Able Demolitions & Excavations Pty Ltd v BHP Billiton Direct Reduced Iron Pty Ltd
[2008] WASC 136
•10 JULY 2008
ABLE DEMOLITIONS & EXCAVATIONS PTY LTD -v- BHP BILLITON DIRECT REDUCED IRON PTY LTD [2008] WASC 136
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WASC 136 | |
| Case No: | CIV:1678/2008 | 2-3 JULY 2008 | |
| Coram: | LE MIERE J | 10/07/08 | |
| 36 | Judgment Part: | 1 of 1 | |
| Result: | Application allowed in part | ||
| B | |||
| PDF Version |
| Parties: | ABLE DEMOLITIONS & EXCAVATIONS PTY LTD (ACN 005 639 449) BHP BILLITON DIRECT REDUCED IRON PTY LTD (ACN 058 025 960) |
Catchwords: | Civil procedure Interlocutory orders Injunctions Application for interlocutory injunction to restrain defendant from acting upon or giving effect to its purported termination of its contract with the plaintiff Application for interlocutory injunction to require the defendant to allow the plaintiff to recommence work under the contract Serious questions to be tried Balance of convenience Whether granting injunctions may require inappropriate court supervision Turns on own facts |
Legislation: | Nil |
Case References: | Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) CLR 57 Bingham v 7-Eleven Stores Pty Ltd [2003] QCA 402 Bradto Pty Ltd v State of Victoria [2006] VSCA 89; (2006) 15 VR 65 Central Exchange Ltd v Anaconda Nickel Ltd [2001] WASC 128; (2001) 24 WAR 382 Colls v Home and Colonial Stores Ltd [1904] AC 179 Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1 Dura (Australia) Constructions Pty Ltd v SC Land Richmond Pty Ltd [2006] VCAT 2120 Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670 Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; (1998) 195 CLR 1 Porter v Hannah Builders Pty Ltd [1969] VR 673 Robert Salzer Constructions Pty Ltd v Embee Pty Ltd (Unreported, VSC, 29 June 1990) Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 State of Queensland v Australian Telecommunications Commission (1985) 59 ALR 243; (1985) 59 ALJR 562 Wilkinson v Clements (1872) 8 Ch App 96 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
BHP BILLITON DIRECT REDUCED IRON PTY LTD (ACN 058 025 960)
Defendant
Catchwords:
Civil procedure - Interlocutory orders - Injunctions - Application for interlocutory injunction to restrain defendant from acting upon or giving effect to its purported termination of its contract with the plaintiff - Application for interlocutory injunction to require the defendant to allow the plaintiff to recommence work under the contract - Serious questions to be tried - Balance of convenience - Whether granting injunctions may require inappropriate court supervision - Turns on own facts
Legislation:
Nil
(Page 2)
Result:
Application allowed in part
Category: B
Representation:
Counsel:
Plaintiff : Mr D R Williams QC & Mr M G Pendlebury
Defendant : Mr G M Abbott
Solicitors:
Plaintiff : Marks & Sands
Defendant : Mallesons Stephen Jaques
Case(s) referred to in judgment(s):
Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) CLR 57
Bingham v 7-Eleven Stores Pty Ltd [2003] QCA 402
Bradto Pty Ltd v State of Victoria [2006] VSCA 89; (2006) 15 VR 65
Central Exchange Ltd v Anaconda Nickel Ltd [2001] WASC 128; (2001) 24 WAR 382
Colls v Home and Colonial Stores Ltd [1904] AC 179
Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1
Dura (Australia) Constructions Pty Ltd v SC Land Richmond Pty Ltd [2006] VCAT 2120
Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670
Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; (1998) 195 CLR 1
Porter v Hannah Builders Pty Ltd [1969] VR 673
Robert Salzer Constructions Pty Ltd v Embee Pty Ltd (Unreported, VSC, 29 June 1990)
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
(Page 3)
State of Queensland v Australian Telecommunications Commission (1985) 59 ALR 243; (1985) 59 ALJR 562
Wilkinson v Clements (1872) 8 Ch App 96
(Page 4)
1 LE MIERE J: The plaintiff applies for urgent interlocutory injunctive relief. The application came on for hearing at short notice. The evidence before the court and counsels' submissions concerning the facts and questions of law was necessarily less comprehensive than if more time had been available to the parties to prepare and present their cases. I have prepared these reasons so that they are available to the parties at an early time and, accordingly, whilst I will set out the facts and my conclusions sufficiently to explain my reasons for decision, I will not attempt to canvass all of the evidence or the matters argued before me.
The Boodarie Iron Plant
2 The defendant (BHPBI) trades as Boodarie Iron and is a wholly owned subsidiary of BHP Billiton Ltd. BHPBI owns the direct reduced iron process plant at Boodarie near Port Hedland. The plant opened in or about July 1999. Whilst it operated it was a gas/petrochemical/metallurgical operation that produced hot briquetted iron. The plant occupies approximately 150 acres of the overall site. The most substantial part of the plant is the reactor/briquetting building which is approximately 100 m high and 65 m wide. There are other substantial parts of the plant. When it was operational the plant produced a substance known as direct reduced iron which is a hazardous material as it re-oxidises on contact with air and great heat may be generated.
3 On 19 May 2004 one employee was killed and three other employees suffered horrific burn injuries at the plant when a fireball or flame erupted from the reactor while it was being cleaned. Operations at the plant were suspended. BHP reviewed all health and safety issues across the whole of its operations and those of its subsidiaries including BHPBI. BHP implemented a principle known as 'Zero Harm' across all of its businesses, including the operations of BHPBI. Zero Harm emphasises the priority that BHP gives to the safety of people in every part of its businesses. As a consequence of the May 2004 incident the plant was put into care and maintenance mode from about November 2004. In or about July 2005 BHPBI sought approval from the Minister for State Development and Energy to close the plant and decommission and demolish it. Approval was granted on or about September 2005.
4 BHPBI invited tenders for work involving demolition, deconstruction, severance and removal of the plant from the site. The plaintiff (Able) was the successful tenderer. Able is a heavy industrial demolition company which operates within a group of companies. It derives its income from carrying out work under demolition contracts.
(Page 5)
- Able's income is received from payments due under its demolition contracts including from the sale of any salvage materials from the demolition works and to a lesser extent from profits on sales of other items purchased from inventory. Able has been operating for many years.
The contract
5 In January 2007 Able and BHPBI entered into a contract for the demolition of the plant.
6 The contract comprises the following documents:
(a) Formal Instrument of Agreement;
(b) General Conditions of Contract with Annexures and Appendices;
(c) Scope of Work including the Specification, Data, Sheets, Drawings and Standards; and
(d) Contract Schedules and the Appendices thereto.
7 Broadly speaking Able derives revenue under the contract in three ways. First, BHPBI is to pay Able a lump sum for the demolition work which is to be paid by way of progress payments. Secondly, title to the plant and each component of it passes to Able upon the component being removed from the site. Able derives revenue from the sale of these components which are described as salvage. Thirdly, Able purchased from BHPBI for resale inventory items comprising principally of spare parts and consumables warehoused by BHPBI on the site.
8 General Condition 26 provides that the Company Representative shall give directions and carry out other functions under the contract as agent for and on behalf of the Company (ie BHPBI) pursuant to the provisions of the contract. For the purposes of these reasons Tom Geling was the Company Representative at relevant times.
9 General Condition 29 deals, amongst other things, with health and safety matters. General Condition 29.1 provides that the Contractor's (ie Able's) failure to comply with General Condition 29 and appendices 1 - 5 amounts to a substantial breach of contract and allows the Company to act pursuant to General Condition 45, which includes the right to terminate the contract. General Condition 29.2 provides that the Company is committed to achieving the highest possible performance in occupational health and safety and has developed a systems approach to health and safety management. General Condition 29.2 further provides that in relation to health and safety the Contractor shall comply with the
(Page 6)
- requirements set out in appendices 1 and 2. General Condition 29.9 provides that, notwithstanding certain specified general conditions, the Contractor shall comply with the Company's directions in relation to, amongst other things, health and safety.
10 Appendix 1 to the contract is entitled 'HSEC Contract Requirements'. Clause 5(i) provides that the Contractor shall comply with all Health, Safety, Environment and Community (HSEC) laws and regulations, approvals, licences and permits which are applicable to the Works and conduct its activities in a manner consistent with the BHP Billiton Health, Safety, Environment and Community Management standards, the BHP Billiton fatal risk protocols, the BHP Billiton guide to business conduct, and any additional guidelines and/or operating standards such as appendices 2 (health and safety management plan), 3 (minimum environmental requirements for contractors), and 4 (human resources management plan). Clause 5(iii) provides that the Contractor warrants that it will comply with those requirements.
11 Clause 6 of appendix 1 deals with termination for breach of HSEC requirements. It includes the following subclauses:
(i) The Company and Contractor agree that these HSEC Requirements are of the utmost importance, and any significant or sustained breach or violation thereof shall be considered to be a material and substantial breach of this Contract;
(ii) Contractor shall ensure that its personnel and its subcontractor's personnel comply fully with the requirements of this Contract. Contractor further agrees that in the event that any of its personnel or any subcontractor or its personnel breach or breaches any HSEC provisions of the Contract, it shall immediately notify the Company Representative. Such breach or breaches shall be remedied promptly and as agreed with the Company Representative, steps shall be taken to avoid recurrence and any person or persons responsible for the breach or breaches shall be removed from the Site if requested by the Company Representative. If the Contractor fails to take the necessary steps to cure a breach promptly or to otherwise comply with the HSEC Requirements, the Company may exercise its rights to terminate this Contract in accordance with the default provisions in this contract.
12 Clause 9.3 of appendix 1 deals with incident reporting, investigation and recording. It provides that the Contractor shall investigate all injuries and incidents relating to the Works in accordance with all applicable statutory requirements and where required by the Company Representative using the Incident Cause Analysis Method (ICAM). The
(Page 7)
- clause further provides that any incident or near miss involving the Company's, Contractors or any third parties personnel, non-compliance with the Demolition Management Plan (DMP), property, plant or equipment shall be reported immediately to the Company Representative, irrespective of whether injury to personnel or damage to environment, property or equipment resulted.
13 Clause 20 of appendix 1 requires that management of change procedures shall be in place for all forms of change including design changes in the layout, design specifications, equipment that may have an effect on hazards and risks to the constructors, operators or maintainers of the Works.
14 General Condition 30.1.1 provides that the Company shall give the Contractor such possession, and such use and control, of sufficient of the Company's plant and the site as is necessary to enable the Contractor to execute the work under the contract. General Condition 30.2 provides that the Company may at any time have access to any part of the site for any purpose and at all reasonable times the Contractor shall give the Company access to the work under the contract at any place where the work is being carried out or materials are being prepared or stored.
15 General Condition 35 provides, amongst other things, that if the Company's Representative considers that suspension of the whole or part of the work under the contract is necessary for any reason, the Company's Representative shall direct the Contractor to suspend the progress of the whole or part of the work under the contract for such time as the Company's Representative decides. General Condition 35 further provides that when the reason for the suspension no longer exists the Company's Representative shall direct the Contractor to recommence the whole or the relevant part of the work under the contract.
16 General Condition 38 deals with variations to the work. General Condition 38.1(a) provides that the Contractor shall not vary the work under the contract except as directed in writing by the Company's Representative.
17 General Condition 45 deals with default. General Condition 45.2 provides that:
Without prejudice to the Company's rights at common law, if the Contractor commits a substantial breach of contract, the Company may give the Contractor a written notice to show cause.
(Page 8)
- Substantial breaches shall include but not be limited to:
…
(e) failure to comply with any safety requirements in the Contract.
…
Upon giving a notice under this GC 45.2 the Company may suspend payment to the Contractor until the date upon which the Contractor shows reasonable cause.
18 General Condition 45.3 provides that the Company's show cause notice shall, amongst other things, specify the substantial breach and require the Contractor to show cause in writing why the Company should not exercise a right referred to in General Condition 45.
19 General Condition 45.4 provides:
If by the time specified in a notice under GC 45.2 the Contractor fails to show reasonable cause, the Company Representative by notice in writing to the Contractor may:
(a) take out of the hands of the Contractor the whole or any part of the work under the Contract remaining to be completed; or
(b) terminate the Contract.
20 General Condition 45.5 sets out the procedure on termination of the contract. General Condition 45.5 provides that on receipt of a notice of termination, to the extent and within the times directed by the Company Representative, the Contractor shall:
(a) cease the part, or the whole, of the work under the Contract, as the case requires;
(b) comply with any directions by the Company Representative including, and to the extent directed to:
…
(ii) demobilise from the Site persons, Construction, Plant, Vehicles, Equipment and other things which are not required by the Company;
…
(v) provide the Company with possession of all plant and equipment, materials and other things on the Site or
- off-site, which are required for the work under the Contract or for incorporation in the Works; and
- (vi) hand to the Company possession of and, should title have passed to the Contractor, title to, or components of the Company's Plant including those components that have been severed from the remainder of the Company's Plant but not yet removed from the Site.
The Company may take possession of such of the Construction Plant and other things on or in the vicinity of the Site as are owned by the Contractor and are reasonably required to facilitate completion of the work under the Contract.
21 General Condition 45.6 then provides:
If the Company's costs, losses, expenses and damages in completing the work under the Contract are:
(a) greater than the amount which would have been paid to the Contractor if the work had been completed by the Contractor, the difference shall be a debt due from the Contractor to the Company; or
(b) less than the amount which would have been paid to the Contractor if the work had been completed by the Contractor, the difference shall be a debt due to the Contractor from the Company.
If the Contractor is indebted to the Company and such debt is not fully satisfied after recourse to the security provided pursuant to GC 8 and set off by the Company pursuant to GC 40, the Company may retain Constructional Plant or other things taken under GC 45.5 until the debt is met. If after reasonable notice the Contractor fails to pay the remaining debt, the Company may sell the Constructional Plant or other things and apply the proceeds to satisfaction of the debt and costs of sale. Any excess shall be paid to the Contractor.
23 The Scope of Work sets out the work to be carried out under the contract including the areas and plant to be demolished and removed. The Scope of Work requires the Contractor to prepare a number of plans for the approval of the Company. Clause 6 provides that the Contractor shall
(Page 10)
- prepare, for Company approval, a Demolition Management Plan that details the contractor's demolition methodology. Clause 6.2 requires the Contractor to nominate for planned significant lifts and/or events to BHP Billiton.
Commencement of work
24 Paul Rossignoli is the founder and managing director of Able. He is known as and was referred to by counsel as Mr Rossi. I will refer to him that way. The demolition project under the contract is a very large project. In order to carry out the works Able acquired overseas machinery at large expense and transported machinery and equipment to the plant by sea and road. It has engaged other subcontractors including local contractors, engineers and explosive experts from America. Able has invested over $30 million into the project since its commencement in January 2007.
25 Able took possession of part of the site in January 2007. Thereafter various sections of the site have been released by BHPBI to the possession and control of Able. From the outset of the works there has been a difference between Able and BHPBI concerning the respective roles of Able and BHPBI in relation to the project. Mr Rossi deposes:
From an early time in the life of the contract BHPBI has imposed ongoing and repeated requirements for Able personnel to follow instructional and procedural programmes formulated by BHPBI. Those programmes have, in many respects, born little or no relation to the function of Able in execution of the work, either by way of competency, safety, risk assessment or performance. Those programmes and procedures have been a hindrance to Able's performance. The programmes and procedures have applied standards and methodologies relevant to the mining and construction industries, but not to demolition. No personnel on behalf of BHPBI involved in the programmes and procedures have qualifications or experience in major demolition … Nonetheless, Able has carried out the programmes and procedures as required in the spirit of co-operation and has continued to do so.
- As early as 15 January 2007 BHPBI gave a direction to Able partly suspending work under the contract.
The bracing issue
26 Mr Rossi says that Able's methodology as set out in the DMP worked well and remained unquestioned by BHPBI until Able removed certain bracing from the briquetting and reactor structures in July 2007. Mr Rossi says that the bracing was removed as a preparatory step in the
(Page 11)
- demolition of the structures in accordance with Able's stated methodology, as set out in the DMP and was done in a way that conformed to orthodox demolition practice. BHPBI raised concern at the removal of the bracing. BHPBI refused to allow Able to progress further with the removal of the briquetting and reactor structures. BHPBI then conducted an investigation in relation to the approach taken by Able leading up to the removal of the bracing which BHPBI referred to as an 'ICAM' investigation.
27 On 17 August BHPBI provided Able with a copy of its report. The report says that the incident was a potential level 4 incident, that is potentially a major incident which could have caused serious harm. The report said that the incident involved bracing being removed from the briquetting plant without approval from BHPBI and without adequate risk assessment or engineering input. The authors say that the previously approved demolition work methodology did not mention the removal of any structural members from the building before it was felled as one unit and that there were no engineering calculations in place to demonstrate that the building would be structurally sound with the bracing removed. Able disputes the findings of that report. The dispute involves the following matters. First, the report claims an unauthorised change of methodology. Able denies that. Secondly, the report finds that the removal of the bracing was a compromise of safety and integrity of the structure. That is denied by Able. Thirdly, the report identifies the position and extent of bracing removed. Able says that the position of the bracing removed is different from that identified in the report and the extent of the removal is less than that identified in the report. I am unable to make any findings concerning these disputed matters.
28 BHPBI required Able to obtain an engineering assessment to satisfy BHPBI that the methodology for the demolition of the briquetting structure as set out in the DMP would work. Mr Rossi was informed that BHPBI required calculations by engineers showing a number of matters including that when the directional bracing was removed the structure would still stand up. Subsequently, Able obtained engineering reports and modelling concerning the demolition of the briquetting and reactor structures. BHPBI was not satisfied with the outcome of those reports and modelling.
29 Mr Rossi says that as a result of the unwillingness of Mr Geling to allow the original methodology to proceed without proof, including structural engineering computations and modelling confirming that the original methodology would work, Able investigated demolition by
(Page 12)
- change of methodology involving implosion. Mr Geling expressed initial favour with such a method being explored by Able and Able obtained input and assessment from experienced implosion experts, from South Africa and the United States. There have been discussions between Able and BHPBI concerning demolition by implosion. However, BHPBI has not approved demolition by implosion.
Notices to suspend work
30 Between January 2007 and April 2008 BHPBI delivered four further notices directing Able to partly or fully suspend work. On each occasion BHPBI subsequently directed Able to recommence work.
The access issue
31 In about February 2008 Mr Rossi told Mr Geling that he was concerned about the way BHPBI personnel were accessing the site. Mr Geling took the position that BHPBI would exercise its right of access to the site under the contract as it saw fit. Mr Rossi says that uncontrolled access would be a danger and problem during demolition of the gas plant in areas 11 - 12A. The bulk of the work commenced on 7 April 2008. In early April Able and BHPBI personnel took different positions concerning access to the site by BHPBI personnel. BHPBI considered that General Condition 30.2 entitled BHPBI personnel to access any part of the site for any purpose and intended to exercise that right. Able considered that reg 3.127(2) of the Occupational Safety and Health Regulations 1996 (WA) prevented it from allowing unfettered access to the site. Regulation 3.127(2) provides:
A licensed person must not allow any person to enter or remain in an area of a workplace where class 1, class 2 or class 3 demolition work being done by the person has commenced other than:-
(a) a person doing the work;
(b) a person authorised by the licensed person to enter the area for a purpose connected with doing the work; or
(c) a person authorised under a written law to enter the area.
- The site was a workplace for the purposes of the Act. Able was the licensed person. Class 1 demolition work was being undertaken in the area. Able said to BHPBI in effect that it must meet its obligations under the contract and comply with the regulation and to that end BHPBI should provide notice so that Able could assess the situation and determine
(Page 13)
- whether the purpose of a proposed visit met the requirements of the regulations.
32 On 9 April 2008 BHPBI forwarded an email to Able and stated that the proposal for access to be limited to specific time periods was unacceptable. BHPBI stated that it was entitled to be aware of the activity being conducted under the contract at all times and to conduct inspection of the work at any time provided that can be done safely. BHPBI gave notice of intention to access the site at 9.30 am on 10 April 2008 and required Able to take notice that unless Mr Murray and other team members were granted immediate access to the site at that time and as may be required thereafter from time to time or Able could demonstrate that it would be unsafe for Mr Murray or the team members to access the site at that time, BHPBI would consider the refusal to allow access a breach of contract. On 10 April 2008 Able denied access at 9.30 am on grounds of safety and offered BHPBI personnel access during breaks along with special access at 11.00 am to inspect the gas works aspect of the site.
33 On 10 April 2008 Mr Geling, as the Company Representative issued to Able Notice 026 - Suspension Notice. In the notice Mr Geling stated:
1. Pursuant to cl 35 of the General Conditions of the contract, I direct Able to suspend part of the work under the Contract.
2. The part of the work under the Contract to be suspended includes any work, demolition activity or removal of plant and equipment or as otherwise directed by me or my delegate.
3. This suspension will commence with the effect from close of business on 10 April 2008 and shall remain in place until otherwise advised or directed in writing by me or my delegate.
4. Whilst Boodarie Iron does not concede that cl 35 of the General Conditions of the contract requires it to provide reasons for the suspension, such reasons are in any event set out below.
5. Please continue all work required to ensure the safe condition of the site prior to your demobilisation and upon making the site safe, pack up your equipment and demobilise your workforce.
6. All demolished material which remains on the site continues to be the property of Boodarie Iron (cl 4.2 of the General Conditions of the contract) and should therefore be secured safely but is to remain onsite and not to be removed for sale.
7. Able's Site Management Team (or part thereof) may remain to ensure the ongoing security of the site and your equipment.
- However, no work is to be undertaken. This includes maintenance of Able equipment, removal of equipment and removal of materials from site.
- 8. All other items and conditions of the Contract remain applicable and Able must continue to comply with its other contractual obligations.
Reasons for Suspension
9. In accordance with the terms of paragraph 9 of my notice 025 dated 9 April 2008 Mr Murray, together with Mr Leith Larham, sought access to the site at 9.30 am today.
10. They were refused access by Eugene Romansky of Able who informed them that:
(a) access would only be granted during the previously mentioned limited times of 10.30 am to 11.00 am and 1.30 pm to 2.00 pm.
(b) specific access would be granted at 11.00 am today to conduct the site walk through of the gas plant to familiarise Able personnel with the inherent hazards associated with the gas plant.
11. Able refused access to Messrs Murray and Larham without providing any reasons as to why it would be unsafe for them to access the site.
12. As to Able's failure to allow access; further and alternatively, to provide reasons for refusal to access, to Messrs Murray and Larham, this constitutes a breach by Able of cl 30.2 of the General Conditions of the Contract.
13. By reason of the above breach, Boodarie Iron is unable to monitor or conduct inspections of the work activity so as to ensure that work is being conducted safely and in accordance with all safety requirements of the Contract.
14. Accordingly, Boodarie Iron is not satisfied that work under the contract can be carried out safely and suspension of the work is therefore necessary.
15. For the avoidance of doubt, as a consequence of Able's breach of cl 30.2 of the General Conditions of the Contract it is not entitled to:
(a) any extension of time for Practical Completion;
(b) any costs that may be incurred by it;
- by reason of the suspension.
34 The suspension of work directed by the 10 April suspension notice has not been lifted. In compliance with the suspension notice, Able has not carried out any work, demolition activity, removal of plant and equipment, removal of demolished (salvage) material from site or the maintenance of Able equipment or removal of equipment or materials from site.
Notice 27 - Safety Incidents
35 On 10 April 2008 BHPBI also delivered to Able Notice 027 - Safety incidents. The recitals to the notice stated that a number of issues had arisen on the project which considered together may demonstrate a substantial breach by Able of its obligations to comply with the health and safety requirements set out in the contract. The recitals referred to a number of notices commencing with Notice 002 dated 26 July 2007 and concluding with Notice 022 dated 4 April 2008 by which BHPBI had notified Able of its concerns regarding Able's commitment to safety. The notice stated that the matters set out in the recitals taken together and considered in light of the nature of the work activity amounted to substantial breaches of the safety requirements in the contract. The notice stated that before recommencing work on site Able was requested to provide full particulars of how it would promptly remedy its non-compliance with the safety requirements in the contract, what steps it would take to avoid any recurrence of the non-compliances with the HSEC requirements and what steps it would take to ensure there are no future safety incidents on site. Annexure A to the notice provided a summary of relevant breaches of HSEC requirements. There were five specific incidents, including the structural bracing incident in July 2007. In addition, there were a number of incidents that were grouped together and described as:
Incident relating to over width vehicle, physical injuries, failure to wear PPE, general failures to report incidents, failure to comply with conditions of demolition licence.
Able responds to suspension notice and safety incidents notice
36 Able responded to suspension Notice 026 on 15 April 2008. Able stated that it was not in breach of General Condition 30.2 as alleged in the notice or in breach of safety requirements. Able said, amongst other things, that it had not and did not intend to deny site access to BHPBI contrary to the proper operation of General Condition 30.2 and stood ready, willing and able to provide such access and to discuss and work
(Page 16)
- with BHPBI to find ways and to agree on times and occasions when, for reasons of safety, BHPBI's personnel should not be present on site. Able requested the Company Representative to forthwith direct Able under General Condition 35 to recommence work.
37 BHPI responded to Able's letter of 15 April 2008 by letter of 18 April 2008. Mr Geling said that in response to Able's request for a direction to recommence work:
5. To date, the only proposal put forward by Able regarding the access to site has been for Boodarie Iron personnel to access the site in certain limited periods when no demolition activity is underway.
6. I do not propose to restate the reasons why Able's proposal is unacceptable. Those reasons were clearly set in notice 025 dated 9 April 2008.
7. Able is requested to provide written confirmation that, pursuant to GC 30.2, Boodarie Iron personnel will be authorised to access the site as may be required from time to time, apart from at those times when Able can properly demonstrate that it would be unsafe for Boodarie Iron personnel to enter the site.
8. Without satisfactory confirmation of the above I do not consider that the reasons for suspension outlined in notice 026 dated 10 April 2008 have been sufficiently addressed.
38 Able replied to Notice 027 - Safety Incidents on 15 April 2008. Able denied that it was in substantial breach of the contract on any alleged ground or combination of alleged grounds contained in the notice. Able said that the alleged incidents set out in annexure A to Notice 027 contained inaccuracies and distortions and do not constitute breaches of contract, that they have been incorrectly classified as breaches and have been assessed by reference to inappropriate and inapplicable standards by personnel unqualified and inexperienced in demolition practices and safety standards. Able then proceeded to respond to each of the incidents described in annexure A to Notice 027.
39 In April and May there was correspondence and discussions between Able and BHPBI and BHPBI's solicitors. On 28 April 2008 Able gave notice of a dispute pursuant to General Condition 49.1. The notice stated that a dispute exists between Able and BHPBI concerning the validity of the suspension of work by BHPBI, the alleged breaches of contract by BHPBI and the entitlement of Able to an extension of time and to consequential costs, expenses and on-site overheads.
(Page 17)
40 On 1 May 2008 BHPBI delivered to Able Notice 030 - Safety Incidents. The notice referred to BHPBI's Notice 027 dated 10 April 2008 by which BHPBI notified Able that it considered Able had failed to comply with a number of aspects of health and safety requirements set out in the contract. BHPBI referred to the suspension of work under the contract and then stated:
7. The suspension will continue until such time as Able has addressed properly the matters referred to in notice 027 and most importantly satisfied Boodarie Iron that it has taken and will take steps to ensure that the risk of future safety incidents on site is minimised to the extent reasonably possible.
41 On 8 May 2008 a Worksafe inspector issued to Able an Improvement Notice under s 48 of the Occupational Safety and Health Act 1984 (WA). The notice stated that the inspector had formed the opinion that Able was contravening s 19(1) of the Occupational Safety and Health Act 1984 on the grounds that there was inadequate safety induction on the site for persons entering the demolition site. The inspector stated that persons were entering the workplace unbeknown to Able and this exposed those unauthorised persons to hazards. The notice directed Able to provide a site specific induction programme for all persons entering the demolition site.
May show cause notice
42 On 16 May 2008 BHPBI delivered to Able a notice to show cause issued pursuant to cl 45 of the general-conditions of contract. A recital to the notice stated that a number of safety incidents had occurred on the project which had resulted in multiple breaches of the safety requirements set out in the contract. Particulars of the most significant incidents, the safety requirements which have been breached as a consequence of these incidents and a list of the relevant documents relating to each incident were set out in annexure A to the notice. A further recital stated that in addition a number of other safety requirements had been breached particulars of which were set out in annexure B to the notice. The recital stated that the breaches referred to annexures A and B considered both individually and together demonstrate a substantial breach by Able of its obligations to comply with safety requirements set out in the contract. The notice stated that by reason of the matters set out in the recitals Able has committed a substantial breach of the contract pursuant to cl 45.2(e) of the general conditions of the contract in that Able has failed to comply with the safety requirements set out in the contract. The notice required Able to show cause by delivery of a letter to BHPBI's solicitors why
(Page 18)
- BHPBI should not exercise a right referred to in cl 45 of the general conditions.
43 The incidents set out in annexure A are substantially the same as those set out in annexure A to the 10 April notice. They may be briefly summarised as follows.
|
|
|
|
|
An incident occurred on 27 April 2007 when Able personnel used oxygen propane equipment to cut free a number of small electric motors, a fire booster pump station and two gas compressors in area 15. |
|
|
An incident occurred on 17 July 2007 when Able personnel were removing bracing from a structure without approval from Boodarie Iron and without an adequate risk assessment or engineering input having been obtained. |
|
|
An incident occurred on 17 July 2007 when Able personnel were cutting Bucket Elevators in areas 6 and 14. Fine dust that was built up in the buckets cascaded to the ground below. Scrap metal was then being removed to a pile outside and was dragged across the ground where the fine dust was located. Considerable flaring and flames from the dust were observed. Significant heat was generated from these piles of fines. |
(Page 19)
|
|
An incident occurred on site on or about 27 August 2007 involving the removal of electrical cables and the contact of the cable with a live transformer within the Alinta facility. |
|
|
An incident occurred on 13 November 2007 when Able personnel were lifting a tank in a Caterpillar 330B excavator and the tank toppled over and fell against the cabin front of the machine. The magnet on the caterpillar was being used in a manner that was not intended by the manufacturer. The impact of the cylinder base contacting the frame and front of the cabin caused damage to the cabin frame and the support structure of the windscreen. |
|
|
|
|
|
Boodarie Iron have significant concerns regarding the competency of Able's workforce. There seems to be a lack of attention to health and safety and a general lack of concentration of workers, evidenced by resulting accidents and near misses such as those referred to below: A twisted ankle on 4 February 2008; Fall from height on 25 January 2007; Hand injury on 3 April 2008; A lifting incident on 3 April 2008. |
There have been multiple occasions on which Able personnel have failed to wear appropriate PPE |
(Page 20)
Two further incidents | ||
|
|
There have been a number of occasions on which Able has failed to properly report incidents. |
|
|
Pursuant to condition 2 of Able's demolition licence. |
Able responds to show cause notice
44 Able responded to the show cause notice with a written response on 23 May and a supplementary written response dated 30 May 2008. Able responded in detail to each allegation in the notice. In essence, Able denied that it was in breach or substantial breach of the contract on any alleged ground or combination of grounds contained in the notice. I am unable to make any findings about the alleged breaches of contract.
June show cause notice
45 On 11 June 2008 BHPBI delivered a document entitled 'Final Demand and Notice to Show Cause' dated 11 June 2008. The notice stated that Able had failed to pay an amount of $880,000 due under invoices issued by BHPBI to Able relating to the sale of briquetting assets. The notice stated that the outstanding amount constituted a debt and that non-payment of the outstanding amount constituted a substantial breach of the contract by Able. Able responded to that notice by letter of 18 June 2008 from Able's solicitors to BHPBI's solicitors. Able's solicitors disputed the amount that was owing in respect of the briquetting assets and stated that the amount owing was the sum of $396,000. Able said that it would, and it did, pay that amount on that day.
Able commences proceedings
46 On 13 June Able issued the writ of summons. The principal relief sought relevant to the present application was a declaration that the suspension of work direction dated 10 April 2008 and its continuation is
(Page 21)
- invalid and of no contractual effect and an order that BHPBI, pursuant to General Condition 35 of the contract, provide Able with a direction to recommence work under the contract. Able further sought a declaration that the May show cause notice is invalid and an injunction restraining BHPBI from exercising rights under cl 45 of the contract pursuant to the May show cause notice.
47 On 18 June BHPBI issued a notice of termination pursuant to cl 45 of the general conditions. The notice said that by reason of the matters set out in the May show cause notice Able has committed a substantial breach of the contract pursuant to cl 45.2(e) of the general conditions in that it has failed to comply with the safety requirements set out in the contract and failed to show reasonable cause why BHPBI should not exercise a right under cl 45 of the general conditions of the contract. The notice of termination then stated that BHPBI terminates the contract pursuant to cl 45.4(b) of the general conditions.
48 On 23 June 2008 Able issued its chamber summons seeking injunctions restraining BHPBI from acting upon or giving effect to its purported termination on 18 June 2008 of the contract and requiring BHPBI to continue to treat the contract as remaining on foot and binding and to give effect to its terms.
Interlocutory orders sought by Able
49 At the hearing of this application Able sought interlocutory orders to the following effect.
1. BHPBI be restrained from acting upon or giving effect to its purported termination on 18 June 2008 of the contract;
2. BHPBI shall continue to treat the contract as remaining on foot and binding and give effect to its terms.
3. BHPBI, through its representative Mr Geling, forthwith provide Able with a direction in writing to recommence work under the contract pursuant to General Condition 35 of the contract.
4. BHPBI be restrained from exercising rights under General Condition 45 of the contract in reliance on the May show cause notice.
5. BHPBI be restrained from exercising rights under General Condition 45 of the contract in reliance on the June notice to show cause.
(Page 22)
Serious questions to be tried
50 In its written and oral submission Able submitted that there are seven serious questions to be tried as follows:
1. The April suspension notice and its continued operation is and remains invalid as it was not and is not authorised by the contract, in particular by General Condition 35. It is contended that Mr Geling, when deciding to issue the notice and thereafter, could not, in good faith and on reasonable grounds have formed the opinion that it was necessary to suspend work.
2. The issuing of the April suspension notice and its continued operation (Mr Geling's refusal to lift that notice) was and is a breach of implied terms:
(a) that BHPBI would do all that is necessary on its part to enable Able to perform its obligations under the contract;
(b) that BHPBI would not do anything that is calculated to hamper Able in performing the contract or to delay Able in performing it.
3. The issuing of the April suspension notice and its continued operation (Mr Geling's refusal to lift that notice) was and is a contravention of the implied term not to exercise powers of suspension:
(a) other than in good faith;
(b) other than on reasonable grounds; and
(c) capriciously.
4. Contrary to that contended in the May show cause notice there had not been substantial breaches of the contract by Able and, consequently, that notice was not valid and the purported exercise of power in the termination notice was invalid.
5. Any purported exercise of powers under General Condition 45.4, including the power of termination mentioned in the termination notice was in breach of the implied terms referred to at 2 above.
6. Any exercise of powers of the type mentioned in 5 would be in breach of the implied term referred to in 3.
7. Any attempt to terminate in reliance on the matters alleged in the June show cause notice would be invalid as a breach of the implied term referred to in 3 above in that, as of 18 June 2008, the
- date of payment by Able of the sum of $396,000 in response to that notice, Able was not in breach of the contract.
51 During the hearing junior counsel for Able submitted that there is an eighth serious question. The eighth serious question is the contention that the 1 May suspension notice (Notice 030) is invalid.
52 I find that there is a serious question to be tried on each of the matters claimed by Able and set out above. Counsel for BHPBI did not argue otherwise. Counsel for BHPBI submitted that there were many factual and legal hurdles to be overcome by Able to establish that it was entitled to final relief and that that was a factor that should be taken into account in determining whether to grant the interlocutory relief sought.
53 Able's case raises a number of factual and legal issues. It is common ground that the power of the Company to give a show cause notice under General Condition 45.2 is conditioned upon the contractor having committed a substantial breach of contract. There is an issue whether Able committed a substantial breach of contract as alleged by BHPBI in the May show cause notice. The issues between the parties include whether or not the incidents alleged by BHPBI in the May show cause notice occurred or accurately stated. It is then in issue whether the facts, as they may be found, constitute a breach of contract and if so whether it is a substantial breach of contract, whether taken individually or collectively. The evidence presently before the court is necessarily incomplete and has not been the subject of cross-examination or otherwise tested. I cannot and do not make any assessment of the strength of that part of Able's case.
54 There is an implied term in every contract requiring each party to do whatever is reasonably necessary to enable the other party to reap the benefit of the contract. This is often referred to as the duty to facilitate performance: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, 607 - 608 (Mason J). Whether BHPBI breached that implied term of the contract depends, amongst other things, on findings of fact. I cannot and do not make any assessment of the strength of that part of Able's case.
55 In Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 Finn J concluded that in New South Wales a duty of good faith, both in performing obligations and exercising rights, may by implication be imposed upon parties as part of a contract. In Central Exchange Ltd v Anaconda Nickel Ltd [2001] WASC 128; (2001) 24 WAR 382, Parker J said:
(Page 24)
- A duty of good faith in the performance of obligations and in exercising rights may, by implication, be imposed upon parties as an incident of a contract, but I would not see it to be established for all contracts, regardless of the nature and terms of the particular contract and the circumstances of the parties by which the contract was concluded, that such a term should be universally implied [22].
56 It is sufficiently arguable that BHPBI is required to exercise its powers of suspension and its powers to issue a notice to show cause and to terminate the contract in good faith to give rise to a serious question to be tried. Whether BHPBI's exercise of those powers was exercised other than in good faith, other than on reasonable grounds or capriciously involves questions of fact, questions of construction of the contract and questions of contract law. I cannot and do not make any assessment of the strength of Able's case that rests on those matters.
57 I find that there is a serious question to be tried that Able is entitled to the final relief it seeks.
Interlocutory injunctions - legal principles
58 In order to secure an injunction Able must show that there is a serious question to be tried or that Able has made out a prima facie case, that it will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted and the balance of convenience favours the granting of an injunction. To establish a prima facie case Able must show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. How strong the probability needs to be depends upon the nature of the rights Able asserts and the practical consequences likely to flow from the orders it seeks: Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) CLR 57 [65] (Gummow and Hayne JJ) [19] (Gleeson CJ and Crennan J).
59 The granting of an injunction involves balancing the injustice which might be suffered by BHPBI if the injunction is granted and Able later fails at trial, against the injustice which might be suffered by Able if the injunction is not granted and Able later succeeds at trial: Films Rover International Ltd v Cannon Film Sales Ltd[1987] 1 WLR 670; Bradto Pty Ltd v State of Victoria [2006] VSCA 89; (2006) 15 VR 65.
(Page 25)
Hardship to Able
60 In its written submissions Able says that the balance of convenience, or balance of justice, favours the grant of the relief it seeks for the following reasons.
1. The consequential effects of the termination of the contract would be likely to be such that damages would not adequately compensate Able in respect of loss of employees and impact upon commercial reputation, each with an attendant impact upon Able's ability to gain further contracts;
2. There is a real likelihood that refusal of injunctive relief would have a disastrous effect upon, if not destroy, Able's business;
3. The impact of BHPBI exercising its contractual right to have recourse to the security provided by Able pursuant to General Condition 8.1 (the security provided is $1 million) cannot be ignored. This amount is borrowed funds, secured in favour of Westpac;
4. Whether it be because of the call on the security or generally termination of the contract, the terms of the security granted by Able in favour of Westpac, pursuant to the facility with Westpac, Westpac is entitled to call for the immediate repayment of all monies loaned under the facilities and, on the event of non-repayment, to exercise its rights as a secure creditor, including appointing receivers over Able (which in itself would do significant harm to Able's reputation - and inevitably lead to a loss of the business and failure of the company);
5. The terms of grant of the Westpac facility make it clear that the status of the contract is a matter of considerable importance to Westpac;
6. The impact upon third parties within the Able group of companies, their businesses, their employees and those that they deal with would be likely to be significant;
7. The impact of General Conditions 45.5 and 45.6, which on their face entitle BHPBI to take possession of various items, including 'construction plant' for the purpose of the works;
8. The loss of value of the salvage items already severed but still on site;
9. The possible loss of inventory; and
(Page 26)
- 10. The great difficulties which would be involved in assessing damages.
61 In its oral submissions Able submitted in essence that the failure to grant the relief sought would cause the financial failure of Able - Able would not survive to trial. There is evidence to support each of Able's contentions.
62 Some, but not all, of the matters referred to by Able might be averted by an order restraining BHPBI from giving effect to its purported termination of the contract but without requiring BHPBI to direct Able to resume and continue the work under the contract. An order restraining a party from giving effect to a purported termination of contract is not unusual.
63 In this case, there are three consequences of the termination of the contract that might be averted by an order restraining BHPBI from giving effect to the termination. First, there are the consequences of termination provided for in General Condition 45.5. Those include that Able shall:
comply with any directions by BHPBI to:
…
(iii) assign to the Company all rights and benefits under contracts with third parties;
(iv) do all things necessary in co-operation with the Company and subcontractors concerned to arrange that subcontractor's contracts be novated to the Company;
(v) provide the Company with possession of all plant and equipment, materials and other things on the site or offsite, which are required for the work under the contract or for incorporation in the works; and
(vi) hand to the Company possession of, and, should title have passed to the Contractor, title to, or components of the Company's plant including those components that have been severed from the remainder of the Company's plant but not yet removed from the site.
64 Further, General Condition 45.5 provides that the Company may take possession of such of the construction plant and other things on or in the vicinity of the site as are owned by the Contractor and are reasonably required to facilitate completion of the work under the contract.
(Page 27)
65 Secondly, BHPBI might have recourse to the security of $1 million provided by the plaintiff pursuant to General Condition 8.
66 Thirdly, BHPBI might enter into a contract with a new contractor to carry out the works the subject of the contract, or might embark upon those works itself.
67 If BHPBI was to take any of the steps that I have referred to consequential upon termination of the contract those steps would be irreversible. It would render Able's claim for final declaratory and injunctive relief nugatory. The refusal of interlocutory relief may have dire consequences for Able. There is a likelihood that Able would become insolvent. Any vindication of Able's rights at trial would be useless to it. Indeed, it is likely that the matter would never proceed to trial.
68 BHPBI delivered notice of termination of the contract when it was under notice that Able intended to apply to the court for interlocutory relief to prevent BHPBI doing so. Where a defendant has, with knowledge of an impending application to the court, acted so as to alter the position pending the decision of the court, the court will take this into account and may order the defendant to undo what has been done: Colls v Home and Colonial Stores Ltd [1904] AC 179.
69 The balance of convenience, or hardship, favours the grant of injunctive relief to restrain BHPBI from taking those steps consequential upon or giving effect to the alleged termination of the contract. That is, the injustice which might be suffered by Able if the injunction of the sort referred to is not granted outweighs the injustice which might be suffered by BHPBI if an injunction of the sort referred to is granted. An injunction of the sort referred to does not require BHPBI to direct Able to resume work and does not require BHPBI to further perform the contract. The injunction is to restrain BHPBI from doing things consequential upon the alleged termination of the contract.
70 I will now consider whether to grant the further interlocutory relief sought by Able.
Injunctions to perform the contract
71 BHPBI submits that the totality of the injunctions sought by Able have the effect of restoring the contract, ruling that the suspension of the works is invalid and compelling BHPBI to continue in a commercial relationship with Able who BHPBI considers to have a fundamental
(Page 28)
- difference of view about the health and safety requirements under the contract and which may need further court intervention to resolve any disputes that could arise in the future. BHPBI says that fundamental to its objection is that Able seeks mandatory injunctions without any real test of the facts or circumstances that give rise to the issue of the notices to show cause and the termination of the contract by BHPBI. Whilst there is some common evidence about the occurrence of occupational health and safety incidents, there is a conflict on the evidence regarding much of those circumstances. BHPBI submits that it is inappropriate for such matters to be determined in an interlocutory hearing.
72 BHPBI submits that the proposed interlocutory mandatory injunction concerning the direction to recommence work invites the court to prejudge the matters that will be the subject of detailed evidence at trial.
73 The relief sought by Able, at least in so far as it requires BHPBI to direct Able to recommence work and to carry out the contract is mandatory in substance.
74 BHPBI submits that in a normal case, before a mandatory injunction is granted, the court must feel a high degree of assurance that at the trial it will appear that the injunction was rightly granted and this is a higher standard than is required for a prohibitory injunction: State of Queensland v Australian Telecommunications Commission (1985) 59 ALR 243; (1985) 59 ALJR 562.
75 In Meagher, Gummow & Lehane'sEquity Doctrines & Remedies (4th ed, 2002) [21-395] the authors say that mandatory injunctions are comparatively rare and the interlocutory mandatory injunction is a particularly rara avis. The authors say:
This is partly because a mandatory injunction is usually more onerous for a defendant to comply with than a prohibitory one; moreover, the usual purpose of an interlocutory injunction is to preserve the status quo, a consideration inapplicable to mandatory injunctions. But there is nothing to prevent a court from issuing an interlocutory mandatory injunction. Typical, but not exhaustive, examples are cases where … the defendant has attempted to forestall the court's order.
In truth, a judge hearing an application for an interlocutory mandatory injunction must apply exactly the same tests as he would in the case of an application for an interlocutory prohibitory injunction, not some different or more exacting test; nor is the fact that the relief sought is mandatory a ground for refusing relief; but in the application of the normal tests, often, but not always, the fact that the relief sought is mandatory will tilt the balance of convenience in the defendant's favour.
(Page 29)
76 In Bingham v 7-Eleven Stores Pty Ltd [2003] QCA 402 [106] Muir J referred to the continuing controversy as to whether an applicant for a mandatory interlocutory injunction is obliged to meet the 'high degree of assurance of success' test propounded by Gibbs CJ in State of Queensland v Australian Telecommunications Commission at (563) and referred with apparent approval to the statement in Meagher, Gummow & Lehane that I have referred to above. Jerrard JA agreed with the remarks of Muir J and added that 'perhaps the high degree of assurance a judge should have before making injunctive orders, whether mandatory or prohibitory, is not that the applicant will succeed at trial but that a greater injustice would occur from a refusal than from a grant of the order, whatever the final outcome on a trial' [41].
77 If I was required to 'feel a high degree of assurance that at trial it will appear that the injunction was rightly granted' I would not be able to grant the injunctions sought because, as I have said, I am not able to form an opinion as to the strength of Able's case. However, in the circumstances of this case that is not a ground for refusing relief.
78 BHPBI submits that an order granting specific performance of the contract (especially on an interlocutory application) would be unjust and therefore the court should not order it because:
1. damages are an adequate remedy;
2. Able is not ready, willing or able to comply with the HSEC obligations of the contract which have been defined as being of the utmost importance to the performance of the contract and in respect of which the parties have agreed that such a breach will be substantial and entitle BHPBI to terminate the contract;
3. the relationship between the parties has completely broken down and BHPBI has lost trust and confidence in Able; and
4. the performance of the contract would require the supervision of the court.
79 I am not satisfied that interlocutory relief should be refused on the ground that damages would be an adequate remedy. There is evidence before the court that if Able is not permitted to resume performing the contract and earning revenue under the contract it may not survive to the trial. Nevertheless, I decline to grant an interlocutory injunction requiring BHPBI to perform the contract and to direct Able to resume work for the following three reasons.
(Page 30)
80 First, there is a dispute whether Able has complied with and is ready, willing or able to comply with the health and safety obligations of the contract. To order BHPBI to direct Able to resume work may be to order a course of action that carries a risk of harm to the workers engaged in the work and others on the site. I am unable to determine that dispute and hence cannot be satisfied that a direction to resume work would not involve the risk of harm or injury.
81 Secondly, the relief sought by Able would involve requiring BHPBI to resume and continue to perform a contract that would involve continued co-operation between BHPBI and Able in circumstances where the relationship between the parties has broken down and BHPBI has lost trust and confidence in Able carrying out the works safely.
82 BHPBI places importance on the fact that the contract is in the nature of or similar to a construction contract. In its written submissions BHPBI submitted that in the specific instance of construction contracts the grant of an injunction preventing the termination of the contract would compel the owner to accept performance of a contract by the contractor, so that in the result a partial or complete specific performance is forced upon the unwilling owner, and the general rule is that a 'building contract is not specifically enforceable': a general rule described in Wilkinson v Clements (1872) 8 Ch App 96 as 'settled' and more recently restated in Porter v Hannah Builders Pty Ltd [1969] VR 673, 679.
83 In 'Is a Building Contract Specifically Enforceable and, if so, Under what Circumstances?' (2007) 23 BCL 16 David Levin QC and Andrew Laird say that the general rule is that prima facie, an ordinary building contract is not specifically enforceable and an aggrieved party is left to its remedy in damages. Levin and Laird say that notwithstanding the weight of authority there have nevertheless been isolated instances where that line of authority has been distinguished. For example, in Robert Salzer Constructions Pty Ltd v Embee Pty Ltd (Unreported, VSC, 29 June 1990) an interlocutory injunction was granted to prevent the termination of a building contract. In granting the injunction, Smith J considered it relevant that there was no dispute between the parties in relation to the standard of the builder's work and that there was nothing in the evidence to suggest that it was unreasonable to expect the parties to continue to work together, two mitigating factors that are frequently not present in building disputes.
84 Those two factors are not present in this case. The dispute between the parties concerning the contractor's work, and in particular whether
(Page 31)
- Able is carrying it out in accordance with the safety requirements of the contract, is at the heart of the dispute between them. That difference and the conflict which it has engendered has led to a breakdown in the relations between Able and BHPBI. Levin and Laird refer to the decision of Senior Member Cremean of the Victorian Civil and Administrative Tribunal in the matter of Dura (Australia) Constructions Pty Ltd v SC Land Richmond Pty Ltd [2006] VCAT 2120 in which the builder sought an interim injunction. Associate Professor Cremean found that the balance of convenience did not lie in favour of granting an interlocutory injunction because:
1. The material before the tribunal indicated that there had been a serious breakdown in the relationship between the principals of the builder and the proprietor, which made it unreasonable to expect the parties to continue to work together;
2. The effect of a continuing injunction would be to force an unwilling proprietor to stand by and watch the builder finish the works in the manner that the builder contended was appropriate before the matter reached a final hearing on the merits;
3. Damages rather than injunctions restraining actionable wrongs were prima facie the appropriate remedy in such disputes and none of the matters advanced by the builder rebutted this basic presumption.
(Page 32)
86 BHPBI submits, and I accept, that the ongoing relationship between BHPBI and Able has the following features:
1. There are no pre-agreed drawings and specifications that are typical in a construction contract and which can be used as a reference point for the parties;
2. The parties were, when the contract was terminated, in disagreement about the programme of works and the demolition method to be employed;
3. The works under the contract are more dangerous than a typical building contract;
4. The contract provides for BHPBI staff to access and inspect the work being carried out and permit BHPBI to monitor the works. That is of importance to BHPBI because carrying out the work safely is an overriding concern.
87 In short, the relief sought by Able would involve requiring BHPBI to resume and continue to perform the contract. That would involve continued co-operation between BHPBI and Able in circumstances where the relationship between the parties has broken down and BHPBI has lost trust and confidence in Able and in particular in Able carrying out the works safely.
88 Thirdly, requiring BHPBI to perform the contract would involve constant supervision of the court and enforcing by the remedy of contempt the performance of contractual provisions where there are differences between the parties concerning their performance.
89 The relief sought by Able includes an order requiring BHPBI to direct Able to recommence work and then to continue to perform the contract. That would involve BHPBI directing Able to resume, amongst other things, demolition work and to co-operate with Able in carrying out that work. That co-operation would involve matters such as agreeing any changes to the demolition methodology such as demolishing the reactor plant by implosion rather than the method presently specified in the demolition plan. It is likely that differences will arise between the parties as to changes in methodology or scheduling of work. It is likely that differences will arise as to whether Able is carrying out the work in accordance with the contract and whether BHPBI is entitled to issue any further directions to stop work or further notices to show cause or even perhaps a further notice to terminate the contract.
(Page 33)
90 In Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; (1998) 195 CLR 1 the High Court said in relation to interlocutory mandatory injunctions ordered by the Federal Court:
We see in the orders no defect which sometimes is expressed as the involvement of the court in 'constant supervision' of continued conduct. Reservations of that nature have been expressed in decisions of this Court. However, questions of degree rather than absolute restrictions upon the scope of curial relief are involved. Reference was made in the Federal Court judgments and in submissions to this Court to the speech of Lord Hoffmann in Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1. His Lordship affirmed the refusal by the judge at first instance of an order for specific performance of a lease for a term of 35 years containing a covenant to keep premises open for retail trade during usual hours of business in the locality. His Lordship's statement that the usual practice was not to grant specific performance to carry on an activity over a period of time was made in response to a submission by the lessor to the effect that the equitable remedy was no longer to be understood as granted in the auxiliary jurisdiction where damages would be an inadequate remedy. The lessor submitted, without success, that in cases such as Argyll Stores the court 'should look at the whole panoply of available remedies and consider the appropriate one rather than the gloss of rules put on them restricting their use.'
The House of Lords discharged the order for specific performance which the Court of Appeal had made. The significance of Lord Hoffmann's speech for present purposes is not the rejection of the lessor's submissions. That rejection, with respect, was virtually inevitable. What is significant is the acceptance by the House of Lords that the concept of 'constant supervision by the court' by itself is no longer an effective or useful criterion for refusing a decree of specific performance. Rather, Lord Hoffmann placed stress on other propositions. First, a person who is subject to a mandatory order attended by contempt sanction (which 'must realistically be seen as criminal in nature') ought to know with precision what is required; and, second, the possibility of 'repeated applications for rulings on compliance' with orders requiring a party 'to carry on an activity, such as running a business over a more or less extended period of time' should be discouraged.
Reference to constant court applications should not be misunderstood. The courts are well accustomed to the exercise of supervisory jurisdiction upon applications by trustees, receivers, provisional liquidators and others with the responsibility for the conduct of administrations. The reservation of liberty to apply to the Federal Court in respect of certain of the orders to be made is in no way out of ordinary in the exercise of equitable jurisdiction [78] - [80].
(Page 34)
91 Lord Hoffmann's judgment in Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1is discussed by Andrew Phang in 'Specific Performance - Exploring the Roots of Settled Practice' (1998) 61 MLR 421. At (423 - 424) Phang says:
What constant supervision did not mean, Lord Hoffman remarked, was literal supervision by the court itself. However, the party enjoined to perform would be liable for contempt if it persisted in disobeying the court order. But, as Lord Hoffman quite pertinently pointed out, this 'does not really meet the point'. The crux of the problem lay, rather, in the fact that the court might have to give 'an indefinite series' rulings to enforce the said order whenever there was a breach and a consequent application by the party aggrieved and it was this 'which has been regarded as undesirable'. That was not, however, the end of the matter, for his Lordship then proceeded to elaborate upon the reasons why the possibility of such repeated rulings was undesirable. And it was at this point that the issue of contempt (mentioned earlier) finally became directly relevant: as 'the only means available to the court to enforce its order', punishment for contempt, was nevertheless 'a powerful weapon: so powerful, in fact, as often to be unsuitable as an instrument for adjudicating upon the disputes which may arise over whether a business is being run in accordance with the terms of the court's order'. The consequences were dire and undesirable: quite apart from damaging the defendant's commercial reputation, it would literally coerce that party to run its business in a certain manner when it had in fact decided that it was not in its economic interest to run the business at all; in addition, enforcement (particularly in the context of repeated applications over a period of time) was 'likely to be expensive in terms of cost to the parties and the resources of the judicial system'. The focus, interestingly, was not only on the individual freedom of the party but also on the more utilitarian consideration of non-wastage of resources as well.
92 And at (427 - 428):
Lord Hoffmann not only referred to the requirement of constant supervision by the court but also to the need for the presence of yet another factor, viz, the definite nature of the terms of the contract itself (and, hence, clarity and precision of the court's order). Indeed, it should be noted that Lord Hoffmann also decided that the obligation in the instant case was, in any event, too imprecise to be enforced. On a related note, the literal language as well as tenor of the judgment suggest that both these last-mentioned factors (ie constant supervision of the court and definiteness in the contractual terms) are separate and independent, a suggestion that finds support not only in the discussion in the text books but also in case law as well. It is, however, suggested that there is a necessary (even significant) overlap between these two factors, for if there is insufficient precision (and therefore inadequate guidance to the defendant), can it not be argued that it would be equally (and
(Page 35)
- simultaneously) difficult for the court itself to supervise the execution of the order, even assuming that there were no other objections?
93 The two factors referred to by Phang, that is constant supervision of the court and lack of precision in contractual obligations, are present in this case. The contract is not a contract to produce a result but rather a contract to carry out activities over an extended period of time. The contract is not one which leaves the contractor to demolish the plant using such methods and processes as it sees fit providing it produces the result. The contract is to execute and complete the work in accordance with specified methods and schedules and to do so in accordance with health, safety, environment and community requirements specified.
94 In the course of carrying out the works to date differences have arisen between Able and BHPBI as to whether or not Able has carried out the work in accordance with the contract. If BHPBI was required by injunction to resume and perform the contract it is likely that such differences would continue or at least differences of a similar nature would arise again. The court might have to give an indefinite series of rulings as to how the works are to be carried out in order to enforce its order that the parties perform the contract. The court is entirely unsuited to undertake such a task.
95 Furthermore, BHPBI would be required to perform the contract and would be liable for contempt if it failed to do so. General Condition 35 provides that if the Company Representative considers that suspension of the whole or part of the work under the contract is necessary for any reason, the Company Representative shall direct the contractor to suspend the progress of the whole or part of the work under the contract for such time as the Company Representative decides. If BHPBI, by its agent the Company representative, suspended the whole or part of the work because it considered that Able was carrying out the work unsafely and not in accordance with the HSEC requirements of the contract then BHPBI would be at risk of being punished for contempt if it was found to have wrongly suspended the works. The punishment for contempt is, as Lord Hoffmann observed, an unsuitable instrument for adjudicating upon the disputes which may arise over whether a business is being run, or a contract being outperformed, in accordance with the terms of the court's order. The consequences are dire and undesirable. It might coerce BHPBI into accepting that the works are being carried out safely and in accordance with the contract when it is strongly of the view that they are not.
(Page 36)
96 For those reasons, it is not appropriate to make an order requiring BHPBI to give a direction to Able to recommence work under the contract and thereafter to continue to treat the contract as remaining on foot and perform the contract.
Conclusion
97 For the reasons stated I will grant an injunction restraining BHPBI from acting upon or giving effect to its purported termination on 18 June 2008 of the contract. I decline to grant any injunction requiring BHPBI to direct Able to recommence work under the contract or to otherwise perform the contract.
1
13
1