records of expenditure incurred in the conduct of joint venture operations, and is also required to maintain records for audit and taxation purposes. As a result, if it was subsequently determined that the Operator had undertaken work it was not authorised to undertake or incurs expense as a result of conduct which was not in accordance with its obligations under the JVOA, those costs will be readily be able to be ascertained and recovered from the Operator."

32. Clause 4.2(b)(iv) of the JVOA provides in relation to the duties of the Operator that:

"(b) in the conduct of the Joint Operations Operator must:

(iv) Charge to the joint account in accordance with this agreement and the Accounting Procedure any damage, loss, cost or liability arising out of, incident to, or resulting from Joint Operations."

33. It has not been shown by the PAC LNG Companies that damages would not be an adequate remedy. To the contrary, any loss that may be suffered is readily quantifiable given:

(a) the nature of the claim;

(b) that pursuant to the JVOA records will need to be kept in relation to cost and liability incurred in relation to the Joint Operations; and

(c) records will need to be kept for audit and taxation purposes.

34. After considering the submissions and evidence on this issue, I am satisfied that damages would be an adequate remedy for the following reasons:

a) the Notice of Dispute of the PAC LNG Companies is founded upon breaches of contract and the remedy for breach of contract is normally damages;

b) as damages are sought in the Notice of Dispute, the PAC LNG Companies presumably are of the view that damages are an adequate remedy;

c) financial records of expenditure incurred in the conduct of the Joint Venture operations are required to be maintained and so any loss suffered by the PAC LNG Companies would be able to be quantified;

d) it has not been shown to the court's satisfaction that damages would not be an adequate remedy or that the defendants' would not be able to pay any such damages.

35. As I have found that damages would be an adequate remedy, the application for the interlocutory injunction should be refused. Given this it is not necessary to consider the other submissions of counsel. As to the application for certification to be given for overseas counsel, I am not satisfied that a case for such certification has been made.

Orders

36. The formal Orders of the Court are:

a) the Notice of Motion of the plaintiffs filed 4th April 2014 is dismissed;

b) the plaintiffs shall pay the costs of the first and second defendants of and incidental to the Notice of Motion;

c) the request for certification of overseas counsel is refused;

d) time is abridged to the date of settlement by the Registrar which shall take place forthwith.

_____________________________________________________________
Posman Kua Aisi Lawyers: Lawyers for the Plaintiffs
Gadens Lawyers: Lawyers for the First Defendant
Ashurst Lawyers: Lawyers for the Second Defendant