CPB Contractors Pty Ltd v Rizzani De Eccher Australia Pty Ltd

[2017] NSWSC 1798

Supreme Court

New South Wales

Medium Neutral Citation:	CPB Contractors Pty Ltd v Rizzani De Eccher Australia Pty Ltd [2017] NSWSC 1798
Hearing dates:	4 and 8 December 2017
Date of orders:	19 December 2017
Decision date:	19 December 2017
Before:	Ward CJ in Eq
Decision:	1.   Dismiss the defendant’s motion for a stay of the proceedings. 2.   Order the defendant within 14 days to sign and return to the plaintiff the Joint Venture Board resolution dated 19 September 2017. 3.   Reserve the question of costs. 4.   Direct the parties within 28 days to serve short written submissions on the question of costs with a view to the question being determined on the papers.
Catchwords:	CONTRACT – Interpretation – Whether “urgent” in “urgent injunctive or declaratory relief” is to be read distributively so as also to qualify “declaratory relief”   ESTOPPEL – Equitable estoppels – Promissory estoppel – Relief
Legislation Cited:	Corporations Act 2001 (Cth), s 248G International Arbitration Act 1974 (Cth), s 7(2)
Cases Cited:	ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 ACS v Ampolex (1995) 38 NSWLR 504 AED Oil Ltd & AED Services Pte Ltd v Puffin FPSO Ltd (2010) 27 VR 22; [2010] VSCA 37 Anaconda Nickel Ltd v Edensor Nominees Pty Ltd [2004] VSCA 167 Ashton v Pratt (2015) 88 NSWLR 281; [2015] NSWCA 12 Australian Securities Commission v Ampolex (1995) 38 NSWLR 504 Bell Group Ltd (in liq) v Westpac Banking Corporation (No.9) (2008) 39 WAR 1 Byrnes v Kendle (2011) 243 CLR 253; [2011] HCA 26 Cherry v Steele-Park [2017] NSWCA 295 Construction, Forestry, Mining and Energy Union v The Australian Industrial Relations Commission [2001] HCA 16; (2001) 203 CLR 645 Costin v Costin (1997) 7 BPR 15,167 CPB Contractors Pty Ltd v JKC Australian LNG Pty Ltd [2011] WASC 112 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 333 ALR 384; [2015] HCA 26 Cubillo v Commonwealth; Gunner v Commonwealth [2000] FCA 1084 DHJPM v Blackthorn Resources Ltd (2011) 83 NSWLR 728; [2011] NSWCA 348 Dillon v RBS Group (Australia) Pty Limited [2017] FCA 896 Dome Resources NL v Silver [2008] NSWCA 322 Doueihi v Construction Technologies Australia Pty Ltd [2016] NSWCA 105 Electra Air Conditioning BV v Seeley International Pty Ltd [2008] FCAFC 169 Equititrust Ltd v Franks [2009] NSWCA 128 at [73] Franklin v Manufacturers Mutual Insurances (1935) 36 SR (NSW) 76 Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 Graham H Roberts Pty Ltd v Maurberth Investments Pty Ltd [1974] 1 NSWLR 93 Green v Econia Pty Ltd [2016] SASC 153 Hawcroft General Trading Co Pty Ltd v Hawcroft [2017] NSWCA 91 Henderson v Louttit (1894) 21 R (Ct of Sess) 674 Howbeach Coal Company Ltd v Teague (1880) 5 H&N 157 Hunt v Carew (1649) 21 ER 786 Jefferys v Jefferys (1841) Cr & Ph 138; 41 ER 443 Jones v Dunkel (1959) 101 CLR 258 Jorden v Money (1854) 10 ER 868 Legione v Hateley (1983) 152 CLR 406 Lipman Pty Ltd v Emergency Services Low v Bouverie [1891] 3 Ch 82 Mercanti v Mercanti (2016) 50 WAR 495 Mount Bruce Mining Pty Ltd v Wright Prospecting Ltd (2015) 256 CLR 104; [2015] HCA 37 Newey v Westpac Banking Corporation [2014] NSWCA 319 Orr v Ford (1989) 167 CLR 316 Perry v Anthony [2016] NSWCA 56 Phoenix Commercial Enterprises Ptv Ltd v City of Canada Bay Council [2010] NSWCA 64 Poliwka v Heven Holdings Pty Ltd (No.2) (1992) 8 ACSR 747 Re Alma Spinning Co (Bottomley’s case) 1880 16 Ch D 681 Rodger v De Gelder (2011) 80 NSWLR 594; [2011] NSWCA 97 Saleh v Romanous (2010) 79 NSWLR 453; [2010] NSWCA 274 Seeley International Pty Ltd v Electra Air Conditioning BV [2008] FCA 29 Sidhu v van Dyke (2014) 251 CLR 505; [2014] HCA 19 Silver v Dome Resources NL (2007) 62 ACSR 539; [2007] NSWSC 455 Silver v Dome Resources NL (2007) 62 ASCR 539 Spettabile Consorzio Vemeziano de Armamento e Navigazione v Northumberland Shipping Co Ltd (1919) 121 LT 628 Superannuation Board [2011] NSWCA 163 Swiss Screens (Australia) Pty Ltd v Burgess (1987) 11 ACLR 756Sydney Consumers’ Milk & Ice Co Ltd v Hawkesbury Dairy & Ice Society Ltd (1931) 31 SR (NSW) 458 Thompson v Palmer (1933) 49 CLR 507 Thorner v Major [2009] 1 WLR 776; [2009] UKHL 18 Van Dyke v Sidhu [2013] NSWCA 198 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Westpac Banking Corp v Tanzone Pty Ltd (2000) 9 BPR 17,521; [2000] NSWCA 25
Texts Cited:	K Handley, Estoppel by Conduct and Election (2nd ed, 2016, Sweet & Maxwell) JD Heydon, Cross on Evidence (8th ed, 2010) K Lewison and D Hughes, The Interpretation of Contracts in Australia, LawBook Co, 2012 A Robertson, “Three Models of Promissory Estoppel” (2013) 7 Journal of Equity 226 A Silink, "Can Promissory Estoppel Be an Independent Source of Rights?" (2015) 40(1) The University of Western Australia Law Review 39 ICF Spry, Principles of Equitable Remedies (8th ed, 2010) ICF Spry, The Principles of Equitable Remedies (9th ed, 2014) Young, Croft and Smith, On Equity (2009, Lawbook Co) R Quirk et al, A Comprehensive Grammar of the English Language (1991)
Category:	Principal judgment
Parties:	CPB Contractors Pty Ltd (Plaintiff) Rizzani de Eccher Australia Pty Ltd (Defendant)
Representation:	Counsel: N Nicholls SC with H Morrison (Plaintiff) F Hicks SC with D Robertson (Defendant)   Solicitors: Corrs Chambers Westgarth (Plaintiff) Clayton Utz (Defendant)
File Number(s):	2017/00332074
Publication restriction:	Nil

Judgment

1. HER HONOUR: This is a dispute between parties to an unincorporated joint venture for the undertaking of design and construction works (the Works) in connection with the widening of the M4 motorway in Sydney. The dispute relates to whether the defendant (Rizzani de Eccher Australia Pty Ltd, to whom I will refer as RdE) is bound to pay a Called Sum of $8.5m for the purposes of the joint venture (the Called Sum Dispute).

2. An anterior issue (raised by RdE’s notice of motion seeking a stay of the proceedings) is as to whether the plaintiff (CPB Contractors Pty Ltd, to whom I will refer as CPB) is entitled to invoke the jurisdiction of the Court to determine the Called Sum Dispute or is bound to refer it to arbitration in accordance with the provisions of the parties’ joint venture agreement (the Stay Dispute). The Stay Dispute turns broadly on the construction to be placed on the words “urgent injunctive or declaratory relief” in the relevant clause (cl 13.6) and, if the adjective “urgent” is to be read distributively, as to whether the present application is or was urgent at the relevant time(s).

Issues

3. The parties have prepared an agreed statement of issues as set out below (for convenience I have used the parties’ acronyms rather than identifying them as plaintiff/defendant).

Issues arising out of RdE’s motion for a stay of proceedings

1   Does CPB by these proceedings “... seek urgent injunctive or declaratory relief ...” within the meaning of clause 13.6 of the Joint Venture Agreement made between the parties on 27 August 2015 (the JV Deed) properly construed?   

2   What is the proper construction of clause 13.6 of the JV Deed as to:

a.   whether the term “urgent” qualifies the entitlement to seek injunctive relief?

b.   whether the term “urgent” qualifies the entitlement to seek declaratory relief?

c.   the meaning of the qualifying term “urgent” with respect to the right to seek interlocutory [sic] and/or declaratory relief?

3   Whether the present circumstances are “urgent” within the meaning of clause 13.6?

4   Whether CPB is entitled to final orders for RdE to perform the alleged obligations under the terms of the JV Deed, as sought by paragraphs 4 and/or 5 of the Summons, within the scope of the exception under clause 13.6?

Issues arising out of CPB’s claim in the proceedings

5   What occurred at the meeting on 19 September 2017 (the JVB Meeting) and subsequently as a matter of fact by reference to the evidence of those involved.

6   Further to [4] above, was there a decision within the meaning of clause 5.4(a) of the JV Deed made at the JVB Meeting, as a result of a vote in accordance with clause 5.6 of the JV Deed, for the payment of a called sum of $8,500,000 on or before 6 October 2017 (the Called Sum).

7   Further and in alternative to [5], did RdE by its conduct at the JVB Meeting and subsequently, as set out in paragraphs 7,8 and 9 of CPB’s List Statement, acquiesce and therefore assent to payment of the Called Sum, in the context of clauses 5.3, 5.4, 5.6, 10.1, 20.9 and 20.10, and schedule 1 of the JV Deed.

8   If the answer to [5] and [6] is “no”, whether RdE is estopped from denying that there was a decision pursuant to clause 5.4(a) of the JV Deed in respect of the Called Sum by:

a.   the alleged conduct; and

b.   the alleged reliance on that conduct by CPB,

asserted at paragraph 2 of CPB’s Reply.

9   If the answer to any of [5]-[7] above is “yes”, whether the Court can or should order RdE to pay the amount of $8,500,000 into the Rizzani CPB Joint Venture Project Account.

Summary

4. As to the first set of issues, for the reasons set out below I have concluded that what CPB is seeking in these proceedings is “urgent injunctive or declaratory relief” within the meaning of cl 13.6 of the JV Deed: that the adjective “urgent” in cl 13.6 qualifies both the entitlement to seek injunctive relief and the entitlement to seek declaratory relief; that, irrespective of the claim for declaratory relief, the claim for a mandatory injunction is “injunctive relief” within cl 13.6; that “urgent” imports its ordinary common sense meaning, namely that the relief is sought where the matter is pressing or requires immediate attention (see below at [105]); and that the present circumstances, objectively viewed, are urgent within the meaning of cl 13.6 of the JV Deed in that the Works have not yet been completed, there are third party creditors to whom moneys are owed and, unless sub-contractors are paid outstanding amounts, the requisite statutory declaration as to progress claims cannot be given and there is a risk of disruption to the Project.

5. I accept that the management of the JV is presently dysfunctional but I place less weight on this issue than as to the financial state of the Project as the former has been, to a large extent if not wholly, the consequence of CPB relying on its asserted legal rights consequent upon its contention that RdE is in default under the JV Deed. I do not suggest that it is not open to CPB to rely on its legal rights in this regard but there is a broad analogy between its position and a party seeking to rely on its own breach of contract to terminate the contract; and, in the present case, any urgency as to the status of the JV Board could have been met by the parties continuing to conduct JV Board meetings on a without prejudice basis.

6. As to the second set of issues, I am not satisfied on the balance of probabilities that a binding vote was passed at the 19 September 2017 meeting in accordance with the requirements of the JV Deed, though I find that there was assent expressed in some form at that meeting by one or both of those representing RdE to the proposition that there be payment by the joint venture participants of a Called Sum of $8.5m each on or before 6 October 2017.

7. I find that the conduct of RdE after the 19 September 2017 meeting, by its General Counsel advising on 19 September 2017 that RdE would sign the resolution prepared by CPB and by RdE not alerting CPB prior to 6 October 2017 (when CPB paid the last of its $8.5m Called Sum contribution into the JV’s Project Account) that RdE did not consider itself bound to do so, amounted to a promise by RdE that it would sign the said resolution. I find that CPB relied to its detriment on the said promise, by paying its $8.5m contribution to the Called Sum and by not taking steps either to prevent the payment out of the Project Account to third party creditors of that amount or otherwise to invoke the default processes under the JV Deed (which would have prevented the payment out of its contribution of the Called Sum pending resolution of the dispute), prior to the date that it issued the notice of default on 12 October 2017, so as to make it unconscionable in the circumstances for RdE now to resile therefrom. I am satisfied that damages are not an adequate remedy in all the circumstances and that RdE should be compelled now to execute the resolution.

8. I am not, however, satisfied that orders of the kind sought in paragraphs 4 and 5 of CPB’s summons should be made. Rather, the relief granted should be limited to an order that RdE sign the resolution prepared by CPB and forwarded to it on 19 September 2017. What happens thereafter may give rise to further disputes but I am not persuaded that the Court should make orders in anticipation of the events that might follow execution of the resolution (and it may well be that any such future disputes will need to be referred to arbitration having regard to the urgency or otherwise of the relief that might then be sought by one or other of the parties and the nature of that relief).

9. As to costs, while CPB has not succeeded in obtaining precisely the relief it sought, it has achieved the outcome that RdE is bound to execute the resolution in question, which was an outcome not possible at this time without the institution of these proceedings and which resolves the uncertainty as to the status of the JV Board at present. Therefore, I am inclined to the view that costs should follow what is in substance the “event” and thus that RdE should pay CPB’s costs of these proceedings. However, I will seek submissions on that issue, with a view to determining it on the papers.

Background

10. In March 2014, the parties (CPB then being known as Leighton Contractors Pty Limited) were together selected by WCX M4 Pty Limited (WestConnex) to submit a tender for the design and construction of the WestConnex M4 Widening (the Project). They entered into an arrangement on 11 April 2014 to work together to lodge a tender for the Project. On 28 November 2014, they were selected as the preferred contractor to enter into the contract for the delivery of the Project and, on 4 December 2014, they entered into a contract with WestConnex as principal to perform the Works (the D&C Deed).

11. On 27 August 2015, the parties entered into a Joint Venture Deed (the JV Deed) by which they formed an unincorporated Joint Venture (JV) (see cl 2.1) and set out the basis upon which they would work together as a joint venture to perform their obligations pursuant to the contract with WestConnex (see recital E to the JV Deed). Pursuant to cl 3.4.1 of the JV Deed, each of the parties agreed to co-operate with and to act in good faith towards the other party. That clause included a definition of “good faith” for the purposes of the JV Deed (including: being fair, reasonable and honest; and doing all things reasonably expected to give effect to the intention of the deed).

JV Deed

12. Clause 5 of the JV Deed provides for the management of the JV. It provides (cl 5.1) that the parties must exercise overall supervision and control of the JV through the JV Board established for that purpose in accordance with the deed and that the JV Board has the powers and responsibilities given to it under the JV Deed.

13. The JV Board is comprised of two “Representatives” for each of the parties or such other number of persons as the parties may agree from time to time (cl 5.2.1). “Representative” (with a capital “R”) is a defined term in the agreement (cl 1.1) meaning a representative appointed to the JV Board pursuant to cl 5. Clauses 5.2.2 and 5.2.3 identify the respective parties’ initial Representatives on the JV Board. Clause 5.2.4 provides that, inter alios, the Project Director, Deputy Project Director and members of the JV Team must not be Representatives on the JV Board.

14. JV Team is defined as the project team appointed pursuant to cl 6. It comprises the Key Personnel appointed by the JV Board for the purposes of the venture (cl 6.2.1; Schedule 4). Suffice it note that the JV Team includes the Project Director, Deputy Project Director and Commercial Manager.

15. Pausing there, as at 19 September 2017, the Representatives for each party constituting the JV Board were: for CPB, Mr Michael Hughes (the Commercial Manager NSW and ACT for CPB) and Mr Peter Chatburn (a Project Director employed by CPB); and, for RdE, Mr Aurelio Mortoni and Mr Fabrizio Vicario, both directors of RdE. The Project Director for the JV was then, and remains, Mr Patrick McCormack (appointed by CPB); the Deputy Project Director was and remains Mr Enrico Mongili (appointed by RdE). The JV Commercial Manager was then Mr David Simbaqueba. He no longer holds that position.

16. Clause 5.4 of the JV Deed provides that:

The JV Board may only exercise its power and duties:

(a)    by a decision made as a result of a vote at a meeting of the JV Board in accordance with clause 5.6; or

(b)   by written resolution, which may be in a number of parts but with identical wording, signed by the current Representatives of each Party.

17. Clause 5.5 contains provisions in relation to JV Board meetings, including the requirement that, except as provided in cl 12.4, a quorum for a meeting of a JV Board “is not less than one Representative of each Party, with each party represented in equal numbers”. (I note that the clause in its terms does not require an equal number of Representatives, as such, for a quorum; rather it requires that there be not less than one Representative of each Party and representation in equal numbers. This is relevant to consideration of the quorum dispute in due course.)

18. Clause 5.6 (headed “JV Board Decisions”) provides that:

5.6.1   All decisions of the JV Board must be made on a “best for project” basis.

5.6.2   Except as provided in clause 12, each Representative has one vote at meetings of the JV Board that are convened in accordance with clause 5.5.4.

5.6.3   The Parties agree that their Representatives have full power and authority to bind that Party as to matters properly decided at meetings of the JV Board.

5.6.4   Subject to clause 12, all decisions of the JV Board will be determined by a unanimous vote. In the event a unanimous vote cannot be reached during a meeting of the JV Board, the meeting of the JV Board will be reconvened within two (2) Business Days to resolve the issue. In the event that a unanimous decision cannot be reached at the reconvened meeting the matter to be resolved will be deemed to be ‘deadlocked’ and must be dealt with under clause 5.7.

19. Clause 5.7, as indicated in cl 5.6.4, contains provisions to apply whenever the JV Board is deadlocked.

20. Clause 6.1 of the JV Deed deals with the positions of Project Director and Deputy Project Director, again making clear that both the Project Director and Deputy Project Director must not be a Representative on the JV Board (see cll 6.1.2; 6.1.8). The clause contemplates that the Project Director and Deputy Project Director will not be persons employed by the same Party unless directed by the JV Board (cl 6.1.8; see also Schedule 4).

21. Clause 7 of the JV Deed provides for the establishment of one or more Project Accounts. Pursuant to that clause the parties established a JV Project Account with the Commonwealth Bank of Australia (the Project Account), into which income derived by the JV in performing the Works is paid, including cash contributions by the parties in the form of Called Sums as directed by the JV Board under cl 10.1 of the JV Deed. All payments out of the Project Account, including payments to third party creditors, are required to be jointly authorised by the parties (see cl 7.4).

22. Clause 10 of the JV Deed provides for the amount and timing of Called Sums to take account of the principle that the JV “will use its best endeavours to achieve and maintain a positive cash flow in the Budgets for the Venture at the earliest practical date, and thereafter to maintain a cash neutral position” (cl 10.3) and that Called Sums be contributed in proportion to each Party’s Participating Interest (cl 10.4). Each Party’s Participating Interest is 50% (see cl 1.1). Unpaid Called Sums constitute a debt due and payable by the Defaulting Party and, without limiting any right the Non-Defaulting Party may have, interest is payable at the rate of 5% per annum by the Defaulting Party from the due date up to and including the date of actual payment (cl 10.5).

19. Failure to pay a Called Sum as directed pursuant to cl 10.1 amounts to an Event of Default (cl 12.1), entitling the Non-Defaulting Party to issue a default notice (cl 12.2). During the period that an Event of Default remains unremedied the Defaulting Party loses, among other things, the right to have any Representative attend or vote at any meeting of the JV Board (cl 12.4). Failure to remedy the default arising from a failure to pay a Called Sum within 10 Business Days entitles the Non-Defaulting Party at any time after the expiry of that time immediately to suspend the rights of the Defaulting Party under the JV Deed and the D&C Deed or to terminate the JV Deed (see cl 12.5), without prejudice to any other rights of the Non-Defaulting Party at law and under the JV Deed (cl 12.6).

Status of the Project

24. The Project achieved “Opening Completion” under the D&C Deed on 4 July 2017. “Opening Completion” is defined (cl 26.6) of the D&C Deed in effect as meaning the stage when (a) the Project Works or a Separable Portion is complete except for minor defects which: do not prevent the Project Works or the Separable Portion from being reasonably capable of being used for their intended purpose; can be corrected without prejudicing the convenient or intended use of the Project Works or Separable Portion; and which the contractor has reasonable grounds for not promptly rectifying; (b) the Project Works are or a Separable Portion is capable of being opened to the public for the safe, efficient and continuous passage of vehicles; and (c) the contractor has carried out and passed all tests which must necessarily be carried out and passed before the Project Works are of a Separable Portion is opened to the public for the safe, efficient and continuous passage of vehicles.

25. As to “Construction Completion” (also defined in cl 26.6 of the D&C Deed), as at the date of the hearing, this was imminent (it had been forecast to occur on 30 November 2017) but had not yet been achieved. The term “Construction Completion” is defined by reference to completion of the Works “except for Defects not known”. Following “Construction Completion”, there will be a defects rectification period (see [131] below) (hence the significance attached by CPB, as I understand it, to the meeting of sub-contractor payments in a timely fashion, so that neither Construction Completion nor the defects rectification process and hence overall completion of the Project is at risk of disruption).

26. The parties agree that the Project is a loss-making project. RdE estimates its 50% share of the loss on the Project to be approximately $86.4 million. In that regard, RdE has for some time been critical of CPB’s management of the project (and CPB accepts that it has been aware of this criticism). RdE has notified CPB that it holds CPB responsible for the losses that the JV has suffered, which it blames on CPB’s mismanagement of the Project and has itself issued a notice of breach to that effect (by letter dated 9 November 2017). It seems likely therefore that the present proceedings will not be an end to the disputes between the parties.

November 2016 JV Board meeting

27. Towards the end of 2016, at a JV Board meeting held via teleconference on 25 November 2016, the attendees were considering measures to take in light of the “great economic loss forecast”; and a decision was recorded as having been made to postpone payments to partners until payment from the client (following “Novation sign off”) was received and that the payments to partners were to be “defined” in the light of the outcome of negotiations with the client. The Project Director (Mr McCormack) is there recorded as having explained that the cashflow situation was such that the Project was going to need funds in mid December (2016).

28. The General Counsel of the RdE Group of Companies (Mr Simone Bagnariol), who attended the November 2016 JV Board meeting, accepted in cross-examination that throughout 2017 issues as to the management of costs and maintenance of projected outcomes, amongst other things, occupied the JV Board management and the JV Team (T 21.16); and that the performance of the Project and the costs being incurred to perform the Works, and how they were to be managed, were “major items of consideration or at least on the minds of the joint venture partners” throughout 2017.

29. Pausing there, I note that Mr Bagnariol has never been an RdE Representative on the JV Board and, though he says he has attended numerous meetings of the JV Board in his role as General Counsel, his evidence is that he has never been entitled to vote in respect of JV Board decisions or to sign JV Board resolutions (see his 21 November 2017 affidavit at [4]).

August 2017 JV Board meeting and August Called Sums

30. By August 2017, RdE was pressing CPB, among other things, for an updated cash flow plan including a reasonable plan for the management of outstanding payments and a detailed breakdown of the remaining activities cost versus the original budget cost to complete the project updated on weekly basis.

31. A JV Board meeting was held on 25 August 2017 by teleconference. At that meeting a Called Sum of $6.5m from each of the parties was discussed and (as is apparent from the draft minute later prepared by Mr Bagnariol – see [37]-[40] below) agreed. (Mr Hughes in cross-examination noted that this minute had not yet been agreed.)

32. Following that Board meeting, on 29 August 2017, Mr Hughes emailed the JV Board members (copied, among others, to Mr Bagnariol), stating:

Please find attached for your signing and return following our Called Sum resolution made in the 25 August 2017 JV Board meeting.

33. The attachment was not identified but presumably it was a formal resolution in relation to the August Called Sum, because Mr Bagnariol responded a few minutes later by email:

We confirm what has been agreed during the BoD Meeting with reference to the called sums.

But I would like to prepare the minute of all the discussions held.

Could you therefore be so kind to send me the soft copy of the resolution that you prepared so I can implement it?

34. Later that day, Mr Franco Alzetta (the Managing Director of RdE) emailed in relation to the August Called Sums to say that “[i]n the mean time we confirm that we are arranging for the payment within the week”.

35. The August Called Sums were paid by both parties on 6 September 2017. (Reliance is placed by CPB on the procedure adopted in relation to this Called Sum to set the context in which the September Call Sum was, it says, agreed. Whether or not that past practice informs the conclusion as to whether a binding agreement was reached at the September 2017 JV Board meeting, and I am of the view that it does not, it certainly sheds light on the willingness of CPB to proceed with its payment of the September Called Sum in advance of a formal signed resolution to that effect.)

Project Director’s request for a September Called Sum to be agreed by JV Board

36. Two days later (on 8 September 2017), Mr McCormack emailed the JV Board members and others (identifying the importance of the message as “High”) in relation to Called Sums, stating:

Refer to the attached Cash Flow template that illustrates the required Called Sums.

Several points to note;

1.   The Called Sum of $8.5m requested for 14 Sept, is required to allow the Statutory Declaration related to the progress claim to be signed. The Cash Flow reflects this sequence of payments – Called Sums received, Progress Claim paid following week.

2.   The Cash Flow is based upon receiving a Progress Claim of circa $12m on 22 Sept. This includes a payment of $8.9m of the $10.9m completion payment ($2m held for defects by SMC).

3.   The Cash Flow is based upon bringing creditor payments up to date to ensure no risk of legal action against the JV.

4.   The Cash Flow is based on partner payments (CPB & RdE outstanding claims) being made at end November 17.

5.   Dates have been given for when the Called Sums are required. The current state of the payments requires that these are paid on-time to avoid further subcontractor issues.

6.   The project currently has outstanding liabilities of $77m, with an equity shortfall of $64m.

Please urgently meet and confirm the Called Sum agreement. Without this commitment, we at site can no longer manage subcontractor & supplier expectations and are placing the project at risk. [my emphasis]

Draft minute of August JV Board meeting

37. At some time before 25 August and 11 September 2017, Mr Bagnariol prepared a draft minute of the 25 August 2017 Board meeting, which he emailed to the JV Board members and others on 11 September 2017 in advance of the Board meeting to be held “tomorrow”. (As the draft minute itself notes the next meeting as being on 11 September 2017, it is possible that the timing of the email communications does not take account of the time difference between Australia and Italy. What nonetheless appears from the emails is that there was a telephone “hook-up” on 11 September 2017, not 12 September 2017 as Mr Bagnariol’s 11 September email would suggest.)

38. The draft minute of the 25 August meeting that was forwarded to the JV members on 11 September 2017 records that the Project Director, Mr McCormack, had explained to the JV Board the “current status with negotiations” with the client’s representatives about the outstanding amounts to be paid to the JV ($10.9m) and a possible compromise being for the JV to accept two instalments (one in September and one in October) on condition that the client formally recognise the achievement of Opening Completion.

39. The minute makes reference to a “possible cash flow” that the Project Director (Mr McCormack) remembered sending to the partners showing the amounts necessary and to Mr Franco Alzetta (of RdE) saying that “the Partners agreed to provide the JV with a cash injection of AUD $6.5m each, to be executed by the end of August”. The minute went on to note that:

In the meantime [i.e., before the end of August], the Board will try to better understand what is the situation with the customer and of the relevant payments. After a possible agreement with the client or a better understanding of the payments, the JV shall have to update the cash flow of up to the end of the project.

40. The minute also recorded that Mr Martin Wood (of CPB) had highlighted that by the end of August there would be an exposure of $35m “of cost overdue” so that an additional contribution would be needed from the partners and that Mr Bagnariol had replied that “we are asking to the Partner to commit today to an additional contribution when we are completely unable to forecast the CTC even if the works have already been handed over to the client”. Mr Alzetta is recorded as suggesting to Mr Enrico Mongili (the Deputy Project Director appointed by RdE) and to Mr McCormack “to identify the necessary and urgent payments to be made to the suppliers in a realistic way”.

September 2017 JV Board teleconference

41. On 12 September 2017, Mr McCormack emailed the JV Board members following “yesterdays phone hook-up” [sic] to advise that the Called Sum table had been revised. In that email, he stated:

1.   Cash Flow revised based upon receiving the client $10.9m outstanding payment prior to next Called Sum, therefore reducing and delaying the payment.

2.   Next Called Sum delayed from 14 Sept to 21 Sept.

3.   Stat Dec will then be able to be signed and August Progress Claim of $3m able to be received.

Please urgently meet and agree the Called Sums. The project cannot

manage the current situation without certainty of funding. [my emphasis]

In addition:

-   The release of the $10.9m is based upon the execution of Sch 4. At site we will amend Sch 4 to include Asphalt Joint Defects.

42. Pausing there, the significance of a statutory declaration being signed (to the effect that all subcontractors had been paid) goes to whether a progress claim by the JV would be met by WestConnex, such a declaration being a pre-requisite under the D&C Deed.

43. A draft minute of the 11 September 2017 Board meeting was prepared by Mr Bagnariol. In that minute, reference was made to the ongoing dispute as to the claim for payment from the client of the $10.9m. Mr McCormack confirmed that Schedule 4 (necessary to establish what was necessary for payment by the client of the $10.9m) could not be signed as there were still two items not closed with the client. There was a discussion in relation to the cash flow and cash call. The minute noted:

PmC explains that the overdue amount due to Subs at the end of September shall amount to AUD 28 mio. PmC also underline that he will be considered liable for the Statutory Declaration to be sent along with the IPC and that if a subcontractor applies to SOPA or goes to Court it will be demonstrated that he signed a false Statutory Declaration he will be disqualified for being a Company Director of whatever company plus a AUD 50k fine to him.

There is also the problem of not having subcontractors on the job due to the lack of payment or for having promised them certain payments which have not been executed due to the delay of the partners in financing the JV.

For the reasons set forth above, we also did not submit the Statutory Declaration of the month of August 17. As of today the client have not required yet to us such Stat. Dec.

… SB proposes therefore to identify which payments have to be made without delay, which payments can be postponed in the next few weeks and then which one can be delayed till the beginning of October when the JV will have hopefully cashed the AUD 10.8 mio from the clients plus the Partners will have already contributed with an additional cash call. [my emphasis]

…

PMC clarifies that in addition to the money we could receive from the client, we would need in any case a cash call from the Partners every week.

…

SB summarize therefore that (1) RdE will discuss with MW the amount to be contributed by each Partner; (ii) FA will call Dennis to understand of the application of LD or the other deductions (iii) MH will prepare the draft of Schedule 4 to be submitted to the client; and (iv) in a couple of days the parties will get again in touch to establish the exact amount of cash contribution in one scenario (if the client pay us) or in the worst scenario if the Client will not pay us.

PmC confirms that the final cost at completion of the Project will be AUD 553 mio.

15 September 2017 email from Project Director re September Called Sums

44. On 15 September 2017, Mr McCormack again emailed the JV Board in relation to the Called Sums, providing an update and requesting that the JV Board urgently meet and commit to paying $8.5m on or before 21 September 2017. The update was as follows:

-   The $10.9m completion payment has yet to be paid. There is a meeting next Tuesday … to discuss asphalt defect at joints and treatment of LDs [liquidated damages]. (see my email 13 Sept. on this issue) to enable Sch 4 to be signed. It is now unlikely that we will receive this payment until the last week of this month.

-   The first review of the Cash Flow had the partners paying $8.5m on 14 Sept;, on basis that the $10.9m would not be received this week. Emailed to JV Board on 8 Sept below.

-   The second revision of the Cash Flow had the partners paying $6.5m on 21 Sept on basis that the $10.9m would be received this week. Emailed to JV Board on 12 Sept below.

-   Accordingly, the project now requests that the original Cash Flow be considered, and $8.5m per partner be made available.

45. The email also noted that the August Progress Claim was valued at $1.32m ($716,000 deducted for asphalt defect/incomplete, $1.5m deducted for LDs); that payment will not be made whilst statutory declaration outstanding “so unlikely to be paid this month”; and that “[t]he current legally overdue amount (excluding partner payments) is circa $28m”. Mr MrCormack further stated that the JV was “in breach of our contract [with the client, WestConnex] and subcontracts”.

19 September 2017 JV Board meeting

46. As is apparent from the correspondence referred to above, by the time the 19 September JV Board meeting was convened, both JV partners were well aware of the urgency being expressed by the Project Director (Mr McCormack) for another cash call in order to meet sub-contractor payments (and to enable the statutory declaration to be signed on which the further progress payment from WestConnex was dependent). Mr Bagnariol’s minute of the 11 September 2017 JV Board meeting (as italicised above) itself contemplated an additional cash call payment by October 2017.

47. On 19 September 2017, Mr McCormack issued an email invitation for the JV Board to meet by teleconference on 19 September 2017 at 4pm to discuss and agree upon the payment of a Called Sum of $8.5m per partner by 21 September 2017.

48. The JV Board meeting was convened for 4pm (Sydney time) on 19 September 2017 by way of teleconference (with an anticipated duration of half an hour). The sole subject matter of the meeting was identified in the email as being:

To discuss & agree below:

Called Sum of $8.5m per partner due on or before 21 September 2017.

49. The meeting request identified the “required attendees” as the Representatives referred to at [45] above, as well as Mr Alzetta, Mr David Simbaqueba (the JV Commercial Manager); Mr Bagnariol and Mr Martin Wood (of CPB).

50. Earlier on the day of 19 September 2017, (which is relevant to explain some of the evidence given as to the later JV Board meeting), there was a meeting between Mr Mortoni, Mr Wood and one or more representatives from WestConnex to discuss the dispute as to a claimed $10.9m bonus payment from WestConnex. It is accepted by both parties that the quantum and timing of that bonus payment were matters relevant to the September Called Sums that Mr McCormack was seeking (see the email from Mr McCormack referred to at [44] above), though Mr Simbaqueba did not accept that the payment of this amount on 29 September 2017 removed the need for the Called Sums.

51. At the commencement of the teleconference the following persons were participants in the conference call: Mr Hughes (CPB’s Representative); MrChatburn (CPB’s Representative); Mr McCormack (the Project Director); Mr Simbaqueba (the JV Commercial Manager); Mr Mortoni (RdE’s Representative); and Mr Bagnariol (RdE’s General Counsel). There is no suggestion that Mr Vicario (RdE’s other Representative) was present or participated in the teleconference.

52. However, Mr Mortoni says (for the first time in the context of these proceedings) that he left the meeting (while it was continuing via teleconference) for about 15 minutes to participate in a call on a different project. He did not announce that he was leaving the meeting and there was no evidence from anyone at RdE who was at the RdE Sydney office who could corroborate this. Nor was there any evidence from the person(s) on the other telephone call that Mr Mortoni said he left the JV Board meeting teleconference to take. I consider this issue further in due course.

53. What occurred in the course of that teleconference is hotly in dispute. CPB asserts, and RdE denies, that during the teleconference it was agreed that a Called Sum (of $8.5m) would be paid by each of the parties by 6 October 2017. Mr Bagnariol did accept that there was a discussion about Called Sums (though he did not recall in the witness box the amount that was discussed) and said he left the meeting with the “impression” that a resolution would be prepared (for a Called Sum) (see [197] below).

54. There were in evidence copies of notes taken by each of Mr Hughes; Mr Chatburn; and Mr Simbaqueba, during or at around the time of the meeting. I will consider those notes, and the evidence of those persons participating in the teleconference (other than Mr McCormack who was not called by either party to give evidence) in due course.

Preparation of draft resolution

55. At 4.38 pm on 19 September 2017 (therefore only shortly after the meeting had been scheduled to finish), Mr Hughes sent an email to Mr Mortoni, copied to various others, including Mr Bagnariol, attaching a JV Board Resolution which had been prepared by Mr Hughes (and signed by both Mr Hughes and Mr Chatburn) for the payment of a Called Sum in the amount of $8,500,000 into the Project Account on or before 6 October 2017 (the Called Sum). The email stated:

Aurelio,

Could you please sign the attached and return documenting the JV Board’s resolution of today.

Regards

Michael Hughes

[my emphasis]

56. The document attached to the email, entitled “JV Board Resolution” and dated 19 September 2017, relevantly provided:

Called Sum - September 2017

This paper confirms that the RdE CPB JV Board resolved in a JV Board Meeting held on 19 September 2017 to the payment of Called Sums to the Project Account in the amount of ($8,500,000 AUD from each Party) paid on or before 6 October 2017.

JV Board approval of this resolution is ratified below:

Aurelio Mortoni   ……………

Fabrizio Vicario   ……………

Michael Hughes    [signed]

Peter Chatburn    [signed]

[my emphasis]

57. Six minutes later (at 4.44 pm on 19 September 2017), Mr Bagnariol responded with an email to Messrs Hughes and Mortoni in the following unequivocal terms:

Yes, we will do it along with the Minute of the Meeting.

58. On 20 September 2017, Mr Bagnariol forwarded a draft of the minute of meeting held on 11 September and said that the “MoM of the BoD of today will follow tomorrow”. (I was not taken to any minute of the 19 September meeting, from which I infer that none has been agreed, perhaps not surprisingly in light of the present dispute.)

Payment by CPB of its contribution to the September Called Sums

59. On 22 September 2017, CPB paid the sum of $1,500,000 into the JV Project Account towards the Called Sum. Between 22 September 2017 and 4 October 2017, there were payments out of the JV Project Account. On 6 October 2017, CPB paid a further $7,000,000 into the JV Project Account completing its contribution of the Called Sum. According to Mr Simbaqueba, the amount of CPB’s Called Sum ($8.5m) paid into the Project Account had been fully disbursed to creditors by the end of October 2017 (his affidavit of 8 November 2017 at [10]-[13]; [13] being read as his assertion, subject to weight).

60. On 6 October 2017, Mr Hughes emailed Mr Mortoni (copied to Mr Bagnariol and others) referring to the Called Sum of 19 September 2017 in the amounts of $8.5m from each party; stating that CPB had paid its share of the Called Sum and that “[a]ppreciate if you could confirm RdE payment timing”.

61. Mr Mortoni’s response, by email on 9 October 2017, was that:

we have a couple of days of delay in the cash contribution. We are confident to do it in the next few days.

We will keep you updated on the exact date. [my emphasis]

62. As it transpired, RdE did not pay the $8.5m Called Sum.

Issue by CPD of notice of default

63. On 12 October 2017, CPB issued a Notice of Default under cl 12.2 of the JV Deed, asserting a breach of the JV Deed by RdE in failing to pay the Called Sum.

64. On 19 October 2017, Mr Mortoni wrote to CPB responding to the Notice of Default, rejecting the allegations made in that notice, disputing any obligation to pay the Called Sum. It was asserted that neither of the conditions in cl 5.4 of the JV Deed was satisfied in respect of the Alleged Called Sums and therefore the JV Board had no power to direct the parties to pay the Alleged Called Sums and the parties were not obliged to do so under cl 10.1 of the JV Deed.

65. Pausing there, insofar as the letter made express reference to the requirements of cl 5.4(a) (that there be a decision made as a result of a voting at the meeting of the JV Board) and cl 5.4(b) (that there be a written resolution “signed by the current Representatives of each Party”), what the letter clearly conveyed was an assertion that there had been no decision made as a result of a “vote” and no signed written resolution. There was, however, no suggestion in that letter (or in any correspondence from RdE prior to the service of its affidavits in these proceedings) that one reason that RdE disputed that any decision had been made (or any agreement had been reached) for the payment of the Called Sum was that Mr Mortoni had, as he now says he did, absented himself (without informing any of the teleconference participants) from the teleconference for a portion of that teleconference and, fortuitously otherwise, had missed that portion of the teleconference in which the discussion as to the Called Sums (which Mr Bagnariol accepts took place) had occurred. This is despite, on the evidence of Mr Mortoni, Mr Bagnariol having been apprised of what had happened within about 2 minutes of the end of the teleconference (and, if so, before Mr Bagnariol had sent his email to Mr Hughes confirming that RdE would do what had been requested (i.e., sign and return the attached resolution).

Subsequent events

66. On 16 October 2017, CPB corrected (or “clarified”) an error in the default notice, as to the date by which it required RdE to remedy the event of default (stating that the date specified should have been 19 October 2017 and then specifying 20 October 2017 as the date by which the default should be remedied).

67. By email on 18 October 2017, Mr Hughes requested the convening of an urgent JV Board meeting to discuss and resolve, among other matters, RdE payment of current Called Sum and resolution of future Called Sums. The email noted that the meeting must be convened no later than 25 October 2017 in accordance with the requirements of cl 5.5 of the JV Deed.

68. There followed further correspondence in which CPB maintained its position that RdE was in breach of the JV Deed by failing to pay the Called Sum (see its letter dated 23 October 2017 to RdE), though also maintaining its request that a JV Board meeting be convened by no later than 25 October 2017) and RdE maintained its denial of any obligation to pay the Called Sum (see letter dated 25 October 2017), RdE there advising that an RdE Representative was not available to attend a Board meeting on 25 October 2017 but would be available in the first week of November 2017.

69. CPB commenced the present proceedings on 2 November 2017. Following the commencement of the proceedings, CPB gave notice by letter dated 8  November 2017, for the convening of a JV Board meeting to be held no later than 15 November 2017, one of the items or the agenda for which was the RdE $8.5m Called Sum.

70. RdE then issued its letter of 9 November 2017, to which I have earlier referred, alleging mismanagement of the project by CPB and breach by CPB of the JV Deed (and claiming that CPB is liable to RdE under the indemnity in cl 11.1.1 of the JV Deed or in the alternative for damages for breach of the JV Deed in the amount of $86.403m).

71. CPB then responded to requests by RdE to confirm the scheduled Board meeting for 15 November 2017 by stating that “the proposed meeting of 15 November 2017 is annulled”; though agreeing to meet with RdE on 23 November 2017 “not as a board meeting” and without prejudice to CPB’s rights and entitlements under the JV Deed arising from RdE’s failure to pay the Called Sum of $8.5m.

72. RdE’s position, as set out in an email of 22 November 2017 was that:

If CPB and RdE will be able to identify truly critical payments that need to be made in the best interests of the JV and the Project, then RdE will definitely agree to make a voluntary contribution of funds to the JV, just as it did in respect of the recent ATO liability, while the parties continue to discuss the alleged Called Sums and the other pending disputes among the parties.

73. The reference in that email to a payment to the ATO was a payment to which each party had contributed towards a tax liability of the JV.

74. RdE pressed for a response from CPB in relation to the proposed Board meeting. CPB’s response was that RdE could best assist critical subcontractor payments by paying the Called Sum and that the dispute was likely to be determined imminently, and thereafter, if appropriate, a further JV Board meeting “may be convened”.

75. The upshot of all of this is that there has been no meeting of the JV Board since 19 September 2017.

76. As noted earlier, as at the date of commencement of these proceedings, and indeed as at the dates of the hearing before me, the Project had not achieved “Construction Completion” as defined by the D&C Deed, though it is said to be imminent.

Issues for Determination

Stay Dispute

77. Logically, the Stay Dispute should be determined first. Four issues arise in that context.

1.   Does CPB seek urgent injunctive or declaratory relief within the meaning of cl 13.6 of the JV Deed as properly construed?

78. This issue turns upon the conclusions on the second and third of the issues in the agreed statement of issues. Suffice it to say that, for the reasons set out below, the answer to this question is “yes” and hence the application by RdE for a stay of the proceedings should be dismissed.

2.   Proper construction of cl 13.6 of the JV Deed

79. CPB accepts that the dispute resolution procedures in cl 13 of the JV Deed contain an arbitration agreement (cl 13.5) which, subject to the operation of cl 13.6, would require these proceedings to be stayed and the issues in these proceedings to be referred to arbitration as required by s 7(2) of the International Arbitration Act1974 (Cth).

80. Clause 13.5 (headed “Arbitration”) provides that:

Any dispute, controversy or claim arising out of, relating to, or in connection with this Agreement, including any questions regarding its existence, validity or termination, must be resolved by arbitration to be conducted in accordance with the Rules of the International Chamber of Commerce. The seat of the arbitration will be Singapore. Any hearings may take place in any other convenient venue agreed by the Parties or as ordered by the arbitral tribunal. The language of the arbitration will be English. The number of arbitrators will be three to be appointed in accordance with the said rules. The arbitrators’ award shall be final and binding on the Parties.

81. Clause 13.6 (headed “Urgent or Injunctive Relief”) then provides:

Nothing in clause 5.7 or this clause will prejudice the right of a Party to seek urgent injunctive or declaratory relief from a court of competent jurisdiction in accordance with the provisions of clause 22.2 of this Deed.

82. Clause 5.7 is the deadlock provision to which I have already adverted. Clause 22.2, read with the definition of “Location” in cl 1.1, provides that this Court is the relevant court in which relief may be sought under cl 13.6.

Legal principles

83. There was no dispute as to the principles of construction to be applied in the present case, namely that the meaning of commercial documents is to be determined objectively, by reference to what a reasonable person in the position of the parties to the transaction would have understood them to mean; which requires consideration not only of the text, but also of the surrounding circumstances known to the parties and the purpose and object of the transaction (see Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[51]), and that commercial agreements should be given a businesslike or commercial construction which does not flout business commonsense (see Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]). The ostensible meaning of language in a contractual term prevails unless its application produces a result which is plainly absurd in which case the Court will endeavour to apply any interpretation to avoid that absurdity (Westpac Banking Corp v Tanzone Pty Ltd (2000) 9 BPR 17,521; [2000] NSWCA 25 at [19]-[22]).

84. See also the recent consideration of the relevant principles by the Court of Appeal in Cherry v Steele-Park [2017] NSWCA 295. There, it was observed that “[t]he starting point and the ending point of the construction of a written commercial contract is the language chosen by the parties record their bargain” (at [72]) and that the “ultimate question” is whether the written language, “when considered in light of legitimately relevant surrounding circumstances, permits a constructional choice” between “different legal meanings” (at [75]) (and see Leeming JA at [76]).

85. There is no particular rule of construction requiring a liberal approach to be applied in the interpretation of arbitration agreements; rather, any such approach remains subject to the language used in the clause itself (see ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 at [121]; Lipman Pty Ltd v Emergency Services Superannuation Board [2011] NSWCA 163 at [8]).

CPB submissions

86. CPB argues that the parties have used clear and unambiguous language in cl 13.6 and that the clause is clearly engaged in that in these proceedings it claims both “urgent injunctive” relief and also “declaratory” relief.

87. Insofar as RdE argues that the adjective “urgent” should be applied distributively so as also to qualify “declaratory”, CPB submits that this contradicts the clear language of cl 13.6 and that it would lead to a commercially impractical result which the parties could not be presumed to have intended. The so-called commercially impractical result identified by CPB appears to be the outcome that the parties would be deprived of the important and commercially useful remedy of declaratory relief other than were there was a situation of urgency.

88. CPB submits that the nature of declaratory relief is such that it is entirely consistent with the commercial objectives of the JV Deed and the presumed intention of the parties that they reserved a right to seek declaratory relief in circumstances where to do so would resolve disputes arising under the JV Deed in a far more commercially expedient way to arbitration (i.e., without the need for the declaratory relief sought to be urgent).

89. In this regard, CPB points to the recognition by the courts that the jurisdiction to grant declaratory relief is a useful and effective power to be engaged, particularly in circumstances where questions arise as to the validity or continuing enforceability of contractual obligations (referring to what was said in Spettabile Consorzio Vemeziano de Armamento e Navigazione v Northumberland Shipping Co Ltd (1919) 121 LT 628 at [629] (Bailhache J); [635] (Atkin LJ); and to the decision in Graham H Roberts Pty Ltd v Maurberth Investments Pty Ltd [1974] 1 NSWLR 93 where the Court declared in a building case that the defendant owner was entitled to possession of land (at 109B-E) notwithstanding that issues concerning payment or non-payment of progress claims and other related disputes were to be referred to arbitration under the building contract (at 101D-G)).

90. Reference is made by CPB to Seeley International Pty Ltd v Electra Air Conditioning BV [2008] FCA 29, where Mansfield J declined to stay proceedings in which the plaintiff had sought declaratory relief, in circumstances where there was an arbitration agreement containing an arbitration clause to the effect that nothing in the arbitration clause prevented a party “seeking injunctive or declaratory relief in the case of a material breach of threatened breach of this Agreement”. There, his Honour said (at [37]):

But it does not flaunt business common sense that the parties, having agreed upon arbitrating their disputes, should nevertheless agree upon an optional alternative dispute resolution process — by way of court proceedings — in certain circumstances. There is no inherent commercial reason why certain disputes where declaratory or injunctive relief is sought should not be agreed to be determined by a court. There is nothing to suggest such resolution would or should be less speedy or less efficacious or more expensive. Particularly where the parties have demonstrated such care in arriving at, and expressing, their bargain, the syntactical and semantic analysis of cl 20 as a whole should not be ignored because it suggests a preserved alternative but limited dispute resolution process by court proceedings. The availability of such access to the courts would not defeat the commercial purpose of the agreement; indeed it may serve it; cf per Kirby J in Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 at 378.

91. On appeal, in Electra Air Conditioning BV v Seeley International Pty Ltd [2008] FCAFC 169, the Full Court of the Federal Court, dismissing the appeal, said at [50]:

Moreover, an arbitrator does not exercise judicial power. An arbitrator’s powers are defined by the agreement of the parties: Construction, Forestry, Mining and Energy Union v The Australian Industrial Relations Commission [2001] HCA 16; (2001) 203 CLR 645 at 658. Whilst it may be accepted that an arbitrator can make an order in an award in the nature of a declaration or an injunction, that declaration or that injunction so made can only be enforced through proceedings in an appropriate court.

92. CPB notes that in Construction, Forestry, Mining and Energy Union v The Australian Industrial Relations Commission [2001] HCA 16; (2001) 203 CLR 645 at 658, the Court stated that “[w]here parties agree to submit their differences for decision by a third party, the decision maker does not exercise judicial power, but a power of private arbitration”.

93. CPB submits that, although an arbitrator can make a form of declaration (within the confines of legislation and agreement permitting that to occur), it is not “true” declaratory relief in that an arbitrator cannot exercise judicial power. Rather, CPB says it is a form of judgment on an issue or issues, inter partes, that would require separate enforcement in a Court.

94. CPB thus submits that there is no justification for limiting the parties’ right to claim declaratory relief to circumstances where it is urgent to do so.

95. CPB acknowledges that the Victorian Court of Appeal held otherwise in AED Oil Ltd & AED Services Pte Ltd v Puffin FPSO Ltd (2010) 27 VR 22; [2010] VSCA 37, where the exception to an arbitration agreement (in terms very similar to that in the present case) was as follows:

Nothing in this Article 33 prevents a party from seeking urgent interlocutory or declaratory relief from a court of competent jurisdiction where, in that party’s reasonable opinion, that action is necessary to protect that party’s right.

96. There, the Victorian Court of Appeal (Buchanan and Bongiorno JJA and Croft AJA) held that the word “urgent”, like the word “relief, was used distributively ([26]); that whether relief was in fact urgent was a matter to be determined objectively ([27]), and that the relief sought in the cross-claim in that case was not urgent ([36]).

97. CPB contends that the reasoning of the Victorian Court of Appeal in AED is “problematic”. First, it points to the fact that, in resisting the stay, Counsel for the defendant/cross-claimant had there submitted that, because interim or interlocutory declaratory relief is not available at common law or in equity, it then followed that the word “urgent” could not sensibly be construed as qualifying the word “declaratory”. CPB contends that such a submission was flawed in that it equated the expression “urgent” with the process by which “interim or interlocutory” relief is sought. CPB argues that the submission out by the Counsel at the hearing deflected the Court’s attention away from the correct task (of construing the language of the clause) to a consideration of whether declaratory relief can be granted on an interim basis (the Court holding that such relief is available, referring to ICF Spry, Principles of Equitable Remedies (8th ed, 2010) at 453).

98. CPB submits that the Court in AED (insofar as it reasoned that because interim declarations are available then, logically, the defendant/cross-claimant’s submission failed, such that the expression “urgent” could logically be applied to declaratory relief) failed to engage in the correct task of focussing on the clear language used in the relevant exception clause.

99. CPB also argues that there can be no such thing as an interlocutory declaration – the nature of declaratory relief being that it is final. Noting that (at [23]) the Victorian Court of Appeal referred to English authority concerning the power to grant interim declarations, CPB points out that in England, the power to make interim declarations is specifically granted under the Civil Procedure Rules. CPB also argues that the Court’s reasoning at [25] (that the type of “urgent declaratory relief contemplated” in that case was of a kind issued in interlocutory proceedings, but which finally determined a matter in dispute, and that the authorities indicated a difficulty in enforcing awards that did not finally determine a matter in dispute) does not sit comfortably with the Court’s earlier conclusion that declaratory awards can be enforced (see [18]-[20]).

96. Thus CPB says that the Victorian Court of Appeal equated the word “urgent” with the process by which interlocutory or interim relief is granted (with no justification for so doing). CPB submits that I should not follow the reasoning in AED and that the correct process is to construe the language of the clause by reference to established principles in an endeavour to determine the objective presumed intention of the parties, and having regard to the nature and utility of the remedy in the context in which it is applied in the exception clause.

RdE submissions

101. RdE notes that, prior to the advent of the Model Law in Schedule 2 to the International Arbitration Act 1974 (Cth), it was considered that arbitrators lacked the power to award enforceable declaratory relief or to make orders for interim measures (viz. interlocutory injunctive relief) but that it is now accepted that an arbitrator’s powers include the making of declarations inter partes and to make an award for interim measures (referring to Seeley International v Electra Air Conditioning at [26]-[27]).

102. RdE argues that therefore, broadly, the purpose of “carve-out” clauses such as cl 13.6 in the context of an arbitration agreement is no longer to ensure that both injunctive and declaratory relief is available to the parties (as it was when it was uncertain if an arbitrator had the power to grant such relief). It argues that the modern purpose of clauses like cl 13.6 is to provide parties with the ability to obtain such relief more swiftly than would otherwise be the case – if the determination of the issue in dispute is in fact urgent and requires immediate attention.

103. RdE places weight on the fact that cl 13.6 of the JV Deed is a provision that commonly appears in the same or similar form in many commercial agreements that contain an arbitration clause such as cl 13.5, and the decision of the Victorian Court of Appeal as to the construction of such a clause in AED (to which I have referred above – see [95]ff above).

104. RdE submits that, consistent with the construction placed on the same or similar wording in AED, the word “urgent” in cl 13.6 should be construed distributively, such that cl 13.6 only entitles a party to apply for urgent injunctive relief and/or urgent declaratory relief; that relief sought by a party is “urgent” only if it is in respect of a matter that requires immediate attention; and that whether the injunctive or declaratory relief sought is “urgent” is a matter to be determined objectively in light of all the relevant circumstances.

105. As to the meaning of “urgent”, RdE notes that in Green v Econia Ptv Ltd [2016] SASC 153 at [23], the Court held that a matter is “urgent” if it has “the quality of requiring immediate attention”; and that in CPB Contractors Pty Ltd v JKC Australian LNG Pty Ltd [2011] WASC 112 at [37], the Court described an “urgent” matter as one that is “pressing; compelling or requiring immediate action or attention”.

Determination

106. The contracting parties in the present case certainly contemplated something narrower than the preservation of a general right “to seek urgent … relief”. So broad a construction would ignore the express inclusion of the words “injunctive or declaratory” (which delimit the nature of the contemplated relief) and the reference to a “court of competent jurisdiction” (which delimits the source of that contemplated relief), as well as the inclusion in the JV Deed of clauses dealing with other forms of dispute resolution.

107. It is obvious that the adjectives “urgent” and “injunctive” both qualify the noun “relief”, given that it makes no grammatical sense to speak of a preserved right to “to seek urgent injunctive”. However, “injunctive relief” is not itself a discrete unit within cl 13.6 – the words “or declaratory” are interposed.

108. Insofar as cl 13.6 as drawn follows a standard form of exception from commercial arbitration agreements (as submitted by RdE – see [103] above), then it is relevant to note that it has been said that courts recognise the desirability of certainty and are therefore reluctant to disturb an established construction (see K Lewison and D Hughes, The Interpretation of Contracts in Australia, LawBook Co, 2012) at [4.08] and the authorities cited therein). That is of course not to deny that in any case the particular clause should be construed on its own terms, in the context of the agreement in question.

109. In my opinion, on the ordinary reading of the clause, the adjective “urgent” should be read distributively as qualifying the succeeding words “injunctive … relief” and “declaratory relief” (just as the word “relief” is to be read in view of the preceding adjectives, though this is of course on the basis that it is the noun of the phrase in question). The clause should be read holistically.

110. In this regard, I note that determiners are often read distributively (for example, “his realty and personalty” would ordinarily be read as “his realty and his personalty”) and that a similar approach may follow in the context of modifiers, though this is naturally dependent upon context (for example, “old system title and personalty” would ordinarily be read such that the words “old system” only qualify the noun “title”, having regard to the nature of Australian land law) (see R Quirk et al, A Comprehensive Grammar of the English Language (1991) at [13.67]). Ambiguities may, of course, arise. Quirk et al give the example of “old and valuable books”, which may mean “‘books which are old and valuable’ (combinatory meaning) or ‘old books and valuable books’ (segregratory meaning)’   ” (see [13.68]).

111. I accept that a “first blush” grammatical reading does not determine the matter. The question therefore becomes whether the content of the words, or their context within the agreement as a whole, otherwise displaces what I consider to be the ordinary grammatical meaning of the text. That might arise, for example, if the concept of “urgent … declaratory relief” were, in view of the terms of the relevant contract, unlikely to be the subject of an intended carve out clause (and see T 145.31-38); or if, in view of the law relating to declarations and with due regard to the contract in question, it is unlikely that the parties intended to invoke such a concept.

112. As to the first, I accept that it may well make commercial sense, in certain commercial contexts, for parties to include a carve-out clause pertaining to “declaratory relief” without limiting that by reference to a concept of “urgency”. However, “[t]he starting point and the ending point of the construction of a written commercial contract is the language chosen by the parties to record their bargain” (Cherry v Steele-Park [2017] NSWCA 295 at [72]). That is not to gainsay the authorities (noted above) concerning the role that notions of “commercial purpose” or “business common-sense” may play in an appropriate case. It merely directs attention to the fact that the parties in the present case chose to preface the words “injunctive … relief” and “declaratory relief” with the adjective “urgent”. As adverted to above, there is an understandable reluctance, in appropriate cases where the language of the relevant contract allows, to depart from the established construction of clauses drawn from standard forms of commercial agreement. AED concerned such a clause, as does the present case. AED is a decision of an intermediate appellate court and, as is clear from the foregoing, I do not consider its conclusion as to the ordinary grammatical reading of the words there considered to be plainly wrong.

113. As to the second possible reason for departing from what I consider to be a natural reading, I do not consider it necessary to enter into the debate as to the reasoning process in AED. As a court of first instance, it would not be appropriate to depart from that appellate decision unless convinced it was plainly wrong. In AED, the Victorian Court of Appeal expressly accepted (in the context of the agreement there in dispute) that “urgent” was to be read distributively. True it is that the reasoning in that case, it has been said, must be read subject to other leading authorities in the area (see JD Heydon, MJ Leeming, PG Turner, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis) at [19-140] fn 123, 124). However, I do not consider that the concept of “urgent … declaratory relief” is necessarily nonsensical or is otherwise of such a nature as to justify a reconsideration of what I consider to be a natural grammatical reading of the clause.

114. In this regard, I note that Lee J recently reviewed some of the authorities in the area in Dillon v RBS Group (Australia) Pty Limited [2017] FCA 896 at [25]-[30]). After noting (at [25]) two High Court decisions in which there were observations to the effect that interlocutory declarations are not a form of order known to the law, his Honour observed that (at [26]):

Away from the context of representative proceedings, the notion that a Court should not make an interim or interlocutory declaration has long been regarded as being fundamental; this is because an interim declaration is inimical to the very nature of declaratory relief, which is to determine, on a final basis, the whole or part of the justiciable controversy between the actors to a dispute … [emphasis in original]

115. After referring to AED and several other relevant authorities, his Honour concluded that the “settled position” is that (at [29]):

… although an interlocutory or interim declaration is unavailable in Australia, this does not operate as an insuperable barrier against making a declaration other than at a final hearing in the special case where the declaration determines on a final basis an aspect of the matter in dispute (and hence can properly be seen as a final determination of the whole or part of a legal controversy). [emphasis in original]

116. Perhaps implicit in CPB’s submissions is the proposition that the legal background against which the contract was made may be of use to the resolution of the constructional question in this case (as to the use of such background, see K Lewison and D Hughes, The Interpretation of Contracts in Australia at [4.06]). This may be relevant, for example, for the purposes of an argument that the parties should not be taken to have intended by this clause to preserve (albeit obliquely, perhaps) a right to seek “urgent … declaratory relief” in circumstances where such relief, assuming that by this reference what was meant was an interim or interlocutory declaration, is unavailable in Australia.

117. It can be observed that the clause in question does not in terms refer to an “interim” or “interlocutory” declaration. It refers, on my construction, to “urgent … declaratory relief”. I do not think it necessarily implausible that parties might include a carve out provision preserving a right to seek “declaratory relief” (in view of its utility, as noted in the authorities to which CPB referred) while nonetheless considering it appropriate, in the circumstances of the arrangement in question, to attach a condition of “urgency”. If such a possibility is said to be uncommercial (or simply less desirable in the circumstances as they have transpired), I observe that “there is no licence for ‘judicial rewriting’ of an agreement’” as “[t]he ability of courts to give commercial agreements a commercial and business-like interpretation is constrained by the language used by the parties” (Newey v Westpac Banking Corporation [2014] NSWCA 319 at [91] (Gleeson JA; Basten and Meagher JJA agreeing).

118. In the present case, as I have noted, the parties have qualified the preservation of a right to seek “injunctive … relief” and “declaratory relief” with a notion of urgency. For the foregoing reasons, I am not persuaded that the clause should be construed other than in accordance with what is, in my opinion, its ordinary grammatical reading.

119. As to the meaning of the word “urgent” in the present phrase (issue 2(c)), I accept that its ordinary meaning is as set out at [105] above and there is nothing in the present agreement to suggest that a different meaning was intended.

3.   Are the present circumstances “urgent”

CPB submissions

120. As to the urgency of the present circumstances, CPB points to two matters: first, the financial position of the JV (both as to the outstanding amounts owing to third party creditors or sub-contractors and as to the JV’s ability to provide the relevant documents to claim progress claims from WestConnex) and, second, the dysfunctional (or “frozen”) state of the management of the JV arising from the uncertainty as to which of the two JV parties is correct on the substantive dispute. CPB submits that the critical time for assessment of urgency is early November 2017, when the proceedings were commenced. (RdE submits that urgency must be assessed both when the proceedings were commenced and when they were heard.)

Financial position of the JV

121. As to the first, CPB says that the circumstances generating urgency commenced with the cash flow needs in September 2017 that led the Project Director to ask the JV Board to direct that the parties to contribute $8.5m each as a Called Sum and ultimately to the 19 September 2017 meeting being expressly called for that purpose (see the sole matter on the agenda contained in the teleconference invitation). CPB points out that a cash injection was required at that time not only to pay sub-contractors’ claims but also to permit the Project Director to sign a statutory declaration in the form of Part 2 of Schedule 5 to the D&C Deed to the effect that all sub-contractors had in fact been paid (which was necessary for JV progress claims to be approved).

122. CPB argues that there was no dispute that, as at September 2017, a cash injection was required and submits that the fact that the parties are “at logger-heads” as to the effect of that meeting alone generates the required level of urgency.

123. The evidence as to the cash flow position of the JV (which was the subject of some dispute) can be summarised as follows.

124. As at 25 October 2017, by reference to a cash flow document prepared by JV personnel (see Mr Hughes’ affidavit of 8 November 2017, Annexure B) current outstanding liabilities were in the order of $39.64m and the JV had a bank balance of $1.3m, with projected income of $2m in November 2017 and $3m in December 2017; remaining project revenue being estimated at approximately $5,110,000 (including GST) with remaining costs and liabilities estimated at $56,910,000 (including GST). Mr Hughes gave evidence that the cash flow was prepared in response to the request made at the meeting on 25 August 2017 to identify “necessary and urgent” payments (see [40] above.

125. Mr Simbaqueba had prepared (for the purposes of the litigation but in a form said by Mr Simbaqueba to be typical of spreadsheets prepared by him for the purpose of determining overdue payments to sub-contractors) a schedule of current liabilities as at 31 October 2017 (see Mr Hughes’ affidavit of 8 November 2017, Annexure O; Mr Simbaqueba’s affidavit of the same date, Annexure E), seeking to identify the current status of the outstanding liabilities to sub-contractors. That schedule (the Simbaqueba Schedule) showed: current liabilities of $46.197m (excluding work in progress), of which overdue amounts totalled $40.295m. Of the overdue amounts, those to third parties (excluding amounts owing to CPB and RdE for their labour or materials) are shown at $14.975m. The Project Account bank balance was $198,096.05.

126. Mr Simbaqueba’s evidence was that, in preparing that schedule, he took the due date payable for each invoice in accordance with the relevant sub-contract terms and identified actual due dates for payment. He says the “JDE” accounting system used by the Project Director was not up-to-date in that it did not include all invoices for liabilities. He also gave evidence that the reference to $7,000,000 designated for the period from 16 to 30 October 2017 represented the “bare minimum” to pay subcontractors, not just all overdue amounts.

127. Mr Simbaqueba identified in the Simbaqueba Schedule a number of the payments to subcontractors, suppliers and consultants which were overdue as at 31 October 2017 and which were in his opinion “important”, “critical” or “super critical” to completion of the Project (see the coloured shading on the Simbaqueba Schedule). There was a dispute as to the admission of the coloured shading but it was ultimately allowed by me as going to Mr Simbaqueba’s opinion or assertion as to the criticality of the sums due.

128. Further, Mr Hughes has deposed that in early November 2017, a number of sub-contractors, suppliers and consultants were threatening action of various kinds against the JV (Mr Hughes’ affidavit of 15 November 2017, Annexures P1-P4).

129. CPB points to the JV’s Statement of Financial Position as at 31 October 2017 (annexed to the affidavit of Mr Luca Brollo, the former RdE Representative on the JV Board who assisted in establishing the JV’s finance systems – Annexure C) which shows outstanding liabilities (excluding “Over Claim” and loans from CPB and RdE) of $47,440,099 (Mr Simbaqueba’s affidavit of 30 November 2017 at [9]), and says that is consistent with Mr Simbaqueba’s evidence.

130. Mr Simbaqueba has also deposed that, as at 8 November 2017, in addition to the invoices listed in the Simbaqueba Schedule, a number of further invoices had been received and a number of further invoices were expected in the near future, together totalling in the order of $3m (his affidavit of 8 November 2017 at [26]).

131. As at the end October 2017, the forecast Construction Completion date was 30 November 2017 (Mr Hughes’ affidavit of 8 November 2017 at [6]). The estimated further cost to complete the project, including Construction Completion and defect rectification, was $12.11m (Mr Simbaqueba’s affidavit of 8 November 2017 at [27]). (As adverted to above, by the time of the hearing Construction Completion had not yet been achieved but was thought to be imminent.) Mr Hughes has deposed that, following Construction Completion there will be a three year Defects Correction Period (Mr Hughes’ affidavit of 8 November 2017 at [6]), which it is said will require the continued involvement of the subcontractors and suppliers who have been experiencing difficulties in obtaining payment from the JV.

132. Both Mr Simbaqueba and Mr Hughes have deposed to concerns as to the risk of suspension, disruption or other action by various sub-contractors, suppliers or consultants, which could threaten the forecast achievement of Construction Completion (albeit that that is now imminent) and result in the JV incurring further liquidated damages in the amount of $10,000 per day (Mr Simbaqueba’s affidavit of 8 November 2017 at [18], [23], [25]; his affidavit of 15 November 2017 at [4]; see also Mr Hughes’ affidavit of 8 November 2017 at [24]; his affidavit of 15 November 2017 at [3]-[4] and Annexures P1-P4 thereto).

133. CPB also notes that, by letter dated 10 November 2017, WestConnex, referring to the failure of the JV to provide a supporting statement for its October progress claim, expressed its concern that non-payment of subcontractors might impact on the obligations of the JV under the D&C Deed and sought written assurance as to RdE’s solvency (and advised the JV that no payment to the JV would be processed until a signed statement was provided) (Mr Hughes’ affidavit of 15 November 2017, Annexure Q). As at the date of the hearing, as I understand it, no response had yet been provided by the JV to that letter from WestConnex.

134. CPB has also submitted that, as a result of the non-payment of subcontractors and the inability of the JV to certify payment, it (as one of the JV partners) was suffering material reputational, relational and commercial damage, and facing the real risk of further such damage, including the risk of a substantial breach of the D&C Deed, which it is said would have potentially very serious consequences (Mr Hughes’ affidavit of 8 November 2017 at [25], his affidavit of 15 November 2017 at [6]).

323. For these reasons, it is said that CPB’s estoppel claim fails.

Determination

Estoppel by representation

332. An estoppel by representation arises “where a person is prevented, as a matter of law, from denying or from asserting, as the case may be, the existence of some fact, irrespectively of whether it really exists” (Franklin v Manufacturers Mutual Insurances (1935) 36 SR (NSW) 76, 80 (Jordan CJ). RdE’s reference to it as “a species of equitable estoppel” is to be understood in the sense that its origins lay in the Chancery (see Hunt v Carew (1649) 21 ER 786) (though it was adopted later adopted by the common law and operates identically; see K Handley, Estoppel by Conduct and Election (2nd ed, 2016, Sweet & Maxwell) at [1-001]-[1-004]; [1-017] fn 83).

333. Broadly speaking, to establish such an estoppel there must be an express or implied representation of past or present fact that is communicated to the representee and upon which he or she relies to his or her detriment (see Thompson v Palmer (1933) 49 CLR 507 at 520 (Rich J); Franklin v Manufacturers Mutual Insurances at 82 (Jordan CJ)). The representation must be clear and unequivocal (Legione v Hateley (1983) 152 CLR 406 at 435-436).

334. Jorden v Money (1854) 10 ER 868 stands for the proposition that estoppel by representation is confined to representations of fact, not of intention. That authority binds this Court (Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 399; 415-416; Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466, 472; Sidhu v van Dyke (2014) 251 CLR 505; [2014] HCA 19 at [58]; see also the authorities noted in Handley, Estoppel by Conduct and Election at [2-003]; [2-010])). Reflecting this position, one can distinguish between “a representation (of an existing or past fact)” and “a voluntary promise about the speaker’s future conduct” (Equititrust Ltd v Franks [2009] NSWCA 128 at [73]; my emphasis).

335. Adopting this terminology, the difficulty in the present case for CPB is that the allegations involve both representations (namely, that a decision had been reached) and promises (namely, that Mr Mortoni would sign the resolution; that RdE would pay the Called Sum). If these promises are to be put forward as giving rise to an estoppel, it can only be on the basis of a promissory estoppel (as to which, see below). It was no doubt for this reason that CPB advanced a two-limbed estoppel argument (T 8):

The first part of the estoppel case is that [RdE] is [estopped] from denying that there was a decision of the Board made on 19 September in consequence of what happened at the meeting and following of which these two emails form part. …

The second part of this novel case which your Honour asked me to be more clear about, I need to formulate. … What we say is this; in consequence of the promise made to sign the resolution and return it confirming the decision of the Board, we say [RdE] is estopped from asserting there was a valid resolution falling within the second part of the decision making process, that is the written resolution aspect of it; that is how we put it. …

336. As adverted to above, in respect of the alleged representation (namely, that a decision had been reached), this was said to be as a result of conduct at the meeting (T 149.17) and the subsequent conduct (which was consistent with this having occurred and inexplicable on any other reasonable basis).

337. I am not satisfied, on the balance of probabilities, that such a representation (as to a valid resolution having been made) was in fact made at the meeting for the reasons set out earlier. As to the submission that the subsequent conduct is not explicable on any other reasonable basis, as already adverted to, I consider that the conduct is explicable on the basis of assent at the meeting falling short of a binding decision. (If I am wrong as to the existence of such a representation, then a difficulty for CPB is that it knew the formal requirements that had to be satisfied for a binding decision to be reached and therefore cannot reasonably have relied on a representation that those requirements had already been met. The position might be different if the representation were to have been that RdE would not insist upon a formal vote or would not rely upon the lack of formal processes to deny a binding agreement had been reached, but those representations have not been pleaded and it is not clear in any event that they could be made out by reference to the accounts given of the discussion at the 19 September 2017 meeting.) That in effect disposes both of the acquiescence case and the related estoppel by representation case.

338. Assuming that an estoppel by representation had been established, I note that estoppel by representation is often characterised as a rule of evidence; as “one step in the progress towards relief on the hypothesis that the defendant is estopped from denying the truth of something which he has said” (Low v Bouverie [1891] 3 Ch 82 at 105). Accordingly, its effect would not be “to create a right in one party against the other” as such; rather, it would be “to establish the state of affairs by reference to which the legal relationship between them is ascertained” (Waltons Stores v Maher at 413 (Brennan J)).

Promissory estoppel

339. In the present case, CPB contends that RdE promised to sign the written resolution and that CPB relied upon this promise (T 163.31-32). CPB expressly formulated its claim in this context under the rubric of promissory estoppel. A threshold question therefore concerns the significance, if any, to the present case of recent authorities concerning the limitations of promissory estoppel.

340. It has been said that promissory estoppel is “based on a non-contractual promise or assurance which, in its orthodox form, becomes binding in equity, so as to restrain the promisor from enforcing his strict legal rights” (Equitrust Ltd v Franks [2009] NSWCA 128 at [70]). Recent Court of Appeal authority has emphasised this negative characterisation of promissory estoppel (see Saleh v Romanous (2010) 79 NSWLR 453; [2010] NSWCA 274 at [73]-[74]; DHJPM at [93]; Van Dyke v Sidhu [2013] NSWCA 198 at [38]-[39]). It is said that promissory estoppel is not to be treated as the “equitable equivalent of a contract” (Saleh v Romanous at [73]).

341. Such authorities are binding on this Court, though I note that the law may not be finally settled (Ashton v Pratt (2015) 88 NSWLR 281; [2015] NSWCA 12 at [102]-[140]; [263]; Hawcroft General Trading Co Pty Ltd v Hawcroft [2017] NSWCA 91 at [49]; see generally, A Robertson, “Three Models of Promissory Estoppel” (2013) 7 Journal of Equity 226; A Silink, "Can Promissory Estoppel Be an Independent Source of Rights?" (2015) 40(1) The University of Western Australia Law Review 39). The authors of Meagher, Gummow & Lehane’s Equity suggest that academic criticism in the wake of cases such as Saleh has been too quick, the “controversy” being in their view more apparent than real. They contend that the import of the reasoning in cases like Saleh and DHJPM is merely that promissory estoppel is preclusionary in nature (see Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies at [17-270]) – namely, that it creates “no legal relationship or cause of action where none previously could arise” but it may, in certain circumstances, preclude a party from denying that such a relationship has arisen. In such a case, the parties would be bound to certain legal relations, such as an intended contract, by a court of equity and their obligations are then governed by reference to that postulated relationship (Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies at [17-270]-[17-280]).

342. In my opinion, the above authorities (to which I was not taken in argument during the course of the hearing nor were they raised in written submissions) do not necessarily prevent CPB from raising a promissory estoppel in the circumstances of the present case. CPB and RdE were both parties to the JV Deed and had representatives on the JV Board. It can be inferred from the parties’ communications that what was in contemplation was the exercise of the JV Board’s powers in accordance with cl 5.4(b) (namely, a written resolution signed by the current Representatives of each Party). In other words, the powers that were to be exercised were those arising in the context of the rights and responsibilities established by the parties’ pre-existing contractual arrangements.

343. This is not, therefore, a case in which a party is attempting to raise a promissory estoppel so as to acquire some positive right to relief in equity independent of a postulated contract. If the promissory estoppel is successfully asserted, this Court would not be creating a contract for the parties; rather, RdE would be bound in conscience from denying that it stands in the postulated legal relationship – namely, that envisioned by the JV Deed, (to which, I emphasise, both CDP and RdE were a party) upon due exercise of the JV Board’s powers in accordance with cl 5.4.

344. I turn now to the elements of promissory estoppel. Broadly speaking, a promissory estoppel will be established if: first, CPB assumed that a particular legal relationship would exist between it and RdE; second, RdE induced CPB to adopt that assumption or expectation; third, CPB has acted or abstained from acting in reliance on that assumption or expectation; fourth, RdE knew or intended CPB to do so; fifth, CPB’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and sixth, RdE has failed to act to avoid that detriment, whether by fulfilling the assumption or expectation or otherwise (Waltons Stores v Maher at 428-429 (Brennan J)).

345. As to the first element, it is clear that CPB assumed that a particular legal relationship would exist between it and RdE; i.e., that as between it and RdE the execution of the resolution would give rise to obligations under the JV Deed.

346. As to the second element, I am satisfied that RdE induced CPB to adopt that assumption or expectation. The relevant inducement is to be found in RdE’s conduct after the JV Board meeting which I consider amounted to a promise that it would sign a resolution confirming and/or ratifying an agreement to pay the Called Sum.

347. In this regard, I note that the requisite certainty for the relevant representation or promise for the purposes of a promissory estoppel was recently considered by the High Court in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 333 ALR 384; [2015] HCA 26. The plurality cited with approval (at [35]) the remarks in Low v Bouverie, an estoppel by representation case, to the effect that: an estoppel must be “clear”, “precise” and “unambiguous”; this does not mean that the words used may not be open to different constructions; and the conduct must be capable of misleading a reasonable person in the way that the person relying on the estoppel claims he or she has been misled.

348. In the present case, the representations and promises were both express and implied. Mr Bagnariol’s email of 4.44pm on 19 September 2017 (“Yes, we will do it along with the Minute of the Meeting”) must be viewed in the context of the email (sent only six minutes earlier) to which it was responding, being a formal request by CPB’s Representative attaching documentation prepared in accordance with the JV Deed (cf Legione v Hateley). RdE’s immediate assent through Mr Bagnariol to this request for the signing of the written resolution was clear, unequivocal and unambiguous. Moreover, it was followed not only by a period of silence in which there was no suggestion by RdE that the assumption on which CPB was operating was incorrect but also by an e-mail from Mr Mortoni on 9 October 2017 confirming that RdE was “confident” that its “cash contribution” would be made “in the next few days”.

349. As to the third element, CPB relied to its detriment on the representations and promises by paying its $8.5m contribution to the Called Sum and by not taking steps to prevent the payment out to third party creditors of that amount, or otherwise invoking the default processes of the JV Deed.

350. As to the fourth element, it was or must have been apparent to RdE that CPB was proceeding from 19 September 2017 on the basis of an understanding that there had been agreement to pay the Called Sum. To the extent that Mr Mortoni or Mr Bagnariol contend otherwise, I do not accept that evidence as credible. Their communications subsequent to the meeting (and prior to the notice of default being issued) are inconsistent with the proposition that they did not understand CPB to have been proceeding in the belief that there had been agreement to the payment of the Called Sums.

351. As to the fifth element, I am satisfied that CPB’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled, not simply because of the potential reputational damage (which I accept will be difficult to assess) but also because of the risk to the ultimate completion of the principal contract in the interim (noting that it is a loss making project), even though (as RdE points out) there is provision for a final reconciliation of the JV parties’ contributions to the JV to take place in the future.

352. As to the sixth element, RdE has failed to act to avoid that detriment, whether by fulfilling the assumption or expectation or otherwise.

353. I therefore find that the claim based on promissory estoppel has been established.

9.   Relief

CPB submissions

354. CPB submits that declarations in the form of those set out in paragraphs 1-3 of the summons should be made; and that an order sought in the nature of a mandatory injunction for payment of money should also be made.

355. Insofar as the relief sought is in the nature of or similar to specific performance (of the deed), and noting that equity does not grant the remedy of specific performance of deeds where no party has provided consideration (as equity will not come to the aid of a volunteer – see Young, Croft and Smith, On Equity (2009, Lawbook Co) at 1088; Jefferys v Jefferys (1841) Cr & Ph 138; 41 ER 443; Silver v Dome ResourcesNL (2007) 62 ASCR 539 at 568-574; [2007] NSWSC 455; Dome Resources NL v Silver [2008] NSWCA 322), CPB argues that equity looks to substance not form and will grant specific performance of an agreement that might be labelled a “deed”, but for which consideration was provided by the parties (referring to Jefferys v Jefferys; Silver v Dome Resources NL generally and at [121]). Reference is also made to the analysis as to why an agreement annuity can be specifically enforced, and a mandatory injunction can be granted to compel payment of the annuity (see Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies at 658 and the authorities cited at fn 111), damages there not being an adequate remedy because the agreement would have to be separately enforced for each payment.

356. The consideration for the deed is identified by CPB as the bundle of mutual promises and obligations made by each of the parties to the deed, whereby each party’s promises represent consideration for the promises and obligations of the other (see Carter, 117 [6-13]; Perry v Anthony [2016] NSWCA 56).

357. CPB says that the promises and assumed obligations of RdE are made in consideration for CPB making substantially the same promises and assuming substantially the same obligations and vice versa.

358. CPB accepts that the Court will not grant a mandatory injunction if damages are an adequate remedy (referring, inter alia, to Costin v Costin (1997) 7 BPR 15,167) but says that damages are not an adequate remedy in this case for a number of reasons: first, the obligations under the JV Deed are continuing and the Called Sum is required to fund continuing liabilities of the JV to creditors; second, damages cannot be adequate because CPB is not seeking payment to it of any some of money; it is seeking payment of the Called Sum to the Project Account for the use of the joint venture; third, the funds are necessary for the continuation of the Project now, whereas damages could not realistically be assessed unless or until the Project is either completed or not completed or completed with some delay, which assessment would necessarily take place some time after the conclusion of the Project (or the ultimate failure of the project). It is thus said that it is not possible now to assess what damage might be caused by the failure to pay the Called Sum.

359. Further, it is said that CPB is continuing to suffer reputational damage, the most adequate remedy for which is to remove or eliminate the source of that reputational damage, being an order that funds be paid to allow the project to continue and for creditors to be paid. CPB points out that damages for reputational damage would be extremely difficult to assess with any degree of accuracy (referring to the observations in Meagher Gummow & Lehane, Principles of Equity at [20-050]).

360. Finally it is said that it would be an inadequate remedy for CPB to have to enforce the agreement, seeking final relief, on each occasion on which a Called Sum was not paid in the context of an agreement that imposes continuing obligations on the parties over time.

361. CPB argues that the balance of convenience favours the granting of the injunction. It says that if the injunction is refused, creditors will not be paid and the continuing obligations under the JV Deed and the D&C Deed will be put at risk.

RdE’s submissions

362. As to whether the Court can or should order RdE to pay the amount of $8,500,000 into the Project Account, apart from disputing CPB’s entitlement to any of the relief sought in the summons, RdE says that whether paragraphs 4 and 5 of the summons are properly characterised as orders seeking mandatory injunctions or as seeking relief in the nature of specific performance, CPB is not entitled to such equitable relief, because it has not demonstrated that damages for breach of the JV Deed (in particular cl 10) would not be an adequate remedy.

363. RdE notes that the grant of equitable relief such as mandatory injunctions and specific performance is discretionary. The fundamental criterion for the granting of such relief is that damages would not be an adequate remedy (see Spry, The Principles of Equitable Remedies (9th ed, 2014) at 61-62; Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies at [21-460]). It says that CPB has failed to demonstrate by its evidence that damages would not be an adequate remedy. And, insofar as what is sought is a mandatory injunction akin to specific performance, it emphasises that Silver v Dome Resources NL supports the proposition (at [121]) that in equity specific performance will not be granted without consideration or where an agreement has not been validly and properly made.

364. It is submitted that in the event that the Court finds that CPB is entitled to any relief, damages would in fact be an adequate remedy for CPB.

365. Insofar as paragraph 5 of the summons seeks an order that RdE “authorise payment of the amounts of the said Called Sum and interest out of the Project Account to meet outstanding payment liabilities of the joint venture”, it is said that such an order would amount to an order depriving RdE of its rights under cll 7.3 and 7.4 of the JV Deed, to scrutinise and approve payments out of the JV Project Account.

366. RdE says that, by seeking a mandatory injunction or an order in the nature of specific performance, CPB cannot achieve any better relief than what it is entitled to in accordance with its strict contractual rights.

Determination

367. I concluded earlier that RdE is estopped in all the circumstances from acting inconsistently with its promise to sign the written resolution. The question therefore becomes one as to the appropriate relief. The orthodox view treats an operative promissory estoppel as a restraint on the enforcement of contractual rights (including contractual powers; see Anaconda Nickel Ltd v Edensor Nominees Pty Ltd [2004] VSCA 167). In Silovi v Barbaro (1988) 13 NSWLR 466, Priestley JA (with whom Hope and McHugh JJA agreed) included in the distillation of the reasoning of the High Court in Waltons Stores v Maher the proposition that the remedy granted to satisfy the equity (which either is the estoppel or created by it) will be what is necessary to prevent detriment resulting from the unconscionable conduct. The present is not a case in which equity would be compelling the enforcement of an incomplete bargain (cf Handley, Estoppel by Conduct and Election at [13-045]) or creating entitlements other than by reference to a postulated contract. The notion that promissory estoppel may not be used as a sword, or is to be conceived in negative terms, does not prevent it from being invoked so as “to preclude the defendant from denying the existence of facts which, if they existed, would give rise to legally enforceable rights between the parties” (see Meagher, Gummow & Lehane’s Equity at [17-270]; and see [12-275]-[17-280]).

367. In the present case, CPB’s successful assertion of a promissory estoppel has the effect of precluding RdE from resiling from its promise to sign the JV Board Resolution and therefore from acting inconsistently with the assumption on which CPB acted to its detriment; namely, that RdE would in due course sign the resolution.

368. To the extent that this is relevant in considering the remedy for an operative promissory estoppel in the circumstances of this case, I accept the submissions by CPB as to why damages would be an inadequate remedy. In particular, in circumstances where the obligations under the JV Deed are continuing and the Called Sum is required to fund continuing liabilities of the JV to third parties, the risk of disruption to the completion of the Project and the potential reputational damage to CPB, coupled with the fact that it is unlikely that damages could be realistically assessed unless or until the completion (or otherwise) of the Project, points to the inadequacy of damages as a remedy.

369. In the present case, the appropriate relief to make good CPB’s detrimental reliance is to preclude RdE, in the context of the pre-existing rights and obligations of the parties under the JV Deed, from acting inconsistently with its promise; RdE is therefore obliged in equity to sign the resolution that it promised it would sign and return back in September 2017 almost immediately after the JV Board meeting had concluded. I will so order.

Orders

371. For the above reasons, I make the following orders:

1. Dismiss the defendant’s motion for a stay of the proceedings.

2. Order the defendant within 14 days to sign and return to the plaintiff the Joint Venture Board resolution dated 19 September 2017.

3. Reserve the question of costs.

4. Direct the parties within 28 days to serve short written submissions on the question of costs with a view to the question being determined on the papers.

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Decision last updated: 19 December 2017