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Lake Vermont Marketing Pty Ltd v Coranar (Australia) Pty Ltd

 

[2018] QCA 2

SUPREME COURT OF QUEENSLAND

 

CITATION:

Lake Vermont Marketing Pty Ltd v Coranar (Australia) Pty Ltd [2018] QCA 2

PARTIES:

LAKE VERMONT MARKETING PTY LTD
ACN 114 286 850
(appellant)
v
CORANAR (AUSTRALIA) PTY LTD
ACN 114 668 727
(respondent)

FILE NO/S:

Appeal No 6119 of 2017

SC No 8877 of 2016

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane – [2017] QSC 120 (Bond J)

DELIVERED ON:

Orders made 29 September 2017

Reasons published 2 February 2018

DELIVERED AT:

Brisbane

HEARING DATE:

28 September 2017

JUDGES:

Sofronoff P, Fraser JA and Mullins J

ORDERS:

Orders made 29 September 2017:

  1. Appeal dismissed.
  2. Appellant to pay the respondent’s costs of the appeal on the standard basis.

Further orders made 2 February 2018:

  1. The question of what redactions, if any, should be made to these reasons before they are made public is reserved.
  2. The parties may on or before 21 days from the delivery of these reasons make a joint submission as to the redactions which should be made to these reasons before they are made public, but if the parties fail to agree on a joint submission, each party may on or before 28 days from the delivery of these reasons make a submission as to such redactions.

CATCHWORDS:

CONTRACTS GENERAL CONTRACTUAL PRINCIPLES CONSTRUCTION AND INTERPRETATION OF CONTRACTS IMPLIED TERMS IMPLICATION OF MUTUAL OBLIGATION – where the respondent is a participant under a joint venture agreement with three other participants in a coal mine – where the appellant and respondent are parties to a marketing agreement – where each other joint venture participants entered into marketing agreements with the appellant on the same terms – where the respondent sought access to inspect and copy certain documents under the control of the appellant pursuant to an express clause of the marketing agreement – where the appellant contended the right to inspect and copy documents was subject to an implied obligation as to the use to be made of the documents – where the primary judge found there was no significant risk the respondent might act in a way inconsistent with its obligations under the marketing agreement and made the orders sought by the respondent without resolving the disputed construction of the clause – whether there was any error in the primary judge’s decision

COUNSEL:

S Couper QC, with J M O’Connor, for the appellant

G A Thompson QC, with E L Hoiberg, for the respondent

SOLICITORS:

DLA Piper for the appellant

Allens for the respondent

  1. SOFRONOFF P:  I agree with the further orders proposed by Mullins J and her Honour’s reasons.
  2. FRASER JA:  I agree with the reasons of Mullins J and the further orders proposed by her Honour.
  3. MULLINS J:  The respondent Coranar (Australia) Pty Ltd (Coranar) and three joint venture participants are parties to a joint venture agreement entered into on 24 March 2006 for carrying out the unincorporated joint venture known as the Lake Vermont Project which covers mining operations at the Lake Vermont coal mine which is an open cut metallurgical coal mine. The appellant Lake Vermont Marketing Pty Ltd (Lake Vermont) and Coranar are parties to a marketing agreement entered into on 24 March 2006.  Each of the other joint venture participants entered into a marketing agreement with Lake Vermont on terms substantially the same as the terms of the marketing agreement between Lake Vermont and Coranar.
  4. Coranar applied for a final order enforcing the obligation of Lake Vermont under the marketing agreement to permit Coranar to inspect and obtain copies of certain documents under the control of Lake Vermont relating to the activities which Lake Vermont undertook to perform pursuant to the marketing agreement.  Coranar contended that Lake Vermont was in breach of its contractual obligations pursuant to the marketing agreement (and another agreement to which they were both parties and which is conveniently referred to as the related agreement) and that it wished to exercise its contractual right to inspect documents, in order to assess the extent of Lake Vermont’s breaches and take appropriate action to recover loss.
  5. Lake Vermont did not dispute Coranar’s entitlement to inspect or copy documents pursuant to the contractual obligation, but sought to limit Coranar’s use of the documents.
  6. The learned primary judge rejected Lake Vermont’s contention and made orders requiring Lake Vermont to permit Coranar to inspect and obtain unredacted copies of all the documents previously provided by Lake Vermont to Coranar in redacted form and also to obtain unredacted copies of any other documents, records and accounts under Lake Vermont’s control relating to the marketing activities of the Lake Vermont Project and listed in identified letters: Coronar (Australia) Pty Ltd v Lake Vermont Marketing Pty Ltd [2017] QSC 120 (the reasons).
  7. Lake Vermont appealed against the orders of the primary judge and, in lieu, sought orders limiting Coranar’s access to Lake Vermont’s documents for the sole purpose of identifying whether Lake Vermont had properly performed its obligations under the marketing agreement and requiring a confidentiality undertaking in specified terms from each of the named persons on behalf of Coranar who would be given access to the documents for that purpose.
  8. These are the reasons for why I joined in making the following orders on 29 September 2017:
    1. Appeal dismissed.
    2. Appellant to pay the respondent’s costs of the appeal on the standard basis.

Background

  1. The respective percentage interests of the participants are set out in clause 3.2 of the joint venture agreement.  ***
  2. The nature of the joint venture relationship is dealt with in clause 5 of the joint venture agreement.  Clause 5.1(e) provides that subject to a specified exception, each participant is to act in good faith towards the other participants.  ***
  3. ***
  4. Clause 15 of the joint venture agreement deals with confidentiality of information relating to the Lake Vermont Project and the joint venture that is not in the public domain.  There are exceptions to the obligation of confidentiality set out in clause 15.1, such as clause 15.2 which provides that the information that is subject to the obligation of confidentiality set out in clause 15.1 may be furnished by a participant without the consent of the other participants to a related corporation, State or Federal Government authorities, a stock exchange, financial and lending institutions or other third parties for the purpose of acquiring finance and certain independent consultants, contractors or legal advisers, or any relevant taxation authority.  There are specific provisions in clauses 15.3 and 15.4 dealing with Highly Sensitive Confidential Information which is defined in clause 1 of the joint venture agreement as follows:

‘Highly Sensitive Confidential Information’ means any of the following information in relation to the Lake Vermont Project or the Joint Venture:

  1. all information regarding the terms or nature of any marketing arrangements;
  2. all information regarding Coal sales contracts including specifications and prices for Coal;
  3. information which can not be disclosed due to obligations of confidentiality imposed on the Participants or the Manager by third parties in Project Documents; or
  4. any information which the Participants agree from time to time is to be regarded as Highly Sensitive Confidential Information.”
  1. Where information is able to be disclosed by a participant under clause 15 of the joint venture agreement, clauses 15.6 to 15.10 set out the steps that a disclosing participant must take in relation to permitted disclosure in an endeavour to limit the information that is disclosed and to ensure that, to the extent that it is disclosed, it is kept as confidential information by the recipient.
  2. Clause 2.1 of the marketing agreement contains an acknowledgement by Coranar and Lake Vermont that each of the joint venture participants will enter into marketing agreements with Lake Vermont on terms substantially the same as the terms of the subject agreement.  ***
  3. Under clause 3.1, Coranar appointed Lake Vermont as its agent for specified activities.  ***
  4. Because of the respective percentage interests of the joint venture participants in all coal mined within the Lake Vermont Project area and the fact that such coal is sold in bulk, each of the joint venture participants has an interest to the extent of its specified percentage in the coal sold as a result of the joint venture mining operations.  ***
  5. Under clause 3.10 of the marketing agreement, Lake Vermont is appointed by and accountable to Coranar for specified activities in respect of “Marketing Activities”.  ***
  6. The definition of “Marketing Activities” in clause 1.1 of the marketing agreement is not limited to marketing activities on account of Coranar’s interest in the coal, but means “all activities conducted for or incidental to the marketing and sale of Coal extracted or to be extracted as part of the Joint Venture and carried out by the Marketing Agent as agent for the Participant”.
  7. Clause 4.3 of the marketing agreement provides:

“The Participant must give to the Marketing Agent such assistance as the Marketing Agent may reasonably require in the performance of the Marketing Agent’s duties.”

  1. Clause 4.5 of the marketing agreement provides:

“The Marketing Agent is appointed by, and is accountable to, the Participant to act in the proper and best interests of the Participant and with the utmost good faith and shall not act in any manner which prefers the interest of one Lake Vermont Participant over that of any other.”

  1. Clauses 8.1 and 8.2 of the marketing agreement provide:

“8.1 The Marketing Agent shall:

  1. keep or cause to be kept comprehensive, true and accurate records and Accounts of the Marketing Activities and of the Marketing Agent’s performance of its duties under this Agreement and of all transactions entered into by or on behalf of the Participant and of the costs and expenses thereof;
  2. ensure that all invoices and financial settlements, financial reports and billings rendered by the Marketing Agent to the Participant reflects properly the facts of all activities and transactions related to the marketing activities; and
  3. keep all such records and Accounts in accordance with generally accepted accounting principles and accounting standards in Australia, consistently applied, and in particular for the mining industry.

8.2 Upon not less than 30 days’ prior notice to the Marketing Agent, the Participant may, by its servants or agents and at its sole cost, inspect and obtain copies of all documents, records and Accounts under the control of the Marketing Agent relating to the marketing activities of the Lake Vermont Project.”

  1. There is a confidentiality provision in the marketing agreement (clause 9.1) that is similar to clause 15.1 of the joint venture agreement, except that it is limited to the information relating to the marketing of the coal and the joint venture generally.  ***
  2. Clause 9.2 of the marketing agreement then sets out the recipients to which the information referred to in clause 9.1 may be furnished without consent, but clauses 9.3 to 9.6 then regulate the steps that must be taken by Lake Vermont to limit the amount of information disclosed under clause 9.2 and to endeavour to ensure that the recipients of that information also keep it confidential, at least to the same degree as provided in clause 9.1.
  3. On 7 April 2016 Coranar’s solicitors sent a letter to Lake Vermont giving notice of Coranar’s belief that Lake Vermont was in breach of the marketing agreement and the related agreement and requiring Lake Vermont pursuant to clause 8.2 of the marketing agreement to make available for inspection and copying by Coranar the documents and records set out in the schedule to that letter.
  4. Lake Vermont’s solicitors responded on 29 April 2016 that Lake Vermont did not accept the letter of 7 April 2016 as a valid notice under clause 8.2 of the marketing agreement.  Eventually by four letters dated 23 May 2016 Coranar gave notices to Lake Vermont seeking the same documents previously requested by its solicitors and those notices were accepted by Lake Vermont as notices under the marketing agreement.
  5. Coranar’s solicitors sent letters dated 7 July 2016 to each of the other three joint venture participants advising of Coranar’s intention to commence a proceeding against Lake Vermont to compel Lake Vermont to make available for inspection and copying by Coranar of documents relating to the activities which Lake Vermont had undertaken on Coranar’s behalf pursuant to the marketing agreement.  The consent of each other joint venture participant was sought to disclose in the proceeding the joint venture agreement, the management agreement between the joint venture participants and the management company, the marketing agreement, and correspondence between Coranar or its solicitors and Lake Vermont or its solicitors requesting disclosure of documents pursuant to the marketing agreement.  Conditional consents to these disclosures were obtained from the other joint venture participants.  None of the other joint venture participants was joined as a party to Coranar’s application or otherwise sought to intervene or adduce evidence in this proceeding.
  6. On 4 November 2016 Coranar made an open offer to settle the proceeding which included an undertaking as to the specified purpose to be made of the documents which were sought (including an undertaking to use the documents solely for a purpose related to the performance or enforcement of the joint venture agreement, the marketing agreement, the related agreement, and another identified agreement to which the joint venture participants were parties), not to use the documents to compete with Lake Vermont in the marketing or sale of coal, and to restrict the access to those documents to Coranar’s professional advisers, employees and officers for the specified purpose.  That offer was made on the basis that Coranar maintained its contractual and general law entitlement to the unredacted documents, but was prepared to resolve the dispute and avoid costs by the offer.  If the offer were not accepted, Coranar reserved the right to seek access to the documents without the confidentiality undertaking.  That offer was rejected by Lake Vermont on 4 November 2016 and Coranar’s application proceeded to the hearing before the primary judge on 7 November 2016.

The hearing at first instance

  1. The sole director of Coranar, Mr Clifford, who had sworn two affidavits for the purpose of the application, was cross-examined at the hearing.  The only other officer of Coranar is the secretary Mr Craig Smith.  There are no employees.
  2. In the course of his oral evidence, Mr Clifford explained that part of his role as the director of Coranar was to ensure that Lake Vermont which acted as agent on behalf of Coranar was carrying out its functions properly.  He proposed that it would be only Mr Smith and himself who would look at the documents and he did not propose informing any other person about the information contained in the documents as “The information is highly sensitive and must be retained within Coranars to my understanding”.  He was asked whether he would show the documents to the controlling shareholder of Coranar’s holding company and he responded that he would not tell him anything about the information in the documents, but would advise of any performance issues that should be flagged to him.
  3. During the hearing of the application after Mr Clifford had been cross-examined, Mr Thompson of Queen’s Counsel who appeared with Ms Hoiberg of counsel for Coranar indicated that Coranar was no longer prepared to provide an undertaking in the terms previously offered and that Coranar was pursuing its claim for an order enforcing its contractual rights without any conditions.
  4. Lake Vermont argued that clause 8.2 of the marketing agreement should be construed as requiring the documents, records and accounts to be made available for inspection and copying for the purpose only of permitting Coranar to ascertain that Lake Vermont had been properly performing its duties.  It was also argued that, as a matter of necessary implication to give business efficacy to the marketing agreement in its context, Coranar was subject to an implied contractual duty of good faith to request and use the information contained in the documents for the purposes of the contract and not for extraneous purposes.
  5. Lake Vermont relied on the maxim that “he who comes to equity must do equity” (Geraghty v Minter (1979) 142 CLR 177, 187) to submit that the equitable relief sought by Coranar should be subject to Coranar’s compliance with its related contractual obligations.
  6. Coranar argued that it had a right both under clause 8.2 of the marketing agreement and the common law of agency to unredacted copies of the documents to which it sought access.  Coranar accepted that the information it sought was likely to be confidential pursuant to the terms of the joint venture agreement and the marketing agreement, but that clause 9.2 of the marketing agreement did not preclude the disclosure of confidential information by Lake Vermont to Coranar and that, as between the joint venture participants, the use of the information by Coranar would be regulated by clause 15 of the joint venture agreement.

The reasons

  1. At [11] of the reasons, the primary judge referred to the confidential affidavits and parts of affidavits articulating matters of confidential commercial sensitivity that were adduced on the application by Lake Vermont, in order to justify the conditions sought to be imposed on Coranar’s access to the documents.  The primary judge then stated at [11]:

“I am satisfied that the evidence reveals that many of the documents which Coronar seeks to inspect and to copy do contain commercially sensitive information which would, if Coronar was so motivated, be capable of being used by Coronar’s parent company (or companies related to it) to the commercial disadvantage of LVM in relation to the marketing and sale of metallurgical coal in the areas in which they compete with LVM.  Especially might that be so if Coronar disclosed that commercially sensitive information to the individual who is the president and ultimate owner of Coronar’s parent company, Mr Mende.” (footnote omitted)

  1. The primary judge at [15] of the reasons noted the contractual entitlement which Coranar sought to enforce against Lake Vermont did not exist in a vacuum, but within “the context of a suite of contracts which were all entered into on the same day” by sophisticated parties under contracts that were sophisticated in structure and expression.  The primary judge observed at [17] of the reasons that the contracts contained contractual terms addressing and regulating the circumstances and conditions of disclosure of confidential information obtained as a result of the performance of the contracts.
  2. It was then in this context that the primary judge noted at [18] of the reasons that the parties were content to express Coranar’s right to inspect and copy documents in the terms of clause 8.2 of the marketing agreement.  The primary judge concluded at [18] that Coranar had a prima facie right to have Lake Vermont fulfil its existing contractual obligations.
  3. The primary judge noted at [26] of the reasons that it was critical to Lake Vermont’s arguments to show there was sufficient risk that Coranar might act in a way inconsistent with either its express contractual obligations of confidentiality, the suggested contractual purpose constraints, or the suggested contractual good faith constraint, as to warrant the imposition of the conditions sought by Lake Vermont.
  4. The primary judge (at [28] and [29] of the reasons) accepted Mr Clifford’s evidence.  The primary judge at [30] noted that Mr Clifford’s evidence was not challenged in any way during cross-examination and that it was not suggested to him in cross-examination that Coranar was seeking to exercise its contractual entitlement for a collateral purpose, that Coranar might provide the information to Coranar’s parent company or companies related to it, or that Coranar might act in a way inconsistent with its contractual obligations of confidentiality.  The primary judge then recorded at [32]:

“I am prepared to infer that at Coronar is in fact ready, willing and able to comply with its contractual obligations concerning the maintenance of confidentiality.  I make that finding.  That conclusion is supported by the open offer made.”

  1. The primary judge then concluded at [33] of the reasons that there was no factual basis to warrant the imposition on Coranar’s contractual entitlement to inspect and copy documents of the conditions for which Lake Vermont contended.  The primary judge also noted at [33] it was irrelevant that at one stage Coranar was prepared to settle the dispute by making the offer it did and the need for Coranar to do equity could not justify requiring an undertaking or imposing a condition that contractual obligations be complied with, when there was no suggestion that they would not be.  The primary judge stated at [33]:

“In order to justify the imposition of a constraint on an express contractual right, I would have to be satisfied that there was some affirmative need to do so, some equity which needs be protected by so doing.  Given Mr Clifford’s evidence and the course of his cross-examination, I am not so satisfied.” (footnote omitted)

  1. In light of the primary judge’s conclusion that there was no suggestion that Coranar may not comply with its contractual obligations, the primary judge noted at [34] of the reasons that it was not necessary to consider whether Coranar’s express entitlement to inspect and copy documents was constrained in the way for which Lake Vermont contended or the extent to which the express terms of the various agreements might have proved an obstacle to the acceptance of Lake Vermont’s contentions.

Lake Vermont’s submissions

  1. Lake Vermont submitted that the primary judge failed to take into consideration adequately that Coranar had made an open offer to settle the proceeding which included an undertaking as to the specified use of the disclosed documents and to restrict the access to those documents to Coranar’s legal advisers, employees and officers in conjunction with the fact that, after the offer had been rejected by Lake Vermont, Coranar’s Senior Counsel indicated during the hearing that Coranar was not prepared to provide an undertaking in the terms previously offered.  That withdrawal of the offer which must have been given on the instructions of Mr Clifford and was inconsistent with the evidence he gave before the primary judge gave rise to a risk of breach of Coranar’s contractual obligation.  The primary judge did not in the reasons deal expressly with Lake Vermont’s argument that Mr Clifford’s evidence had to be considered in light of Coranar’s Senior Counsel’s express disavowal of the confidentiality undertaking that had been offered prior to the hearing.
  2. It was not possible for the primary judge to be satisfied that Coranar would comply with its contractual obligations under clause 8.2 of the marketing agreement, when the primary judge did not determine the scope of those obligations.
  3. Lake Vermont submitted that clause 8.2 of the marketing agreement had to be construed against the background of Coranar’s obligations under the joint venture agreement, in the context of the other terms of the marketing agreement, and the purpose of the marketing agreement.  Clause 8.2 of the marketing agreement had to be construed particularly in the context of the obligations imposed under clauses 4.3 and 4.5 of the marketing agreement.  It justified its role in seeking to impose conditions on Coranar’s use of the documents on the basis of enforcing the obligation of Coranar under clause 4.3 of the marketing agreement to assist Lake Vermont in fulfilling its obligation under clause 4.5 of the marketing agreement that carried with it “the necessary corollary” that Coranar will not impede Lake Vermont in carrying out its marketing agent’s duties.  Lake Vermont’s obligation under clause 4.5 of the marketing agreement is not to act in any manner which prefers the interest of one of the joint venture participants over that of any other.  This obliged Lake Vermont to ensure there was no breach by Coranar of its obligation under clause 4.3 and that Coranar’s provision of sensitive marketing information to a competitor of the other joint venture participants would breach Coranar’s obligation under clause 4.3.  Lake Vermont was seeking to enforce an obligation owed by Coranar to Lake Vermont under the marketing agreement.  The benefit the marketing agreement conferred on Lake Vermont which required the limitation on the use to which Coranar might put the information provided pursuant to clause 8.2 was the benefit of the assistance referred to in clause 4.3 in the context of clause 4.5 of the marketing agreement.  This follows from the recognition by Warren CJ in Bytan Pty Ltd v BB Australia Pty Ltd (2012) 41 VR 46 at [56] that in a case where the contract confers on one party a power that, if used in a particular way, could defeat a benefit that the contract intends to confer on the other party, the power may be subject to an implied limitation that prevents it from being used in that way.
  4. Mr Couper of Queen’s Counsel who appeared with Ms O’Connor of counsel for Lake Vermont conceded that if the court did not accept these submissions on the effect of clauses 4.3 and 4.5 of the marketing agreement relied on by Lake Vermont to imply a purpose constraint as to the use of the information provided under clause 8.2, then it followed that Coranar’s use of the information was unconstrained by any such implied purpose.
  5. The alternative argument is that it is necessary to give business efficacy to the marketing agreement in its context to imply on an ad hoc basis a contractual duty of good faith that Coranar would request and use the information contained in the documents for the purpose of the marketing agreement (found in clause 3.1) and not for extraneous purposes:  relying on the approach for the test for implication of a term set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283.
  6. Lake Vermont relied on the obligation imposed on Coranar under clause 5.1(e) of the joint venture agreement to act in good faith towards the other joint venture participants as extending to Coranar not using information obtained from the marketing agreement for the purpose of competing in the sale of coal with other joint venture participants.
  7. On the basis that Coranar had sought the equitable remedies of specific performance or a mandatory injunction in respect of its application for access to the documents to which it claimed a contractual entitlement, the maxim “he who comes to equity, must do equity” must be applied to put appropriate restrictions on the use by Coranar of the information contained in them, consistent with Coranar’s obligations to the other joint venture participants.

Coranar’s submissions

  1. Lake Vermont could not succeed on the appeal unless it could displace the finding of the primary judge there was no factual basis for the risk that Coranar might act in a way inconsistent with its contractual obligations or the finding that there was not a sufficient risk that Coranar might act in a way inconsistent with its obligations, or unless it could show that the right under clause 8.2 of the marketing agreement should be construed subject to a constraint as to the use of the documents, or subject to an implied constraint.
  2. Clause 8.2 of the marketing agreement did not contain any express constraint on the purpose for which Coranar could inspect and copy the documents to which it was entitled relating to the marketing activities of the Lake Vermont Project.  ***
  3. Construing clause 8.2 in the context of the suite of contracts entered into on the same day by sophisticated parties does not support implying a limitation on the purpose for which Coranar may use the documents obtained pursuant to clause 8.2.  Clause 8.2 regulates the entitlement of Coranar to inspect and obtain copies of the documents and is not directed to the purpose for which Coranar may use the documents.
  4. In respect of Lake Vermont’s argument based on clauses 4.3 and 4.5 of the marketing agreement, Lake Vermont is seeking to imply a limitation on clause 8.2 from another term that it is implying into clause 4.3.  In any case, as each of the other joint venture participants have the right to documents under clause 8.2 of the marketing agreement that Lake Vermont has entered into with that joint venture participant, there is no preference being given to Coranar in Lake Vermont’s complying with its obligation under clause 8.2 of the marketing agreement to which Coranar is the only other party.
  5. The maxim “he who comes to equity, must do equity” could apply only if there were some constraint implied in clause 8.2 of the marketing agreement, as to Coranar’s use of the documents.
  6. Even if there were a limitation implied into clause 8.2 of the marketing agreement, the evidence is that Coranar intends to use the documents to assess Lake Vermont’s compliance with its obligations under the marketing agreement, so there is no evidentiary basis to expose Coranar to an undertaking more onerous than its contractual obligations.
  7. Lake Vermont cannot pursue on appeal its contention that Coranar might act in a way inconsistent with its contractual obligations of confidentiality, when that proposition was not put to Mr Clifford during cross-examination.
  8. There is no inconsistency between Coranar’s making submissions on the proper construction of clause 8.2 to the effect there was no legal constraint on the use of the documents by Coranar obtained under clause 8.2 of the marketing agreement and Mr Clifford’s evidence of how the information in the documents would be used by Coranar as a matter of fact.
  9. It is not appropriate that Lake Vermont take action under the marketing agreement against Coranar for the purpose of acting on behalf of the other joint venture participants in policing the obligations that arise under the joint venture agreement.  The separate duty of good faith Coranar owes to the other joint venture participants under clause 5.1(e) of the joint venture agreement would be enforceable by the other joint venture participants against Coranar, if Coranar sought to use the documents provided by Lake Vermont pursuant to clause 8.2 of the marketing agreement in a way that amounted to a breach of that obligation to act in good faith towards the other joint venture participants.
  10. The purpose of the marketing agreement is to appoint Lake Vermont to act as Coranar’s agent and the majority of the obligations are imposed on Lake Vermont.  It is not necessary to give business efficacy to the marketing agreement to imply an obligation of good faith on Coranar.  The conditions set out in BP Refinery (Westernport) at 283 are not satisfied.  It would be inconsistent with the detailed provisions of the marketing agreement for such a term to be implied and, particularly, with the express obligation of good faith imposed on Lake Vermont in clause 4.5 of the marketing agreement.

Was there any error in the primary judge’s decision?

  1. The terms of the marketing agreement must be understood in the context of the existence of the joint venture, but for the purpose of determining the contractual rights between Lake Vermont and Coranar, it is the terms of the marketing agreement that are determinative.
  2. It would be inappropriate for the court in this proceeding to purport to construe the joint venture agreement to which Lake Vermont is not a party without the consent or joinder of the other joint venture participants to this proceeding, neither of which has occurred.
  3. The confirmation by Coranar’s Senior Counsel to the primary judge of the withdrawal of the undertaking previously offered by Coranar was consistent with the construction of clause 8.2 of the marketing agreement advanced by Coranar and it did not follow that the withdrawal affected adversely the risk that Coranar may act inconsistently with its contractual obligations.
  4. There was no error in the primary judge not referring in the reasons expressly to the withdrawal of the undertaking previously offered by Coranar.  Lake Vermont’s submission assumed incorrectly that the withdrawal of the offered undertaking was relevant to the assessment of the risk that Coranar may breach its contractual obligations.  The withdrawal of the undertaking was, in fact, anticipated in Coranar’s solicitors’ letter of 4 November 2016 where Coranar reserved the right to seek access to the documents without the confidentiality undertaking, if Coranar’s offer to settle the proceeding were not accepted.  Mr Clifford was not cross-examined on that reservation that had been notified to Lake Vermont prior to the hearing of the application which Lake Vermont had the opportunity to do, if it were endeavouring to show it was relevant to risk of a breach by Coranar of its contractual obligations.
  5. Lake Vermont’s reliance on clause 4.5 of the marketing agreement to justify imposing conditions on Coranar’s use of the documents to which it is entitled under clause 8.2 of the marketing agreement is misconceived.  The justification could arise only if there were, in fact, a breach by Coranar in respect of its use of the subject documents.  Lake Vermont could not be said to be preferring the interest of Coranar over the other venture participants in providing Coranar the copies of the documents to which it is entitled under clause 8.2 of the marketing agreement.  In any case, it is a necessary step in Lake Vermont’s reliance on clause 4.5 that it imply a negative obligation on the part of Coranar under clause 4.3.  It does not follow that clause 4.3 which obliges Coranar to give to Lake Vermont “such assistance as the Marketing Agent may reasonably require in the performance of the Marketing Agent’s duties” supports an implied obligation that Coranar must not impede Lake Vermont in carrying out its duties under the marketing agreement.  Such an implied obligation has a much wider potential application than the positive obligation imposed by clause 4.3 to do what is reasonably required by Lake Vermont in performing its duties under the marketing agreement with Coranar.
  6. Ultimately, as the primary judge found (at [34] of the reasons) it is not necessary to determine the construction of clause 8.2 of the marketing agreement on any of the alternative arguments advanced by Lake Vermont, as irrespective of its construction, there was no evidence of any risk that Coranar would act otherwise than in accordance with its obligations under the marketing agreement.  On the basis of the evidence before the primary judge, that finding of fact is unchallengeable on this appeal.  There was therefore no error in the primary judge’s refusal to place a limitation on the purpose for which Coranar could otherwise use the documents of which it was entitled to obtain copies under clause 8.2.  There was no equity being enforced by Coranar that could be made subject to conditions, when it was seeking only the copies of the documents to which it was entitled under the clause 8.2.

Orders

  1. The orders dismissing the appeal with costs were made on 29 September 2017.
  2. These reasons will be published in the first instance to the parties to give them an opportunity to make submissions on what, if any, redactions should be made to the reasons, before they are made public.  The following further orders should be made:
  1.  The question of what redactions, if any, should be made to these reasons before they are made public is reserved.
  1.  The parties may on or before 21 days from the delivery of these reasons make a joint submission as to the redactions which should be made to these reasons before they are made public, but if the parties fail to agree on a joint submission, each party may on or before 28 days from the delivery of these reasons make a submission as to such redactions.
Close

Editorial Notes

  • Published Case Name:

    Lake Vermont Marketing Pty Ltd v Coranar (Australia) Pty Ltd

  • Shortened Case Name:

    Lake Vermont Marketing Pty Ltd v Coranar (Australia) Pty Ltd

  • MNC:

    [2018] QCA 2

  • Court:

    QCA

  • Judge(s):

    Sofronoff P, Fraser J, Mullins J

  • Date:

    02 Feb 2018

Litigation History

Event Citation or File Date Notes
Primary Judgment [2017] QSC 120 14 Jun 2017 Bond J.
Notice of Appeal Filed File Number: Appeal 6119/17 20 Jun 2017 -
Appeal Determined (QCA) [2018] QCA 2 02 Feb 2018 Appeal dismissed: Sofronoff P, Fraser JA and Mullins J.
Appeal Determined (QCA) [2018] QCA 40 20 Mar 2018 Judgment concerning redaction of [2018] QCA 2 for publication: Sofronoff P, Fraser JA and Mullins J.

Appeal Status

{solid} Appeal Determined (QCA)