City West Water Pty Ltd v Simon Engineering (Aust) Pty Ltd
[2005] VSC 248
•24 June 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No. 6713 of 2005
No. 6716 of 2005
| CITY WEST WATER PTY LTD | Plaintiff |
| v | |
| SIMON ENGINEERING (AUST) PTY LTD & ORS | Defendants |
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JUDGE: | CUMMINS J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 June 2005 | |
DATE OF JUDGMENT: | 24 June 2005 | |
CASE MAY BE CITED AS: | City West Water Pty Ltd v Simon Engineering (Aust) Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 248 | |
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Practice Court – Interlocutory mandatory injunction.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G. Clarke, S.C. and Mr J. Davis | Blake Dawson Waldron |
| For the Defendant | Mr R. Brett, Q.C. and Mr M. Whitten | Mallesons Stephen Jaques |
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HIS HONOUR:
In the matter 6716 of 2005, process was filed on 21 June 2005, pursuant to s.400D of the Corporations Act, seeking an Order that leave be given nunc pro tunc to begin and proceed with proceeding no. 6713 of 2005. That is not opposed and I grant the relief thee sought and have initialled the Order accordingly.
COUNSEL: May it please Your Honour.
HIS HONOUR:
In relation to matter no. 6713 of 2005, this is a summons filed 21 June 2005 for an interlocutory mandatory injunction. The plaintiff seeks an interlocutory injunction compelling each of the defendants forthwith to deliver up to the plaintiff the information referred to in Schedule B of the statement of claim annexed to the writ.
The first defendant is Simon Engineering Australia Pty Ltd, voluntary administrators appointed. The second, third and fourth defendants are administrators of Sydney, and the fifth defendant administrator of Perth. Schedule B sets forth a list of items which are sought coercively to be provided by the defendants to the plaintiff.
The basal proceeding is a writ issued the same day as the summons, 21 June 2005. In it the plaintiff pleads that since 1 February 2005 the first defendant has been under administration pursuant to Part 5.3A of the Corporations Act and the second to the fifth defendants, being the administrators, were appointed at that time. It is pleaded that by an agreement between the plaintiff and the first defendant, on or about 23 June 2003, the first defendant agreed to design, construct and commission an upgrade to the sewerage treatment plant operated and owned by the plaintiff in Altona, and known as the Altona Treatment Plant (the ATP), operate the existing plant while the upgrade to the ATP was being performed and prior to its completion, and then operate the upgraded plant once completed in accordance with the contract, the Enviro Altona Contract.
It is pleaded that on 18 February 2005, the first defendant suspended the works without the consent of the project director and abandoned the project, and from that date the first defendant failed to perform its obligations and covenants under Part 3 of the contract. It is further pleaded that by those circumstances, the first defendant has committed a development fault and thereby a material default defined in terms of the contract; that on 1 March 2005, the plaintiff served on the first defendant and the administrators, defendants two to five, a default notice under the contract; and that that default notice has not been remedied or cured. By that circumstance, clause 41.3(g) of the contract became activated entitling the plaintiff to do anything which is reasonably considered necessary to rectify the said defaults.
It is pleaded that the upgrade is not completed and is only 85 per cent complete; hence the upgraded plant has not been commissioned and neither completion nor commercial acceptance has been achieved. In all the circumstances the first plaintiff seeks the items in Schedule A to the writ, which is an extensive list of items, and also the items in Schedule B, a short list of items as to which this summons relates.
In the writ the plaintiff claims a final injunction compelling all the defendants to deliver up the material in Schedule A; an interlocutory injunction seeking the items in Schedule B, which is the subject of this proceeding in the Practice Court today; and declarations, costs and consequential orders.
Filed on behalf of the plaintiff in support of the summons is a comprehensive affidavit of Mr M.A. Giesemann, general manager engineering of the plaintiff sworn 20 June 2005 and with 24 exhibits; an affidavit of Mr K.I. Mann, senior engineer, sworn 23 June 2005 with 5 exhibits; of Mr M.W. Mason, operations manager at the Altona Treatment Plant, sworn 23 June 2005 with 5 exhibits; and of Mr J.G. Mulcahy, solicitor for the plaintiff, also of 23 June 2005. Filed on behalf of the defendants is a comprehensive affidavit of Mr D.R. Feldman, solicitor for the defendants, affirmed 23 June 2005, with 12 exhibits.
It is well established that issuance of an interlocutory mandatory injunction is a high standard to achieve. The matter is conveniently addressed in the judgment of Warren J, as then she was, in Elan Trading Corporation Pty Ltd v Clarence Street Freeholds Pty Ltd[1]. There Her Honour reviews the initial criterion of a high degree of assurance stated by Gummow J, (then being in the Federal Court) in Business World Computers Pty Ltd v Australian Telecommunications Commission[2]. The lower risk of injustice formulation of Hoffman J, as then he was, Film Rover International Limited v Cannon Film Sales Ltd[3] and the other authorities are there set out, all of which confirm as indeed did National Australia Bank Ltd v Bond[4] that such an injunction will never be granted lightly. No injunction will be granted lightly; mandatory ones especially so.
[1](2001) VSC 339, in particular paragraphs 11 to 16 .
[2](1988) 82 ALR 499 at 501.
[3](1987) WLR 670 at 680.
[4](1981) 1 VR 529.
In Mr Feldman’s affidavit in paragraphs 70 to 72 is set out the significance of granting of leave to the plaintiff, as presently sought, to the defendants, wherein Mr Feldman deposes the documents sought constitute valuable intellectual property belonging to the first defendant; that the documents were developed by the first defendant at very great cost and effort; that if the documents are presently disclosed, pursuant to this interlocutory proceeding to the plaintiff, in a circumstance in which Altona Enviro Securities has failed to return the outstanding retention moneys and has failed to pay the substantial outstanding claims “the documents will have irretrievably lost all of their value to SEA”. The affidavit affirms that there is no general market for the documents. The plaintiff is the only customer for them and once they are in the plaintiff’s possession “they will inevitably become commercially redundant”. Mr Brett of senior counsel for the defendants ultimately submitted that indeed that would be the deleterious consequence if an order were made as sought. Once done it cannot not be undone; which indeed is true. He further put that it effectively would dispose of the primary proceeding, which is partly true in that it would dispose of it in relation to the Schedule B documents. I agree with Mr Brett that those documents, if not holistically conclusive, are at least of very substantial significance in the main proceeding.
However I am satisfied in this case, giving the high standard of satisfaction which is required, that the relief sought ought be granted on this interlocutory proceeding, for the following reasons.
The history of the matter is conveniently set forth in the primary affidavit for the plaintiff, that of Mr M.A. Giesemann of 20 June 2005 that I have stated. In particular in paragraphs 29 to 30 he set forth what he deposed were the relevant circumstances as follows. By 18 February 2005 SEA had abandoned the upgrade project and at that time construction of the upgraded plant was delayed and incomplete, at least in part. The upgraded plant had not yet been commissioned and neither technical completion or commercial acceptance had been achieved. On the construction side of the adjusted contract price of approximately $16,200,000, the plaintiff had paid the first defendant some $13,000,000 and holds as retention in accordance with the contract some $650,000. Payments and retention represent 84 per cent of the adjusted contract price. The upgraded plant was approximately 85 per cent complete.
On 1 March 2005 the plaintiff served a further default notice (the second default notice – it is unnecessary to go to the first one for the purposes of this judgment) on the first defendant. The second default notice indicated that in accordance with Clause 41.1 of the contract, the plaintiff gave notice to the first defendant that defaults had occurred, namely failure to perform the relevant covenants and obligations; (b) a suspension of the works by the first defendant without the plaintiff’s consent; and (c) an abandonment of the project by SEA.
Mr Giesemann in summation put in paragraph 56 that the plaintiff requires a complete set of documentation for the plant from the first defendant so that it can ensure that it has a full understanding of the design parameters and specifications of the completed plant; so that it can verify the plant has been constructed in accordance with its design; and so that it can safely and effectively address any issues that arise in the operation of the upgraded plant over its life. In paragraph 68 he deposed that the works were to be completed in parallel and that there was an inevitable interface (not a word he used) as to failure to complete any discrete part upon other parts. He further deposed in paragraph 68 – a deposition which Mr Brett, I think correctly, submitted was an overstatement – that the failure to complete any of the requirements, will cause the whole project to fail. However, the qualification was that “in that the new EPA requirements would not be achieved by 14 October 2005”.
I must say having read the material, I do not share the sanguine view of Mr Brett that the time is not critical in this case. The defendants, understandably, seek not to provide the material because for all practical purposes it is their strength in relation to moneys outstanding. I do not regard that as a cynical or wrongful approach in the circumstances of this case. The question is what is the proper and appropriate Order to be made in relation the sought for Schedule B documents.
The position of the defendant is clearly set out in exhibit 12 to Mr Feldman’s affidavit of 23 June 2005, being a letter from him to the solicitors for the plaintiff. In the letter Mr Feldman states (para.3.3):
“In circumstances where CWW owes substantial money to SEA, SEA is not prepared to give CWW the benefit of its extremely valuable intellectual property”.
The letter continues (paragraph 4):
“On our instructions, CWW currently owes SEA $4,288.250.79 (“outstanding sum”).
The outstanding sum comprises the following components:
(a)three bank guarantees issued by HSBC in favour of CWW dated 30 June 2003, each securing the amount of $1, 268,000 (a total of $3,084,000);
(b)unpaid claims of $502,652.74, incorporating:
(i)invoice 1000111 dated 10 March 2005, claiming a net amount (exclusive of CWW’s 5% retention) of $217,034.86; and
(ii)invoice 1000115 dated 10 March 2005, claiming a net amount (exclusive of CWW’s 5% retention) of $285,617.88; and
(c)short-paid invoices totalling $20,899.77, comprising:
(i)invoice 27883 dated 10 June 2004, which claimed a net amount of $2,494,614.27, only $2,488,914.50 of which was paid; and
(ii)invoice 1000039 dated 18 October 2004, which claimed a net amount of $608,000.00, only $592,800.00 of which was paid;
(d)retention moneys duly withdrawn by CWW from payments invoiced by SEA, totalling $608,698.28.”
The letter rhetorically asks that as CWW owes SEA that outstanding sum, will SEA have to commence proceedings to obtain its lawful entitlement? He thus set forth the commercial situation of the defendant.
Mr Clarke, senior counsel for the plaintiff, said that on the material the three triggering events set out in Schedule S to the contract (Technical Completion, Commercial Acceptance and the guarantee) had not occurred and thus those moneys are not owing. Of course it is not for me to determine the position in relation to that, but I rehearse it because that is the financial background in relation to the disputation.
There is also one other amount which was a triggering matter, and that is Tax Invoice No. 1000093, being MWM1 to Mr Mason’s affidavit, which erroneously set forth an amount of GST, the claim stating $629,798.01 plus $12,738.80 GST total $642,536.81. This was corrected by the same invoice number and date, which is MWM2, where the correct GST amount, $62,979.80 was included, giving a total of $692,777.81. Mr Brett said that, and it is in the affidavit also of Mr Feldman, that then plaintiff knew precisely what was being claimed and what had occurred was merely a formal error. Mr Clarke has put that such an error and then non-compliance with the first erroneous invoice but compliance with the second could never realistically be said to constitute repudiation.
Turning to the contract I will not rehearse it, being Exhibit MG2, save the following. Development Default is defined in the definition clause 1.1 at p.10. Facility Information is defined in that clause at p.12, and which definition clearly comprehends Schedule B documents. Material Default is defined at p.16. Critically, clause 41.3(g) states that where the default is a material default the plaintiff “may … exercise … the following remedy, (g), do anything it reasonably considers necessary to rectify the relevant default, at the cost of the promoter”.
Mr Clarke has relied upon that and said even if that fails there is clearly an implied term to the same effect. Mr Clarke submitted that the plaintiff has a contractual right to the Schedule B information under clause 41.3(g), empowering it to take the necessary steps to rectify the default which he submits clearly in this case involves the gathering to it of the Schedule B documents. He put, and I agree with him, that given the context of this case involving environmental protection, compliance with the law and compliance with time schedules are important, and that the October requirement date, 14 October 2005, ought be met rather than postponed. He put that it inherently follows from the failure to provide the material and the abandonment of the project that at a 85 per cent stage it being inherently interconnected, the right, both under Clause 41.3(g), or at the very least, as an implied term, accrues to the plaintiff, and the plaintiff seeks to exercise it on this writ and summons. He rightly acknowledged that the plaintiff is not contending that it owns the Schedule B information and thus he submitted the intellectual property issue falls away. He submitted that the plaintiff is only seeking the use of the information and it does not seek exclusive possession of the information, but rather its use. As I have said, he submitted the compliance with the B invoice and the non-compliance with the erroneous invoice could never realistically be said to constitute repudiation although the first defendant purported to do so. In any event the accrued rights principle springs to the aid of the plaintiff.
He further put, and I agree with this, on its face damages is not an adequate remedy for the plaintiff in this instance, given the context of the non-compliance, if it is such, and the requirements environmentally and legally. The matter is not a matter of damages but a matter of remedying the situation to comply with environmental requirements.
Further, he put and I agree also with this, that from the defendants’ point of view if it transpires on the hearing of the matter that the Schedule B documents properly ought not have been provided to the plaintiff, that error can be remedied by damages. The usual undertaking is proffered.
Mr Brett on behalf of the defendants, put in essence that the modification which was sought was something under the contract clause 12.3 which ought be paid by the plaintiff, not the defendant; that there was repudiation by the plaintiff in the terms that I have stated; and that the first defendant lawfully and legitimately exercised its right to terminate the contract. He relied partly upon Progressive Mailing House v Tabali[5], although he acknowledged correctly that there was a much lengthier period applicable in that case than in the present case of the brief period relied upon by the defendants.
[5](1985) 157 CLR 17.
It seems to me, looking at this not finally of course but merely at the interlocutory stage, that Mr Clarke’s submissions are correct; that the purported repudiation was not efficacious; that the requirements of the situation justify the ordering of the Schedule B documents; and that time is important in this case and ought not be let run.
For those reasons, accordingly, I propose to grant the order sought.
I reserve the costs of this proceeding.
HIS HONOUR: Mr Clarke, are there any other matters?
Mr CLARKE: Only that I formally proffer the undertaking I indicated ---
HIS HONOUR: Yes. Thank you very much. Do you seek costs?
Mr CLARKE: My usual practice is I think in a case of this kind not to seek costs, rather reserve costs in the event that at trial if things were to be different. We have also taken into account the fact that the first respondent company is in administration and we are suing the defendants in their capacity as administrators. We only seek that the costs be reserved, Your Honour.
HIS HONOUR: Thank you. Mr Brett, I propose to reserve the costs, are there any other matters which are outstanding”
Mr BRETT: No, not that I need to ask Your Honour to do. The only thing I want to make clear is this. I have discussed with my instructor and he has sought some instructions over the adjournment as to how long it will take to provide these documents. The Order that is sought is an Order that they be provided forthwith.
HIS HONOUR: I think they propose to order it by Monday, 5 pm.
Mr CLARKE: Four p.m. Monday.
Mr BRETT: Your Honour, we cannot give them all by 4 pm. Monday.
HIS HONOUR: Looking at it fairly and realistically what are you saying?
Mr BRETT: Your Honour, if it were 4 pm Wednesday, with liberty to come back and ask for a longer period, if necessary, I can indicate we can give some documents pretty much immediately, but they are not all in the one place and they have to be collected.
HIS HONOUR: I understand.
Mr BRETT: So if Your Honour says Wednesday with liberty apply.
Mr CLARKE: I’m instructed that we would be content with that on the basis that there is an element of goodwill here and that such documents and information as are immediately available to be provided.
HIS HONOUR: I will make the Order that the documents are to be provided by 4 pm next Wednesday, which is 29 June.
Mr CLARKE: Yes, Your Honour.
HIS HONOUR: If you are nearly there I would, with no disrespect to you, Mr Clarke, hope I do not see you at five past four.
Mr CLARKE: You will not, Your Honour.
Mr BRETT: May it please the Court.
HIS HONOUR: Thank you.
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