Adcon v Icon (No 2)
[2020] VSC 227
•22 April 2020
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL COURT TECHNOLOGY, CONSTRUCTION AND ENGINEERING LIST | Not Restricted |
S ECI 2020 0577
| ADCON VIC PTY LTD (ACN 606 820 375 ) | Plaintiff |
| v | |
| ICON CO (VIC) PTY LTD (ACN 604 790 132) | Defendant |
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JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 April 2020 |
DATE OF JUDGMENT: | 22 April 2020 |
CASE MAY BE CITED AS: | Adcon v Icon (No 2) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 227 |
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PRACTICE AND PROCEDURE – Injunctive relief – Building Subcontract – Application to restrain proprietor from calling on bank guarantees – Serious issue to be tried – Australian Consumer Law, ss 20, 21 and 22 - Usual approach – Balance of convenience – Application for injunction dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Whelen | Maddocks |
| For the Defendant | Mr A Morrison | Holding Redlich |
HIS HONOUR:
The proceeding
By an Originating Motion filed on 6 February 2020 the Subcontractor, Adcon Vic Pty Ltd (the plaintiff), commenced this proceeding in respect of two bank guarantees (the First Bank Guarantee and the Second Bank Guarantee) provided under a Subcontract (the Subcontract) for concrete and form work at a project known as Botanical Melbourne in Southbank Melbourne, Victoria (the Project). The proceeding was directed to restraining the Main Contractor, Icon Co (Vic) Pty Ltd (the defendant), from having recourse to those Bank Guarantees.
Plaintiff’s prior application – application of 20 February 2020 to restrain recourse to the companion Second Bank Guarantee under the Subcontract
By Summons dated 6 February 2020 the plaintiff applied to restrain the defendant from having recourse to the second of two Bank Guarantees provided by the plaintiff as security for performance under the Subcontract. The hearing of the plaintiff’s earlier Summons filed 6 February 2020 seeking to restrain the defendant’s recourse to the Second Bank Guarantee, took place on 20 February 2020. Judgment was provided to the parties on 9 April 2020 in which the plaintiff’s application was refused. Revised reasons for that decision were provided to parties on 16 April 2020.[1]
[1]Adcon v Icon [2020] VSC 165.
Ultimately, on 17 April 2020, the plaintiff elected to pay the defendant the sum of $396,250, thereby obviating the defendant calling upon the Second Bank Guarantee.
This application - plaintiff’s application of 17 April 2020
By a further Summons dated 17 April 2020, the plaintiff now seeks injunctive relief in respect of the First Bank Guarantee in the sum of $396,250 (Bank Guarantee DG762643418) which the plaintiff contends has also now been the subject of recent threatened recourse by the defendant on 14 April 2020.
The stated basis for the defendant’s call in respect of the First Bank Guarantee is on account of liquidated damages due and payable by the plaintiff to the defendant, which contractual debt in the total sum of $1,364,000 the defendant claims has been certified by the Subcontract Superintendent in a Payment Schedule dated 24 January 2020. The validity of the Subcontract Superintendent’s certifications dated 24 January 2020, have also been upheld by the decision of 20 February 2020.
Matters usually required to be established for injunctive relief
To obtain the injunctive relief sought by the plaintiff, it must demonstrate:[2]
[2]Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57, [19], [65]-[72].
(a) the existence of a serious issue or issues to be tried;
(b) a sufficient likelihood of success at trial in respect of one or more of those issues, evaluated on the material available at the time of the application;[3]
[3]Ibid [65].
(c) as part of the evaluation of such sufficiency, the required likelihood of success at trial may be informed by the relative extent to which the balance of convenience favours the grant of the injunction sought, and likewise the requisite balance of convenience may be informed by the likelihood of success at trial on the identified issue or issues;
(d) that the applicant will suffer injury for which damages would not be an adequate remedy;[4] and
(e) that the balance of convenience favours the grant of the injunction sought.
[4]In Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57, Gleeson and Crennan JJ characterised this as a separate consideration from consideration of the balance of convenience [19], however other courts have considered it when assessing the balance of convenience.
The plaintiff’s arguable issue for trial – based on breach of the Australian Consumer Law
The plaintiff’s serious issue to be tried
In this application the plaintiff has confined its case to the identification of the following serious issue to be tried:
Whether the defendant by seeking recourse to the First Bank Guarantee, in the circumstances defined and principally relied upon by the plaintiff, would be acting unconscionably and for that reason prohibited by, and in breach of, s 20 of the Australian Consumer Law (ACL) in Sch 2 to the Competition and Consumer Act 2010 (Cth) (CCA), or alternatively, s 21 of the ACL, within the meaning of s 22(2)(j) of the ACL.
These circumstances, identified by the plaintiff in its reply submission dated 22 April 2020, are dealt with below.
Australian Consumer Law
The provisions of the ACL relied on by the plaintiff provide as follows in the sections set out below.
Section 20 provides:
20Unconscionable conduct within the meaning of the unwritten law
(1)A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time.
Note: A pecuniary penalty may be imposed for a contravention of this subsection.
(2)This section does not apply to conduct that is prohibited by section 21.
Section 21 provides:
21Unconscionable conduct in connection with goods or services
(1)A person must not, in trade or commerce, in connection with:
(a)the supply or possible supply of goods or services to a person; or
(b)the acquisition or possible acquisition of goods or services from a person;
engage in conduct that is, in all the circumstances, unconscionable.
(2)This section does not apply to conduct that is engaged in only because the person engaging in the conduct:
(a)institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or
(b)refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition.
(3)For the purpose of determining whether a person has contravened subsection (1):
(a)the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and
(b)the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.
(4)It is the intention of the Parliament that:
(a)this section is not limited by the unwritten law relating to unconscionable conduct; and
(b)this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and
(c)in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of:
(i)the terms of the contract; and
(ii)the manner in which and the extent to which the contract is carried out;
and is not limited to consideration of the circumstances relating to formation of the contract.
Section 22(2)(j) provides:
22 Matters the court may have regard to for the purposes of section 21
(2)Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the acquirer) has contravened section 21 in connection with the acquisition or possible acquisition of goods or services from a person (the supplier), the court may have regard to:
…
(j)if there is a contract between the acquirer and the supplier for the acquisition of the goods or services:
(i)the extent to which the acquirer was willing to negotiate the terms and conditions of the contract with the supplier; and
(ii)the terms and conditions of the contract; and
(iii)the conduct of the acquirer and the supplier in complying with the terms and conditions of the contract; and
(iv)any conduct that the acquirer or the supplier engaged in, in connection with their commercial relationship, after they entered into the contract; …
The Authorities relied upon
In relation to the alleged arguable issue based on unconscionable conduct, in addition to the above provisions of the ACL, the plaintiff relied upon the following authorities.
In Hurley v McDonald’s Australia Ltd,[5] (Hurley), relied on by the plaintiff, the Full Court of the Federal Court of Australia were dealing with the primary judge’s refusal to grant leave to amend, which refusal was in part based upon the proposed amendment enjoying no real prospect of success, in turn principally because the prohibited conduct which was alleged to be unconscionable, namely the defendant’s reliance upon a condition of its contract with the applicant, reflected ‘nothing unfair or unreasonable or immoral or wrong in relying upon those terms’.[6] The Full Court rejected the appeal to overturn the primary judge’s refusal of grant leave to amend.
[5][1999] FCA 1728.
[6]Ibid [28].
In my view Hurley, to the very limited degree it is of assistance in the quite different context of this matter involving a comprehensive Australian Standard Subcontract terms and conditions regulating the performance of building works in respect of which the parties agreed that a Superintendent, subject to an agreed form of review, was to assess and certify subcontract entitlements and achievement of milestones, marginally assists the defendant because the court in Hurley considered that for the proposed amendment to enjoy a real prospect of success, the plaintiff needed to be able to allege conduct which was unfair or unreasonable or immoral or wrong.
The plaintiff also relied upon Legione v Hateley[7] which involved a claim for specific performance in relation to a contract of sale of land in Victoria. Although , in my view there is nothing approaching close analogy between that case involving a vendor and a purchaser and rescission of contract, and the plaintiff’s present case, the plaintiff relies upon a general statement of principle by the Court that ‘the fundamental principle according to which equity acts, namely that a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct’ (footnote omitted).
[7](1983) 152 CLR 406.
The plaintiff also cites Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd[8] (Lenah Game Meats). In Lenah Game Meats the proceedings had to do with an injunction sought to restrain the publication of film taken on the respondent’s premises and of the respondent’s operations. The central issue concerned whether the publication of the video in question amounted to an actionable invasion of privacy or breach of confidentiality. The plaintiff relied upon a passage at [99] in which French J, in citing Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (No 2),[9] observed ‘[t]he fundamental principle according to which equity acts is that a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct’. In my view however the generality of the principle stated does not advance the plaintiff’s case as to how in this instance the defendant’s conduct is arguably unconscionable.
[8](2001) 208 CLR 199.
[9](2000) 96 FCR 491 at 498; 169 ALR 324 at 330.
Further, the plaintiff relied upon Australian Competition and Consumer Commission v Samton Holdings Pty Ltd[10] (Samton) a case which concerned a lease which provided for an option to renew for seven years which the tenant neglected to exercise within the prescribed period. The landlords initially refused to extend the time in which the option could be exercised but at a later point in time the landlords agreed to an arrangement which offered the requested extension but only on condition that a substantial payment was made by the tenant to the landlords.
[10](2002) 117 FCR 301.
In Samton the Full Court of the Federal Court of Australia stated:[11]
[11]Ibid [46]-[50].
Unconscionable Conduct and Equitable Relief
46Equity is directed to the prevention of unconscionable behaviour. The fundamental principle upon which equitable relief is granted is that a party having a legal right may not exercise it in such a way that the exercise amounts to unconscionable conduct - Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406 at 444 (Mason and Deane JJ). Those words may encompass duress, undue influence and “unconscionable dealing as such” - Hardingham “Unconscionable Dealing” in Finn (ed) Essays on Equity (1985) p 1. Professor Finn (as he then was) himself identified “four not altogether distinct ways” in which the language of unconscionable conduct has been used in the case law:
1.As an organising idea informing specific equitable rules and doctrines which do not in terms refer to, or require, an explicit finding of unconscionable conduct - eg rules on stipulations as to time and notices to complete.
2.In relation to specific equitable doctrines of which estoppel, unilateral mistake, relief against forfeiture and undue influence are examples. They are united by the idea that equity will prevent an unconscionable insistence on strict legal rights and are conditioned upon the explicit finding of unconscionable conduct in the persons against whom they are invoked - Waltons Stores (Interstate) Limited v Maher [1988] HCA 7; (1988) 164 CLR 387; Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489 and Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422.
3.In relation to the discrete doctrine of unconscionable dealing which concerns one species of unconscionable conduct - Commercial Bank of Australia Ltd v Amadio; Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621.
4.In relation to unconscionable conduct founding a cause of action not mediated by any discrete doctrine - Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137.
Finn, Unconscionable Conduct (1994) 8 Journal of Contract Law 37 at 38-39.
47Four classes of case attracting the application of the language of unconscionability are described in LBC, Laws of Australia, vol 35 (at 31 January 2002) Unfair Dealing 35.5 Notion of Unconscionability [1]-[38]:
(i)Exploitation of vulnerability or weakness
(ii)Abuse of position of trust or confidence
(iii)Insistence upon rights in circumstances which make that harsh or oppressive
(iv)Inequitable denial of legal obligations.
These are said to be supported by three broad standards:
(i)That those in positions of strength or influence should not take advantage of another's relative weakness.
(ii)That people should not, by appeal to strict legal rights, cause hardship to others by violating their reasonable expectations.
(iii)That those in fiduciary positions should act only in the interests of those to whom those fiduciary duties are owed.
48Under the rubric of unconscionable conduct, equity will:
(i)Set aside a contract or disposition resulting from the knowing exploitation by one party of the special disadvantage of another. The special disadvantage may be constitutional, deriving from age, illness, poverty, inexperience or lack of education - Commercial Bank of Australia Ltd v Amadio. Or it may be situational, deriving from particular features of a relationship between actors in the transaction such as the emotional dependence of one on the other - Louth v Diprose; Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457.
(ii)Set aside as against third parties a transaction entered into as the result of the defective comprehension by a party to the transaction, the influence of another and the want of any independent explanation to the complaining party - Garcia v National Australia Bank Ltd [1998] HCA 48; (1988) 194 CLR 395.
(iii)Prevent a party from exercising a legal right in a way that involves unconscionable departure from a representation relied upon by another to his or her detriment - Waltons Stores (Interstate) Limited v Maher; The Commonwealth v Verwayen.
(iv)Relieve against forfeiture and penalty - Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406; Stern v McArthur.
(v)Rescind contracts entered into under the influence of unilateral mistake - Taylor v Johnson.
Each of these categories of case (the list may not be exhaustive) involves the identification of unconscionable conduct, albeit its content and degree will vary according to the category. It is a term which has various shades of meaning according to its context. There are different thresholds of conduct in various categories, all of which may be described as unconscionable - G Dal Pont, Varying Shades of “Unconscionable Conduct” - Conduct - Same Term, Different Meaning (2000) 19 Aust Bar Rev 135 at 165.
The Scope of Section 51AA
49Ultimately the language of s 51AA requires identification of conduct able to be characterised as unconscionable in a sense known to the unwritten law. In the context of that law as it presently stands, unconscionable conduct is that which supports the grant of relief on the principles set out in specific equitable doctrines. Five categories of case are set out above. As was said of s 51AA in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2000] FCA 2; (2000) 96 FCR 491 at 509:
“[It] prohibits conduct in respect of which a judge in equity would have been prepared to grant relief. The imposition of the prohibition precedes any actual or notional judicial decision. The judge deciding a case under s 51AA will be asking himself or herself whether he or she would have been prepared to grant relief at equity on the basis of an assessment of the conduct in question as unconscionable.”
Although the application of the principles in that case to a particular circumstance of special disadvantage on the part of a shopping centre tenant was overturned by a Full Court the principles were not impugned - see CG Berbatis Holdings Pty Ltd v Australian Competition and Consumer Commission [2001] FCA 757. See also the discussion in Dietrich The Meaning of Unconscionable Conduct under the Trade Practices Act 1974 (2001) 9 Trade Practices Law Journal 141-148.
50The approach has been criticised as too wide having regard to the terms of the Explanatory Memorandum and the Second Reading Speech which referred to the special disadvantage cases of Blomley v Ryan and Amadio - See Buckley Section 51AA and Section 51AC of the Trade Practices Act 1974: The Need for Reform (2000) 8 Trade Practices Law Journal 5-16. But as already noted, the terms of the section are not limited to those categories. Although the section is confined by the parameters of the “unwritten law”, it is the unwritten law “from time to time”. Neither the Explanatory Memorandum nor the Second Reading Speech can be treated as imposing qualifications which are not found in the words of s 51AA. On the other hand, equitable doctrine does not presently provide a remedy against conduct simply on the basis that it is unfair in the opinion of a judge. It cannot be applied to unconscionable conduct at large. As Gummow and Hayne JJ recently observed in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 185 ALR 1 at 28, “... the notion of unconscionable behaviour does not operate wholly at large...”. In this respect it is not necessary to pass upon the correctness or otherwise of Olex Focas Pty Ltd v Skodaexport Co Ltd (1996) 3 VR 380 which was concerned with the grant of interlocutory relief and the existence of a serious question to be tried rather than any concluded view as to the construction of s 51AA.
I consider that, as with Legione v Hateley, the above elucidation of general principle in Samton, does not advance the plaintiff’s case as to how in this instance the defendant’s particular conduct is arguably unconscionable.
The plaintiff has not in this application sufficiently identified any recognisable category of unconscionable conduct by the defendant, or the Superintendent for which the defendant is arguably liable, into which the specific circumstances relied upon by the plaintiff fall.
Further, the plaintiff submitted that the case of Olex Focas Pty Ltd v Skodaexport Co Ltd[12] (Olex Focas) was analogous with the circumstances of the present case.
[12][1998] 3 VR 380.
In Olex Focas, Batt J considered among other matters whether there was a serious question to be tried that the first defendant’s conduct, in seeking to call upon bank guarantees securing mobilisation and procurement advances and bank guarantees securing performance, was ‘unconscionable conduct’ for the purposes of s 51AA of the Trade Practices Act 1974, the predecessor to s 20 of the ACL, as a basis for the plaintiff’s claim for injunctive relief.[13]
[13]Ibid 401.
His Honour found that there was a serious question to be tried in relation to the plaintiff’s conduct in calling in full upon certain bank guarantees relating to mobilisation and procurement advances made under the contract (as opposed to performance bonds which secured performance of the work).[14]
[14]Ibid 403–404.
In finding there was a serious question to be tried, his Honour was persuaded by his findings that the guarantees were in respect of advances for the mobilisation of services and procurement of supplies only, and not for any other purposes. His Honour was also persuaded by largely undisputed evidence that the advances had been substantially repaid, and that it was open to the first defendant to make a partial demand under each of the bank guarantees, or make a demand under one but not others. In making these findings, his Honour observed that had the first defendant simply called upon an amount not exceeding the balance still outstanding on the advances, such conduct could not have been said to be open to a serious question that it was unconscionable. His Honour also observed hypothetically that even where a party is acting within its rights, it may still be engaging in unconscionable conduct; and it follows that where a party incorrectly believes it is acting within its rights, it might still be acting unconscionably.[15]
[15]Ibid 404; citing Stern v McArthur (1988) 165 CLR 489, 527.
In relation to the performance bonds however, his Honour was not persuaded that the first defendant’s conduct in seeking to call upon, or procuring the call upon, the performance bonds for their full amount was unconscionable, or that there was a serious question to be tried.[16] His Honour observed this was the case notwithstanding the High Court of Australia’s extension of the use of the concept of unconscionable conduct as a criterion of liability,[17] and despite the particular facts of the case.
[16]Ibid 403.
[17]For example, see Stern v McArthur (1988) 165 CLR 489.
In Olex Focas, Batt J stated:
I consider separately the performance bonds and the mobilisation/procurement guarantees. Despite the extension by the High Court in recent years of the use of the concept of unconscionable conduct as a criterion of liability, and despite the facts as deposed to by Mr Campbell, in this case I am not persuaded that the conduct of the first defendant in seeking to call up and procuring the call up of the performance bonds for their full amount is unconscionable or that there is a serious question to be tried about that.
I reach that conclusion against the background of the historical purpose and use of such bonds, as discussed in the cases that I have referred to earlier and in textbooks, and against the background of the High Court in Wood Hall, noting with apparent equanimity that it seemed that in making the demands the authority was acting pursuant to what it described as a “strategy” to put pressure on the contractor in the hope that the dispute between the parties might be settled more advantageously to the authority.
Even if I am wrong about that, I would not exercise my discretion to grant an injunction with respect to the performance bonds having regard to their nature and to the effect on commerce and especially international commerce that the grant of an injunction or the repeated grants of injunction might have. The balance of convenience favours refusal.
However, in the case of the mobilisation and procurement guarantees I consider the position to be different. I have already indicated my understanding of the clause relating to those guarantees, that is to say that they are guarantees in respect of the mobilisation/procurement advances. They are not guarantees for other purposes. Secondly, I have already indicated that under them a partial demand under each of them could have been made or a demand made under one, but not the others. Thirdly, there is evidence before me which is not really disputed, if disputed at all, that the advances have largely been repaid, as appears from the figures that I have given earlier.[18]
[18][1998] 3 VR 380 at 403.
In Olex Focas it was accepted that the defendant when accessing the performance guarantees in that way was contractual and not unconscionable but conversely his Honour also concluded that the defendant’s conduct in respect of the mobilisation and procurement guarantees gave rise to a serious question to be tried based on unconscionability.
Accordingly, I consider that Batt J’s above statements concerning the nature and effect of performance bonds support the defendant’s position in this application and render the plaintiff’s arguments in relation to unconscionability more untenable in the present circumstances.
Further, there is no sufficient parallel between the access to the mobilisation/procurement guarantees in Olex Focas and the particular circumstances of this case, particularly when understood in the light of the Superintendent, Mr David Wood’s (Wood) affidavit of 12 February 2020 (Wood Affidavit) concerning the non-achievement of practical completion and Wood’s explanation, as Superintendent, in relation to the communication of 12 November 2019.
The circumstances relied upon by the plaintiff as giving rise to a serious issue to be tried in relation to the defendant’s unconscionable conduct
The circumstances defined and relied upon by the plaintiff as constituting the defendant’s relevant unconscionable conduct and thereby giving rise to a serious issue to be tried in this proceeding, are four in number, as set out in the plaintiff’s Reply Submission dated 22 April 2020, paragraph [6], as follows:
(a) the contract obliges the defendant to release the so-called ‘first guarantee’ within 14 days of practical completion: cl. 5.4;
(b) the Superintendent decided, on 12 November 2019, to reject four of the plaintiff’s claims for extensions of time expressly on the basis that they concerned a period of time post-dating practical completion;[19]
(c) the defendant did not, consequent upon the Superintendent’s decision, release the so-called ‘first guarantee’ within 14 days;
(d) the Superintendent has not, since then, either revised his decision to reject the extensions of time in question or, tellingly, given any evidence in this proceeding to explain his decision to reject those extensions of time and the Court is entitled to infer that nothing the Superintendent could have said would have assisted the defendant's case.
[19]Affidavit of Anthony Quinn, 6 February 2020 (First Quinn Affidavit), [12] and Exhibit ‘AQ-6’.
The plaintiff however, has also acknowledged and accepted the matters set out in paragraph [3] of the defendant's submissions dated 21 April 2020, namely in substance that the following relevant key issues have already been addressed and decided in the 9 April 2020 Reasons for Judgment in this matter.
(a) the Subcontract Superintendent’s Payment Schedule dated 24 January 2020 constitutes a compliant, valid and effective certification pursuant to both cls 37.2(a) and 37.2(b);[20]
[20]Reasons, [99].
(b) the Payment Schedule dated 24 January 2020 validly and effectively certified the sum of $1,364,000 as liquidated damages due and payable by the Subcontractor to the Main Contractor under cl 34.7, at the date of that Payment Schedule;[21]
(c) the defendant has a presently accrued immediate entitlement to be paid the certified sum of $1,363,000, due on account of liquidated damages;[22]
(d) nothing in the Subcontract precluded the defendant from seeking recourse to the Second Bank Guarantee only in respect of the specific sum certified for liquidated damages.[23]
[21]Ibid [99] and [111].
[22]Ibid [122].
[23]Ibid [121].
I will deal in turn with the circumstances relied on by the plaintiff as giving rise to the serious issue for which it contends.
Plaintiff’s reply submission [6(a)]
The first of the relevant circumstances the plaintiff asserts is that the Subcontract obliges the defendant to release the First Bank Guarantee within 14 days of practical completion of the Subcontract works being achieved.
The terms of the Subcontract which oblige the defendant to release the First Bank Guarantee are not in contention on this application, however, whether or not practical completion of the works under the Subcontract has been achieved is a matter in dispute between the parties.
Further, the parties have by their Subcontract agreed to repose the power of certification under the Subcontract to the duly appointed Superintendent in respect of matters, including the achievement of practical completion. The Superintendent has however not issued a Certificate of Practical Completion, pursuant to cl 34.6 of the Subcontract. Further, Wood has affirmed, in his Affidavit, that in his opinion as certifier under the Subcontract, the plaintiff has not achieved practical completion of the works.
Furthermore, on this aspect, the plaintiff has withdrawn its earlier submissions of 20 April 2020 (paragraphs [9(b)] and [15]) that it had achieved practical completion on 21 October 2019, or alternatively, that subsequent to that date it had achieved practical completion[24] and therefore a Certificate of Practical Completion should be issued, and that further as a result the defendant's entitlement to the first guarantee has ceased, or should cease.
[24]T4.19-31.
The plaintiff does not now argue that practical completion occurred at some particular point in time on the basis of the communications referred to in the plaintiff’s material, in particular the communications of 15 and 16 April 2020 referred to in the Affidavit of Anthony Quinn of 17 April 2010, at paragraphs [6] to [8] (Third Quinn Affidavit) between the plaintiff and the defendant.[25]
[25]T4.27-31.
The communications, referred to in the last preceding paragraph, in effect stated the plaintiff’s position that notwithstanding its view that practical completion under the Subcontract was achieved on 21 October 2019, in any event it had obtained and provided all remaining documents the defendant had asserted were required and outstanding for practical completion. These documents were provided by the solicitors for the plaintiff to the solicitors for the defendant on 16 April 2020. In these circumstances the plaintiff submits that, even where practical completion had not been certified as having been achieved in October or November 2019, the plaintiff had in fact achieved practical completion by 21 October 2019, or has since achieved practical completion. As a result the plaintiff had earlier contended both that the Superintendent ought certify practical completion and the defendant’s entitlement to the First Bank Guarantee should evaporate.
Accordingly, the fact asserted by the plaintiff in its reply submission at paragraph [6(a)], namely that practical completion has been achieved at some point in time, is not now asserted by the plaintiff (and is expressly refuted by the Superintendent) and therefore does not support an arguable basis for unconscionable conduct by the defendant, either on its own or taken together with the other three claims in paragraph [6 ]of the plaintiff's reply submission.
Plaintiff’s reply submission [6(b)]
In paragraph [6(b)] of the plaintiff’s reply, it submits that the Superintendent decided on 12 November 2019 to reject four of the plaintiff’s claims for extension of time expressly on the basis that they concerned a period of time postdating practical completion. The plaintiff refers to the First Quinn Affidavit, paragraph [12], and Exhibit ‘AQ-6’, and also to a related bundle of materials.
The Superintendent recorded the rejection of four purported extension of time claims advanced by the plaintiff’s (plaintiff’s correspondence (reference 000553)) as relating to days claimed after ‘PC’, and irrelevant.
However, the Superintendent’s evidence at paragraphs [25], [28], [30] and [32] of the Wood Affidavit expressly refutes that he has certified or recognised the achievement of practical completion under the Subcontract and maintains that practical completion under the Subcontract has not yet been achieved. The Superintendent also maintains that the plaintiff’s four purported time extension claims (plaintiff’s correspondence (reference 000553)) were non-complaint claims under clause 34 of the Subcontract.
Consequently, on the material before me in this application, I am not satisfied that the Superintendent has, inconsistently with the certification of the liquidated damages on 24 January 2020, earlier certified the achievement of practical completion, or recognised the attainment of that milestone under the Subcontract.
For the same reasons, I am not satisfied that the Superintendent has approbated as to the achievement of practical completion at some earlier point in time and then reprobated to the opposite effect by certifying liquidated damages on 24 January 2020, as the plaintiff submits.
Further, even if the Superintendent had acted inconsistently (which I am not satisfied is reasonably arguable), as is asserted in the plaintiff’s submissions relating to his treatment of the plaintiff’s four-time extension applications mentioned and the Superintendent’s subsequent certification of liquidated damages, or if the Superintendent had erroneously undertaken assessments of the achievement of milestone dates in some way or erroneously certified liquidated damages, in the context of this Subcontract that would not in my view give rise to a reasonably arguable case that the defendant acted unconscionably. Such errors and related actions, were they to have occurred in this setting, may amount to contractually erroneous decisions, or perhaps instances of failure to decide as contractually required, which if disputed would constitute disputes of the type which the parties have agreed to resolve, and have set right, pursuant to the Subcontract dispute resolution regime.
Under the Subcontract such issues, disputes, errors and inconsistencies are to be dealt with pursuant to the dispute resolution regime in cl 42 of the Subcontract and that thereunder the rights and entitlements of the parties would be determined and adjusted as necessary.
Further, the parties also agreed pursuant to cl 42.6 that the submission of disputes under the Subcontract to arbitration would be subject to a carve-out, in relation to, amongst other things, a party’s right to seek injunctive or urgent declaratory relief.
This contractual regime encompasses the parties’ risk allocation agreement, to the effect that even in the face of disputes of the type which exist at present between the plaintiff and the defendant, in the interim, and subject to satisfaction of the requirements of cl 5.2 of the Subcontract, the defendant is entitled to recourse to the subject guarantee.
That is, described broadly, the parties have allocated the risk associated with disputes[26] including disputes of the type that the plaintiff relies upon here in connection with the Superintendent and the defendant’s conduct in relation to Subcontract performance and administration.
[26]Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd [2015] VSCA 98, [43]-[46], [55]-[56], [67]-[68], [111]-113] and [116]; and Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd & Anor [2019] VSC 771, [60]-[61].
For the above reasons, I can identify no arguable unconscionable conduct on the part of the defendant, or the Superintendent for which the defendant may be liable, arising from, or in connection with, the matters relied on by the plaintiff in paragraph [6(b)] of the plaintiff’s reply submission.
Plaintiff’s reply submission [6(c)]
In paragraph [6(c)] of its reply submission, the plaintiff submits that the defendant did not, consequent upon the Superintendent’s decision, release the so-called first guarantee within 14 days. This, the plaintiff’s third point, is directed to the establishment of unconscionable conduct on the part of the defendant based upon what the plaintiff asserts was the Superintendent’s “decision“ of 12 November 2019, which the plaintiff asserts recognised that practical completion had been achieved.
In my view, this third element does not give rise to the arguable issue contended for by the plaintiff for the same reasons as outlined above in respect of the plaintiff’s points in paragraphs [6(a)] and [6(b)] of its reply submission.
Plaintiff’s reply submission [6(d)]
The plaintiff’s fourth point in support of the existence of the serious issue to be tried as to the defendant’s unconscionable conduct is in substance a submission that the Superintendent has not since 12 November 2019, either revised his decision to reject the extension of time claims in question nor, the plaintiff submits, tellingly, has the Superintendent given any evidence in this proceeding to explain his decision to reject those extension of time claims.
The plaintiff also argues that because the Superintendent has not given any evidence in this proceeding to explain his decision to reject the extension of time claims in question, the Court is entitled to infer that nothing the Superintendent could have said would have assisted the defendant’s case.
This further asserted basis of unconscionable conduct is, in my view also insufficient to establish, either alone or in combination with the other three bases asserted by the plaintiff, a serious issue for be tried for the same reasons as outlined above in relation to the plaintiff's reply submission, paragraphs [6(a)] and [6(b)].
I add that, in my view, the plaintiff’s assertions of unconscionable conduct are, when considered in light of the Wood Affidavit, not advanced by the plaintiff’s submission that an adverse inference should be drawn against the Superintendent as a result of the Superintendent providing no additional explanation for the rejection of the plaintiff's four extension of time claims.
Finally, I do not consider that the defendant’s decision to first access the Second Bank Guarantee gives rise to any implied admission on the part of the defendant.
Conclusion – no serious issue to be tried
For the above reasons the plaintiff has failed to make out the first limb of the two required limbs for injunctive relief by failing to satisfactorily establish the existence of a serious issue to be tried.
Balance of convenience
The plaintiff also advances the same balance of convenience arguments that it put in respect of the matters determined in the earlier judgment concerning the Second Bank Guarantee.[27] No submission beyond those made in that application is advanced in this application in respect of the First Bank Guarantee.
[27]Adcon v Icon 2020 VSC 165.
Because, for reasons I have earlier addressed, I am not persuaded that the plaintiff has identified any serious issue to be tried in relation to its application for an injunction restraining access to the First Bank Guarantee, it is not necessary to proceed further to address matters put by the parties in relation to potentially relevant balance of convenience considerations.
However, had the balance of convenience considerations remained relevant, the plaintiff’s same arguments on this aspect of its application as put by the plaintiff in support of the injunction sought in relation to the Second Bank Guarantee, would again for the reasons earlier explained in the Judgment of 9 April 2020 in this proceeding, not have weighed in the balance in favour of the plaintiff obtaining the injunction it seeks because:
(a) the plaintiff’s asserted appreciable risk of significant reputational and commercial damage would, in my view, be readily obviated by the plaintiff tendering, and making immediately available, an amount equal to the sum of the Security in issue, as the defendant has confirmed would be acceptable to it;[28] and
(b) the plaintiff’s potential detriment referred to in (a) above should, in any event, be ascribed little weight given that the plaintiff was willing to subcontract on terms including the Security regime provided for under the form of Subcontract which is at Exhibit ‘AQ-1’, and accordingly, agreed to a Subcontract regime providing for recourse to the subject security, subject to the terms of cl 5.2 of the Subcontract. Agreement to that regime as part of the overall Subcontract terms was, at contract, as a bargain acceptable to the plaintiff, and the plaintiff does not seek to complain of either any pre-contract vitiating circumstance or matter, nor does the plaintiff seek to complain of any post-contract material change of circumstances. For these reasons little weight should be given to the plaintiff now seeking to avoid the potential detriment which at contract was accepted and which formed part of the parties’ agreed risk allocation under the Subcontract.
[28]In open letters of 15 and 20 April 2020 (Affidavit of Lachlan Ingram, 21 April 2020, Exhibits ‘LCI-1’ and ‘LC-3’), the defendant offered to accept the equivalent of the First Bank Guarantee on account in substitution for it having recourse to the guarantee itself, thereby addressing the plaintiff's concerns in relation to reputational damage.
In my view, were balance of convenience issues to remain relevant, the factors above should be taken into account against that balance favouring the plaintiff.
Decision – plaintiff’s application of 17 April 2020
For the reasons I have alluded to, I dismiss the plaintiff's application by Summons dated 17 April 2020.
Costs
The defendant seeks indemnity costs, principally on the basis of its letters of 15 and 20 April 2020 offering to accept a tender of the sum secured in lieu of having recourse to the First Bank Guarantee.
The plaintiff resisted an order for indemnity costs but accepted the appropriateness of an order that it pay the defendant its costs of the plaintiff’s unsuccessful Summons of 17 April 2020, on a standard basis.
Further, the plaintiff argued that its offer of the full amount of the First Bank Guarantee communicated to the defendant on 21 April 2020, should be a factor taken into account against an indemnity costs order.
Further again, the plaintiff argued that the basis of its asserted serious issue to be tried in this matter was narrower, and more targeted in respect of unconscionable behaviour on the part of the defendant, than the basis, which it did not ultimately press at hearing, in respect of its earlier injunction application concerning the Second Bank Guarantee.
The defendant responded to the plaintiff’s above arguments as to costs by submitting that the plaintiff’s offer to pay the sum in issue, made the evening before the hearing of the plaintiff’s application, was not a “like for like” offer because it was on terms that the sum offered was not payable until 1 May 2020, and further the plaintiff’s offer of payment did not include an offer to pay the defendant’s costs of responding to the plaintiff’s injunction application.
Decision as to Costs
In my view the defendant’s offers to accept a cash payment from the plaintiff in lieu of it accessing the First Bank Guarantee, together with the defendant’s statements in those communications warning the plaintiff of the cost ramifications in the event its offers were not accepted, together with both the plaintiff’s failure on this application to identify an arguable serious issue to be tried and the plaintiff’s failure to identify how the balance of convenience in this matter favoured its application for an injunction, justify an order for indemnity costs in the defendant’s favour. In my view such an order is also justified by the circumstance that in the recently determined very similar application by the plaintiff, the shortcomings of its arguments in support of the existence of a favourable balance of convenience were addressed and described as likely to be unpersuasive, and yet in this application the plaintiff pressed on and unsuccessfully presented the same case on this second required limb of its application for an injunction.
Accordingly, for these reasons, I consider that the defendant has comfortably established an entitlement to indemnity costs against the plaintiff in the circumstances.
Orders
Accordingly, I shall order that:
(a) The plaintiff’s Summons dated 17 April 2020 be dismissed.
(b) The defendant’s undertaking to the Court of 17 April 2020 is discharged.
(c) The plaintiff pay the defendant’s costs, of and associated with the plaintiff’s Summons dated 17 April 2020, on an indemnity basis.
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