FEDERAL COURT OF AUSTRALIA

Nation Energy (Australia) Pty Ltd v Paltar Petroleum Ltd (Administrators Appointed) (No 2) [2020] FCA 271

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 240 of the Corporations Act 2001 (Cth), leave is granted for the settlement of the proceeding commenced by originating application filed on 22 November 2017 as between the applicant and the second, third and fourth respondents on the basis that the proceeding is discontinued with no order as to costs and that previous costs orders as between the applicant and the second, third and fourth respondents are vacated.

2.    Pursuant to s 240 of the Corporations Act 2001 (Cth), and r 26.12(2)(c) of the Federal Court Rules 2011 (Cth) (to the extent necessary), the applicant is granted leave to file the notice of discontinuance dated 18 February 2020 that is annexure ES-2 to the affidavit of Elan David Sasson affirmed on that day.

3.    There be no order as to costs in the proceeding, including the interlocutory application filed on 18 February 2020.

4.    All existing costs orders in the proceeding as between the applicant and the second, third and fourth respondents are vacated.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

STEWART J:

1    I previously granted leave pursuant to s 240 of the Corporations Act 2001 (Cth) for the settlement of the applicant’s proceeding against the first respondent on the basis that the proceeding be dismissed against the first respondent, and I dismissed the proceeding against the first respondent pursuant to s 241 of the Act: Nation Energy (Australia) Pty Ltd v Paltar Petroleum Ltd (Administrators Appointed) [2019] FCA 1473 (the September judgment).

2    This is now an application by the applicant for leave under s 240 of the Act to settle the proceeding with the remaining respondents on the basis that the proceeding is discontinued with no order as to costs, and for an order pursuant to s 241 of the Act that the proceeding is discontinued with no order as to costs.

3    The requirement for leave under s 240, both in respect of dismissing the proceeding against the first respondent as canvassed in the September judgment and discontinuing the proceeding against the remaining respondents pursuant to the present application, arises from the fact that the original proceeding was commenced as a derivative proceeding in the name of the applicant against the respondents with leave pursuant to s 237 of the Act: Hislop v Paltar Petroleum Ltd (No 3) [2017] FCA 1253.

4    The relevant history is set out in the September judgment at [3]-[11]. To that can be added what follows.

5    John Hislop, the individual who sought and obtained the leave of the Court to commence the derivative proceeding in the name of the applicant, has formed the view that the relief sought by the applicant in the statement of claim is no longer viable and there is no longer any utility in pursuing the proceeding. The basis for that view is that as a consequence of the winding up of the first respondent and the appointment of liquidators, the applicant is unable to get relief that unwinds or reinstitutes the agreements pleaded in the statement of claim.

6    The solicitor on record for the applicant, Mr Sasson, has deposed an affidavit in which he states that the applicant (by which he means Mr Hislop) has obtained legal advice from their appointed external counsel as to the merits of continuing the proceeding against the remaining respondents. Continuing the proceeding would include taking steps to vary the relief that the applicant seeks against those respondents and a further evaluation of the loss and damages that are claimed in the pleadings. Mr Sasson says that following that advice, Mr Hislop has resolved that no further funds should be committed to the proceeding and that the proceeding should be discontinued.

7    Mr Sasson says that Mr Hislop and the remaining respondents have together evaluated the prospect of resolving the proceeding. He says that the applicant, represented by Mr Hislop, and the remaining respondents have agreed to the entry of orders discontinuing the proceeding with no order as to costs against any party.

8    The agreement of the applicant and the remaining respondents is reflected in a notice of discontinuance signed for them dated 18 February 2020. It records that each party consents to the discontinuance of the proceeding on the basis that there be no order as to costs in respect of the applicant’s proposed application for leave to discontinue (i.e. this application) or in respect of the proceeding itself, together with the vacation of any existing costs orders.

9    Section 240 of the Act provides that a proceeding brought with leave must not be discontinued, compromised or settled without the leave of the court. Section 241 of the Act provides that the court may make any orders that it considers appropriate in relation to a proceeding brought or intervened in with leave including in relation to various specified matters.

10    As identified in the September judgment with reference to authority (at [14]), s 241(1) of the Act gives to the court a broad supervisory power to make any orders, and give any directions, that it considers appropriate in relation to a proceeding brought or intervened in with leave. Although none of the particular types of orders listed in s 241(1) specifically covers the order for discontinuance that is presently sought, the list is clearly not exhaustive and the wording of the section may be wide enough to enable the court to make such an order.

11    However, r 26.12 of the Federal Court Rules 2011 (Cth), which deals with the discontinuance of proceedings in this Court, provides for discontinuance of a proceeding to be by way of notice of discontinuance rather than by way of order discontinuing a proceeding. In certain circumstances leave to file such a notice is required, but once a notice to discontinue is filed with leave then the proceeding is by that act discontinued.

12    In the circumstances, once leave to discontinue is granted under s 240 of the Act, which can be confirmed by giving such leave also under r 26.12(2)(c) to the extent necessary, there is no need to exercise any power under s 241 of the Act.

13    As identified in the September judgment (at [15]), since the question of the interests of the company was central to the granting of leave to commence the proceeding, the interests of the company must be central to the exercise of the power to grant leave to discontinue the proceeding under s 240. The point is that the court must be satisfied that the settlement or discontinuance serves the interests of the company rather than the interests of the person who was granted leave under s 237 to bring the proceeding in the name of the company.

14    I am satisfied for the reasons given by Mr Hislop that there is no interest in the applicant continuing the proceeding, particularly in circumstances where he has secured the agreement of the remaining respondents to such a discontinuance on the basis that there will be no adverse costs consequences to the applicant. Clearly, the intervening winding up of the first respondent put much of the relief sought by the applicant in jeopardy. That has substantially changed the nature and complexion of the proceeding.

15    Added to that is the consideration that no one else has indicated any desire to take over the litigation in the name of the applicant, nor has the possibility of any such person been identified. Such a substitution is specifically provided for in s 238 of the Act. If leave is not granted for the matter to be discontinued on the terms that have been agreed, the future of the litigation is at best uncertain and is likely to end at some stage with costs orders against the applicant.

16    In the circumstances, the relief that is sought by the applicant in the interlocutory application should be granted – with appropriate variation to deal with the fact that there is no need to exercise any power under s 241 of the Act as discussed above.

17    The costs orders which the applicant and the remaining respondents have agreed to can be made as an ordinary incident of the Court’s jurisdiction and power to deal with costs, and also pursuant to s 242 of the Act which provides that the court may at any time make any orders it considers appropriate about the costs in a derivative proceeding.

Associate:

Dated:    5 March 2020

SCHEDULE OF PARTIES