Alstom Power Ltd v Yokogawa Australia P/L (No 3)

[2006] SASC 256

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

ALSTOM POWER LTD v YOKOGAWA AUSTRALIA P/L & ORS (No 3)

[2006] SASC 256

Reasons for Ruling of The Honourable Justice Debelle (ex tempore)

17 August 2006

CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - RECOVERY

Claim to enforce guarantees - application for early trial of question whether there should be early determination of the question whether grounds of defence, as a matter of law, are a sufficient answer to prevent enforcement of guarantees - application granted.

Trades Practices Act 1974 (Cth), referred to.
Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1998] 3 VR 812, considered.

ALSTOM POWER LTD v YOKOGAWA AUSTRALIA P/L & ORS (No 3)
[2006] SASC 256

Civil

1. DEBELLE J.       The plaintiff has applied, among other things, for an order for the early determination of a question the subject of its statement of claim.  That question concerns the issues raised in paras 55 to 67 of the statement of claim and the relief sought in paras 1 and 2 of the prayers for relief.  Relying on the decision of the Court of Appeal in Victoria in Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1998] 3 VR 812, the plaintiff claims that there can be no answer to its claim to be able to require the defendants to replace the Performance Security and the Retainage Security. The plaintiff asked that the question be heard and determined before other questions. It does so on the footing that it should not have to wait until all other issues in the action have been resolved.

2. Shortly stated, the claim made by the plaintiff is a claim to enforce guarantees called in the statement of claim “Parent Company Guarantees” and the “Performance Security” and the “Retainage Security”.  Those claims give rise to an identifiable sum of money.  The issues in relation to the Performance Security and the Retainage Security are in a very narrow compass.  There is no dispute on the facts which give rise to the claim by the plaintiff.  The only question is whether the plaintiff is, as a matter of law and in the circumstances which have occurred, entitled to the relief it seeks.

3. Shortly stated, the case for the defendants is that the plaintiff has acted in breach of the terms of the subcontract to install electrical control and instrumentation works in the refurbished power station at Port Augusta, that it has acted in a misleading and deceptive manner contrary to the provisions of the Trade Practices Act1974 (Cth), and that in any event it has acted in a way which gives rise to equitable grounds upon which the court, in the exercise of its discretion, should refuse to grant relief.

4. On any view it is clear that the issues raised in the defence will result in a long and complex action.  It is but one instance of those disputes which all too frequently arises in relation to the execution and discharge of a contract to perform substantial building or engineering works, in this case electrical works.  Of necessity, a long time will be spent on issues such as discovery.  The trial of the action is likely to be long.  By contrast, the issues which are raised in the statement of claim are, as I have said, in a very narrow compass.  They are questions of law and it is common ground it could be resolved in a hearing occupying no longer than one day.

5. One of the grounds upon which the defendants oppose an order for the early determination of this question is that there is no utility in such a course.  I do not think that is a proper ground of opposition.  In my view, there is on the face of the decision in Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd authority to the effect that a plaintiff holding guarantees of such a kind as the Performance Security and Retainage Security is entitled to relief notwithstanding that it may have acted in breach of contract.  If the claim made by the plaintiff has a proper legal foundation and the defences relied on by the defendants are not as a question of law an answer to that claim, the plaintiff is entitled to recover an amount in excess of $6 million.  If that is so, I do not think the plaintiff should be kept out of its money by reason of the fact that the defendants seek to raise substantial issues arising out of the performance of the works the subject of the subcontract.  It is for that reason that I believe that the plaintiff is entitled to an early determination of the question whether the grounds relied on are capable, as a matter of law, of defeating the plaintiff’s claim.  The claim in respect of the two securities is simply one of the two grounds of relief stated in the statement of claim.  The plaintiff should not be denied a prompt answer to that claim by reason of the fact that the defendants raise in their defence and counterclaim issues which may well require a long period before they are heard and determined.  For those reasons it is appropriate to make the orders sought.

6. The manner in which the plaintiff framed the question was unsatisfactory.  It has been the subject of extensive discussion between the parties and has been redrafted.  I note that counsel for the defendants participated in that discussion on the footing that the defendants opposed the course for which the plaintiffs had contended.  Plainly, the fact that he participated in that discussion does not in any sense prejudice the position of the defendants in respect of their overall opposition to the plaintiff’s application.

7. I will not attempt to summarise the effect of the debate which occurred in open court as to the terms in which the question should be framed.  It is sufficient to note that Mr Wells QC, who appeared for the defendants, was concerned that the issues should be raised as questions of law so that there would not have to be any examination of the particular facts which give rise to the three sets of grounds which appear in the question as framed.  In effect, what is occurring is that a kind of demurrer is being pleaded. More accurately perhaps, it is a reduction of the issues raised in paras 55 to 67 and in the defence to a simple set of questions.  If there is any debate as to the footing upon which the questions have been asked reference can not only be had to these reasons but also to the transcript of the debate on the form of the questions.

8. For those reasons I have ordered that the following question be heard and determined separately from and before any other issues raised on the pleadings in this action:

   1.Are the allegations of the defendants in their respective defence and counterclaim

   (a)     that the plaintiff has contravened the Trade Practices Act1974 (Cth) and seek an order declaring that the EC&I subcontract is void or unenforceable, or will not be enforced;

   (b)     that the plaintiff has acted or will act in breach of the EC&I subcontract; and

   (c)     that, in the exercise of its discretion, the Court should deny the relief on the grounds listed in paragraphs 95 to 101 of the defence of the first, third and fourth defendants (paragraphs 104 to 109 of the defence of the second defendant)

   or any or them a sufficient answer to the relief that the plaintiff claims in paragraphs 1 and 2 of the prayers for relief in its statement of claim?

   2.If the answer to question one is No, is the plaintiff entitled to the relief it claims in paragraphs 1 and 2 of the prayers for relief in its statement of claim?

   I might amplify these reasons, if needs be, after the hearing of these questions, especially if in the course of the hearing some further issue arises which needs attention.