East Rockingham RRF Project Co Pty Ltd as Trustee for the East Rockingham RRF Project Trust v Acciona Construction Australia Pty Ltd
[2024] FCA 759
•12 July 2024
FEDERAL COURT OF AUSTRALIA
East Rockingham RRF Project Co Pty Ltd as Trustee for the East Rockingham RRF Project Trust v Acciona Construction Australia Pty Ltd [2024] FCA 759
File number: WAD 72 of 2024 Judgment of: FEUTRILL J Date of judgment: 12 July 2024 Date of publication of reasons: 24 July 2024 Catchwords: PRACTICE AND PROCEDURE – summary judgment – strike out – suppression and non-publication – concise statement method – mandatory interlocutory injunction – without prejudice privilege
EQUITY – mandatory injunction for performance or specific performance of a contractual term – adequacy of damages – readiness and willingness – dependency of obligations – discretionary considerations for equitable relief
Legislation: Australian Consumer Law ss 21, 232, 237
Banking Act 1959 (Cth)
Corporations Act 2001 (Cth) ss 95A, 477(2B)
Evidence Act 1995 (Cth) ss 131, 131(1), 131(1)(a); 131(1)(g), 131(2)(g), 135
Federal Court of Australia Act 1976 (Cth) ss 23, 31A, 31A(1), 33V, 37AE, 37AF, 37AF(1)(b)(iv), 37AF(2), 37AG, 37AG(1)(a), 37AH, 37AI, 37M
Federal Court Rules 2011 (Cth) rr 1.32, 1.40, 1.34, 2.32, 8.05(2)(b), 15.06(1)(a). 15.10, 16.01A, 16.02(2), 16.13, 16.21, 16.21(1)(f), 16.21(2), 26.01, 26.01(1)(e), 30.01, 30.02; Div 16.1
Property Law Act 1969 (WA) s 11(2)
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Isenberg v East India House Estate Co Ltd (1863) 3 De GJ & Sm 263; (1863) 46 ER 637
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Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533
Laing Management Ltd v Aegon Insurance Co (UK) Ltd [1997] 86 BLR 70; (1997) 55 Con LR 1
Laws v Australian Broadcasting Tribunal [1990] HCA 31; (1990) 170 CLR 70
Liberty Mercian Ltd v Cuddy Civil Engineering Ltd [2013] EWHC 4110 (TCC)
Liberty Mercian Ltd v Cuddy Civil Engineering Ltd [2014] EWHC 3584 (TCC)
Lindholm (liquidator), in the matter of Aviation 3030 Pty Ltd (in liq) [2021] FCA 1244
Liu v Fairfax Media Publications Pty Ltd [2012] NSWSC 1352; (2012) 84 NSWLR 547
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105
Minister for Immigration and Border Protection v Egan [2018] FCA 1320
Motorola Solutions Inc v Hytera Communications Corporation Ltd (No 2) [2018] FCA 17
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
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Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2011] 1 AC 662
Pakenham Upper Fruit Co Ltd v Crosby [1924] HCA 55; (1924) 35 CLR 386
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Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
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Re Daintrey; Ex parte Holt [1893] 2 QB 116
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Reynolds v JP Morgan Administrative Services Australia Limited (No 2) [2011] FCA 489; (2011) 193 FCR 507
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Rush & Tompkins Ltd v Greater London Council [1989] AC 1280
Rush v Nationwide News Pty Ltd [2018] FCA 357; (2018) 359 ALR 473
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Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 187 Date of last submissions: 29 May 2024 Date of hearing: 28 May 2024 Counsel for the Applicant: Mr SK Dharmananda SC with Mr L Firios and Mr NL Pham Solicitor for the Applicant: Herbert Smith Freehills Counsel for the First, Second and Third Respondents: Mr D Miller SC with Mr TJ Porter Solicitor for the First, Second and Third Respondents: Gilbert + Tobin Counsel for the Fourth and Fifth Respondents: Mr RFF Edwards Solicitor for the Fourth and Fifth Respondents: DLA Piper Australia ORDERS
WAD 72 of 2024 BETWEEN: EAST ROCKINGHAM RRF PROJECT CO PTY LTD ABN 83 623 495 278 AS TRUSTEE FOR THE EAST ROCKINGHAM RRF PROJECT TRUST
Applicant
AND: ACCIONA CONSTRUCTION AUSTRALIA PTY LTD ACN 618 030 872
First Respondent
ACCIONA M&E PTY LTD (FORMALLY JOHN BEEVER (AUST) PTY LTD) ACN 618 030 872
Second Respondent
ACCIONA INDUSTRIAL AUSTRALIA PTY LTD ACN 620 692 784 (and others named in the Schedule)
Third Respondent
ORDER MADE BY:
FEUTRILL J
DATE OF ORDER:
12 JULY 2024
THE COURT ORDERS THAT:
1.Paragraphs 2 and 3 of the interlocutory application for summary judgment and to strike out paragraphs of the first, second and third respondents’ amended concise statement in response filed 8 May 2024 be dismissed and, otherwise, that application be stood over and re-listed for further or other orders at not before 10.15 am on 24 July 2024.
2.By 4.30 pm on 23 July 2024 the parties file and serve an agreed minute or competing minutes of proposed orders to give effect to paragraph 186 of the reasons for these orders.
3.The interlocutory application for suppression and non-publication orders filed 8 May 2024, as amended, be dismissed with no order as to costs.
4.Paragraph 5 of the orders of 28 May 2024 be varied so as to extend the operation of the interim suppression and non-publication order to 4.30 pm on 24 July 2024.
5.The reasons for these orders not be published until after 4.30 pm on 24 July 2024.
6.The Registrar be directed to refer any application to inspect Exhibits KN-1, KN-2, KN‑3, KN-4, KN-5 or KN-6 to the affidavit of Kon Nakousis sworn 20 May 2024 to a judge of the Court.
7.Any non-party who applies to inspect Exhibits KN-1, KN-2, KN-3, KN-4, KN-5 or KN-6 to the affidavit of Kon Nakousis sworn 20 May 2024 do serve that application on each of the parties to the proceedings.
8.The matter be listed for a case management hearing at not before 10.15 am on 24 July 2024.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
FEUTRILL J:
INTRODUCTION
The applicant in these proceedings is East Rockingham RRF Project Co Pty Ltd as trustee for the East Rockingham RRF Project Trust. East Rockingham, in that capacity, is developing a thermal treatment plant that will produce energy from waste at a resource recovery facility (RRF) located in East Rockingham in Western Australia. The respondents are members of an unincorporated joint venture with which East Rockingham has contracted for the design, procurement, engineering and construction of the RRF (EPC Contract). There are two groups within the joint venturers: (1) the first, second and third respondents or the Acciona parties; and (2) the fourth and fifth respondents or the HZI parties. Disputes have arisen between East Rockingham and all respondents, but this matter primarily involves East Rockingham and the Acciona parties.
The Acciona parties have refused to deliver to East Rockingham replacements of certain bank guarantees that, all other things being equal, they are obliged to provide under the terms of the EPC Contract. East Rockingham commenced these proceedings seeking, amongst other things, declaratory relief and a mandatory injunction or specific performance compelling the Acciona parties to deliver the guarantees to it. East Rockingham has applied for summary judgment under s 31A of the Federal Court of Australia Act 1976 (Cth) or r 26.01(1)(e) of the Federal Court Rules 2011 (Cth) and to strike out certain paragraphs of the Acciona parties’ concise statement in response and statement of cross-claim under r 16.21 of the Rules. Separately, East Rockingham has applied for suppression and non-publication orders under s 37AF and s 37AG of the Federal Court Act with respect to certain parts of the concise response, its concise statement in reply and certain parts of affidavits, submissions and transcript relating to the applications.
The principal issue that arises on the strike out application is whether the Acciona parties are permitted to allege that East Rockingham made statements during without prejudice negotiations from which it may be inferred that East Rockingham is insolvent and to rely on those statements to allege, directly, that it is, in fact, insolvent. That issue turns on whether it is reasonably arguable on the face of the concise response that the asserted statements and facts can be proved by admissible evidence or use of confidential and without prejudice information as a foundation for the asserted facts is otherwise justifiable under common law principles and (or) s 131 of the Evidence Act 1995 (Cth).
The principal issue raised on the suppression and non-publication application is whether it is necessary for the proper administration of justice to prevent disclosure and (or) publication of the asserted statements about insolvency. East Rockingham contends that the restriction is necessary because of the commercial sensitivity of the allegations and the financial and other harm that disclosure or publication of them will cause to it.
The summary judgment raises a number of issues. First, the Acciona parties contend that they have reasonable prospects of defending East Rockingham’s contract claim because, on the proper construction of the EPC Contract, they have no obligation to provide the bank guarantees if East Rockingham is not ready, willing and able to perform its obligations under that contract. It is not so ready, willing and able because it is insolvent. That issue turns largely on the proper construction of cl 6.7(d) and cl 6.7(g) of the EPC Contract. The second issue that flows from the first is whether, if the construction issue is decided against the Acciona parties, they are in breach of cl 6.7(d) and cl 6.7(g) of the EPC Contract. The last issue is whether, assuming breach and that East Rockingham is insolvent, East Rockingham is entitled to summary judgment for injunctive relief or specific performance. This issue turns on two further questions: (1) whether cl 6.7(d) and cl 6.7(g) are capable of specific performance; relevantly, whether damages are an adequate remedy; and (2) whether in all the circumstances equitable relief is just; relevantly, whether assuming East Rockingham is unable to perform its substantive and essential obligations under the contract, there is a reasonable prospect that the Court would not consider it just that the Acciona parties should be compelled to deliver the bank guarantees to East Rockingham.
For the reasons which follow, the applications to strike out paragraphs of the concise response and statement of cross-claim and for suppression and non-publication orders should be dismissed. On the application for summary judgment, the construction issue should be resolved against the Acciona parties. Consequently, they have no reasonable prospects of defending the claim for breach of cl 6.7(d)(iii)(B) and cl 6.7(g) of the EPC Contract. However, summary judgment for a mandatory injunction or specific performance should be refused because the Acciona parties have reasonable prospects, on the assumed facts, of resisting that relief on equitable discretionary grounds. Nonetheless, I am satisfied that, subject to appropriate safeguards to preserve the status quo, a mandatory interlocutory injunction should be granted compelling the Acciona parties to deliver replacement bank guarantees to East Rockingham. I will hear the parties on the form of those orders and costs.
BACKGROUND AND UNCONTENTIOUS FACTS
As already mentioned, East Rockingham, as trustee, is developing a thermal treatment plant that will produce energy from waste. It has entered into long-term energy sale agreements with the East Metropolitan Regional Council, the City of Cockburn and certain other parties for the supply and treatment of waste at the RRF. The project involves the financing, design construction, testing, commissioning, operation and maintenance of a nameplate capacity of 300,000 tonnes per year and 30 megawatt waste-to-energy facility at a site in East Rockingham in Western Australia (Project).
On 20 December 2019 East Rockingham (Employer), on the one hand, and the Acciona parties and HZI parties, on the other (EPCC) made the EPC Contract which is an engineering, procurement and construction contract for the design, construction, commissioning of the RRF. East Rockingham has also entered into certain financing agreements to finance construction of the Works (as defined) under the EPC Contract.
As these reasons make many references to the terms of the EPC Contract, for ease of reference East Rockingham, as trustee, is referred to as the Employer. Likewise, the Acciona parties and HZI parties are referred to collectively as the EPCC. Where it is necessary to differentiate between the two groups of joint venturers, they are referred to as the Acciona parties or HZI parties as required. Again, for ease of reference, capitalised terms are taken from the EPC Contract. Where it is necessary or appropriate the meaning of the term, as defined in the EPC Contract, is described in the reasons.
On 20 December 20219 the Acciona parties and the HZI parties made an agreement styled ‘EPC Consortium Agreement’ for the purpose of committing to the construction of the Project in accordance with the terms of the EPC Contract as an unincorporated joint venture. The joint venturers or EPCC are experienced contractors with considerable experience in undertaking and completing works for the design, construction and commissioning of resource recovery facilities and associated infrastructure.
On 20 December 2019 the Employer, the EPCC, National Australia Bank Limited (Security Trustee), Hitachi Zosen Corporation (a company incorporated in Japan) (HZI parent) and Corporacion Acciona Infraestructuras SLU (a company incorporated in Spain) (Acciona parent) made a deed styled ‘Financier Side Deed’. That deed recites that HZI parent and Acciona parent (Parent Company Guarantors) have agreed to guarantee the EPCC’s performance of its obligations under the EPC Contract in accordance with documents entitled ‘Parent Company Guarantees’. (The Parent Company Guarantees were not in evidence.) That deed also recites that the Employer has granted a security interest, or will grant a security interest to the Security Trustee, over its rights under and interest in the EPC Contract, the Parent Company Guarantees and the Financier Side Deed, under the Security (as defined in the Financier Side Deed). (None of the instruments comprising the Security were in evidence.)
Under the terms of the EPC Contract, as described in more detail later in these reasons, the EPCC were obliged to deliver certain Bank Guarantees to the Employer. Both the Employer and the Security Trustee were required to be beneficiaries of the Bank Guarantees. In accordance with cl 6.7(a) of the EPC Contract the Employer or the Security Trustee may have recourse to the Bank Guarantees in certain circumstances. Pursuant to cl 6B of the Financier Side Deed, the EPCC and Parent Company Guarantors acknowledge and agree that the Security Trustee may have direct recourse to the Bank Guarantees in accordance with cl 6.7(a) of the EPC Contract. These provisions reflect the Security Trustee’s security interest in the EPC Contract and, no doubt, facilitate the exercise of the Security Trustee’s powers and rights under the Security or the power and rights of a controller appointed by it under the Security.
Relevantly, under the terms of the EPC Contract the EPCC were required to deliver to the Employer the Performance Bond. The EPCC were permitted to provide the Performance Bond through multiple Bank Guarantees provided that the aggregate amount was as required by the terms of the EPC Contract.
The HZI parties obtained a number of Bank Guarantees with various expiry dates. Relevantly, the HZI parties obtained three amended Bank Guarantees each in the sum of AUD 6,025,562.22 on 23 May 2023 expiring on 14 October 2024, on 15 December 2023 expiring on 31 December 2024 and on 15 December 2023 expiring on 31 December 2025. It is common ground that these Bank Guarantees have been delivered to the Employer and satisfy the obligations of the HZI parties under the EPC Contract.
The Acciona parties also obtained bank guarantees with various expiry dates. Relevantly, JP Morgan Chase Bank NA issued two irrevocable bank guarantees at the request of the Acciona parties naming the Employer and Security Trustee as beneficiaries. The first is in the sum of AUD 12,877,459.88 and is dated 19 December 2019 expiring on 1 February 2023. The expiry date was evidently extended to 21 November 2023 by an amendment made on 19 January 2023. The second is in the sum of AUD 25,754,099.76 and is dated 19 December 2019 expiring on 30 January 2024.
On 22 February 2024 a representative of the Employer sent an email to a representative of the Acciona parties indicating that the relevant bank guarantees had expired and requesting that they be ‘re-issued urgently’. On 21 March 2024 the Employer sent a letter to the Acciona parties asserting that the Acciona parties were in breach of the EPC Contract and requesting urgent replacement of the bank guarantees. On 24 March 2024 a similar letter was sent to the Acciona parent and to the Acciona parties. That letter called on the Acciona parent to procure the Acciona parties to provide replacement bank guarantees pursuant to the terms of the Parent Company Guarantee.
On 25 March 2024 a representative of the Acciona parent sent a representative of the Employer an email in which it was asserted that the bank guarantees had already been replaced. The email attached copies of letters of JP Morgan Chase Bank dated 30 November 2023 and 16 January 2024 indicating that the guarantees had been amended to extend the expiry dates to 30 September 2024 and 30 September 2026 respectively. On 26 March 2024 a representative of the Employer sent an email to a representative of the Acciona parties indicating that the Employer required the Acciona parties to deliver the original document to it.
On 28 March 2024 the Employer sent a letter to the Acciona parties, amongst other things, demanding that the original replacement bank guarantees be delivered to the Employer. It is common ground that the Acciona parties have not delivered any original replacement bank guarantees to the Employer.
On 8 April 2024 the Employer filed the originating process.
On 24 April 2024 the Employer issued a demand to the EPCC for payment of Delay Damages in the amount of AUD 37,716,076.04. On 26 April 2024 the parties exchanged further correspondence. On 29 April 2024 the Employer sent the EPCC a Notice of Dispute in accordance with cl 37 and cl 2.1 of Schedule 24 of the EPC Contract giving notice of a Dispute in relation to the EPCC’s failure to pay the Delay Damages the subject of the Employer’s demand.
The remaining unpaid amount of the Contract Price is AUD 45,486,500. Of that amount AUD 6,632,990 has been certified for payment and invoiced (i.e., is due and payable) and is unpaid. Of course, there may be an explanation for non-payment, such as a right of set off the Delay Damages against that amount under the terms of the EPC Contract. That is not a matter that needs to be explored because, as explained later in these reasons, for the purposes of the summary judgment application the Court is to assume that the Employer is not presently able to pay its debts.
Otherwise, it does not appear to be controversial that the EPCC has made 51 separate Extension of Time claims under the EPC Contract each of which has been rejected by the Employer and (or) the independent Certifier. The rejection of these claims is disputed by the Acciona parties. What I take from the evidence about these matters is that a significant dispute about extensions of time, responsibility for delays and damages flowing from delays in completion of the Works looms large and the subject matter of these proceedings is, in the scheme of things, likely to be a relatively minor skirmish.
STRIKE OUT APPLICATION
Concise statement method
It is convenient to commence with the application to strike out the various paragraphs of the Acciona parties’ concise statement in response and statement of cross-claim.
Both the Employer’s proceedings and the Acciona parties’ cross-claim proceedings utilise the concise statement method. As the originating application does not seek relief that includes damages, it was permitted to be accompanied by an alternative accompanying document: r 8.05(2)(b); r 15.06(1)(a); r 15.10; CPN-1 paras 6.8–6.10; C&C-1 paras 5.4-5.9. As a consequence, the notice of cross-claim was required to be accompanied by a statement of cross-claim: r 15.06(1)(a). However, as the Rules apply to the cross-claim in the same way as they apply to the principal proceedings and the parties must conduct a cross-claim in the same way as the principal proceedings, the statement of cross-claim also utilised the concise statement method: r 15.10.
A concise statement is not a traditional pleading. It is a document intended by the practice notes to give a concise summary of the nature of a party’s case and the central issues involved. Its primary purpose is to facilitate effective case management. Effective case management may mean that the proceedings proceed with or without pleadings. If they proceed without pleadings, while a function of the concise statement method is to play a role in ensuring that there is fair disclosure of the case each party advances in the proceedings, that role is not confined to the concise statement. Moreover, none of the more technical rules concerning pleadings apply to concise statements: r 16.01A, r 16.13, Div 16.1. Application of pleading rules is limited to the primary rules that ensure that a concise statement does not contain any scandalous, frivolous or vexatious material, is not evasive or ambiguous, is not likely to cause prejudice, embarrassment or delay in the proceedings, does not fail to disclose a reasonable cause of action or defence, and is otherwise not an abuse of the process of the Court. Failure to comply with any of these primary rules may result in a concise statement or part of it being struck-out: rr 16.01A, 16.13, 16.02(2), 16.21. Notwithstanding the role played in providing notice of a party’s case and the application of the primary rules of pleading to the document, a concise statement should not be viewed as a de facto pleading to which rules or principles of pleading apply unaffected by the context and character of the concise statement. Thus, in instances where there is no pleading, in considering whether a case has been stated with sufficient clarity to ensure that a party has a fair opportunity to meet that case and to define the issues for determination, the whole case management process must be taken into account: Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 [2021] FCAFC 121; (2021) 287 FCR 388 at [140]-[154].
It follows that, in the application of r 16.21 to a concise statement, the whole case management process must be taken into account, as must the stage of the proceedings at which an application to strike out is made. Where, as here, an application to strike out is made at an early stage and before any case management orders have been made to determine if and the extent to which the proceedings should proceed on pleadings the Court should take into account that the case management of the proceedings will be undertaken with a view to ensuring that the moving party has a fair opportunity to meet the case against it and that the concise statement is not intended to contain a fulsome statement of all the material facts with particulars of the cause of action or defence identified in the document.
The parties’ concise statements
The concise statement sets out what the Employer contends are the important facts giving rise to its claim: CS [1]–[18]. These largely mirror the background and uncontroversial facts set out earlier in these reasons up to the filing of the originating process. More specifically, paras 13–18 contain allegations to the following effect.
(1)On 28 March 2024 the Employer sent a letter to the EPCC raising breach of the EPC Contract and requesting that the EPCC provide replacement Bank Guarantees: CS [13]
(2)On 2 April 2024 there was a telephone conversation between a director of the Employer and the Chief Financial Officer of one of the Acciona parties during which the topic of replacement of the Bank Guarantees was discussed in the context of ‘ongoing without prejudice discussions between the parties’. The Acciona parties’ position was that it would ‘only deal with everything together’. The Employer’s position was that replacement Bank Guarantees was separate to those discussions, which the Employer characterised as ‘concerning unrelated issues under the [EPC Contract]’: CS [14]
(3)The EPCC did not respond to the letter of 28 March 2024 and no Bank Guarantees were provided: CS [15].
(4)On 3 April 2024 during a telephone conversation between the Chief Executive Officer of the Employer and a senior representative of the Acciona parties that representative said that the Acciona parties would only provide replacement Bank Guarantees as part of any settlement of the issues the subject of the ongoing without prejudice discussions: CS [16].
(5)On 4 April 2024 there was a discussion and email correspondence between other representatives of the Employer and the Acciona parties following email correspondence from the Employer’s representative of 3 April 2024 raising the issue of a response to the letter of 28 March 2024 and provision of Bank Guarantees. The Acciona representative said, in substance, that the Acciona parties were resisting providing replacement Bank Guarantees due to the ongoing negotiations between the parties: CS [17]-[18].
The Employer alleges that the Acciona parties breached cll 6.7(d)(iii), 6.7(d)(iv) and 6.7(g) by failing to notify the Employer that the Bank Guarantees were due to expire before they expired, failing to provide replacement Bank Guarantees at the time required, and, thereafter, continuing to fail to provide the guarantees: CS [23]–[25]. The Employer also alleges that in circumstances where the EPCC is a sophisticated commercial party and, is or ought to be aware, that the Bank Guarantees are a material component of the Employer’s security under the EPC Contract and the parties have been engaged in without prejudice discussions for more than 12 months in relation to ‘unrelated’ disputes, the EPCC’s ongoing refusal to prove replacement Bank Guarantees is a means of exerting illegitimate pressure in the context of the parties’ commercial negotiations, a lack of good faith, and conduct that is, in all the circumstances, unconscionable in contravention of s 21 of the ACL: CS [26]-[29]. The Employer seeks declarations regarding the breaches of contract and contraventions of the ACL and a mandatory injunction, alternatively an order for specific performance, compelling the EPCC to provide replacement Bank Guarantees: CS [19]-[22].
The Acciona parties’ amended concise statement in response largely admits the important facts described in the concise statement, but denies the substance of the conversations alleged to have taken place on 2, 3 and 4 April 2024: ACR [1]. The Acciona parties then set out what they contend are the important facts and other matters including terms of the EPC Contract: ACR [2]-[20].
The Acciona parties emphasise the importance of the Employer’s ability to obtain finance and ongoing solvency to the completion and possible termination of the EPC Contract. These include a right of the EPCC to terminate the EPC Contract under cl 33.9(a) for an Employer Default Event which includes an Insolvency Event in respect of the Employer. Those events include that the Employer is unable to pay its debts. If the EPC Contract is terminated, subject to certain conditions, the Employer must return all Bank Guarantees in accordance with cl 6.7(j): ACR [4]-[7].
The Acciona parties set out various facts and other matters relating to the negotiations and what they characterise as the ‘Employer’s attempts to refinance’. The Acciona parties allege that the Works were not completed by the Scheduled Date for Practical Completion, the EPCC has made claims for Extensions of Time and Delay Costs under cl 25 of the EPC Contract that have not been granted resulting in disputes. The parties have been engaged in negotiations directed to the settlement of these disputes since at least April 2023: ACR [8]-[10]. The Acciona parties then set out a number of facts and matters that are the subject of the application to strike out the document. These may be summarised as follows.
(1)In their negotiations the parties sought to agree on an amount that would be paid to the Acciona parties, a new date for the Schedule Date of Practical Completion, changes to the payment Milestones, as well as other key terms including a term relating to the ‘security package’ which includes the Bank Guarantees. The Employer issued various proposals and one included a key term relating to the Bank Guarantees: ACR [11].
(2)In October 2023 the Employer stated to the Acciona parties that its existing finance was insufficient and its ability to continue to fund the Project, and fund the terms of its settlement proposal, was dependent on it obtaining additional finance which it was seeking to negotiate and obtain: ACR [12].
(3)The matter of the Employer’s financial position was and remains of concern to the Acciona parties and they have requested and obtained information from the Employer concerning its efforts to obtain additional finance: ACR [13]-[14].
(4)In January 2024 the Employer issued a draft settlement deed containing a term that made the commencement of the deed conditional upon the Employer obtaining certain varied, or additional, finance facilities: ACR [15].
The Acciona parties assert that if the Employer does not obtain additional finance it will have a cash shortfall by the date of Practical Completion, scheduled for 30 December 2024. The Employer has not obtained additional finance and appears to have no realistic prospects of obtaining additional finance. The Employer is insolvent/unable to pay its debts within the meaning of Insolvency Event in the EPC Contract. Subject to the requirements of the Financier Side Deed, the EPCC is entitled to issue a Default Termination Notice to the Employer terminating the EPC Contract with immediate effect: ACR [16]-[20]. These assertions are substantially repeated in the statement of cross-claim: SCC [4]-[7].
The Acciona parties assert, in effect, that by reason of the facts and matters stated elsewhere in the concise response, the Employer is not entitled to the relief it seeks or any relief and the Acciona parties are entitled to a declaration that an Employer Default Event has occurred within the meaning of cl 33.8 of the EPC Contract: ACR [21]-[22]. Again, these assertions are substantially repeated in the statement of cross-claim: SCC [8].
Although initially they admitted the breach, following an amendment to the concise response for which leave was granted on 28 May 2024, the Acciona parties now deny, based on the asserted construction of the EPC Contract addressed later in these reasons, that failure to replace the Bank Guarantees is a breach of cl 6.7(g) of the EPC Contract in circumstances in which the Employer is insolvent: ACR [23]. Further, the Acciona parties assert that in circumstances in which they are entitled, subject to complying with the Financier Side Deed, to terminate the EPC Contract by reason of the Employer’s insolvency, the Court ought not, in the exercise of its discretion in equity, grant declaratory or injunctive relief or specific performance: ACR [24]-[26]. That assertion was developed and extended in the Acciona parties’ written and oral submissions into a contention that where, due to insolvency, the Employer is not ready and willing to perform all its future obligations under the EPC Contract, even if the Acciona parties are in breach of the contract, equitable relief should be refused.
The Acciona parties also assert that in circumstances where: (1) the security package and Bank Guarantees were an element of the negotiations between the parties; (2) the Employer made statements about its financial position; (3) a reasonable party in the position of the Acciona parties would be concerned about the Employer’s financial position; and (4) the Employer is, in fact, insolvent, the conduct of the Acciona parties in respect of refusing to provide replacement Bank Guarantees is not unconscionable within the meaning of s 21 of the ACL. Accordingly, there is no basis for relief under s 232 and s 237 of the ACL: ACR [27]-[28].
The Employer’s concise statement in reply essentially takes issue with the concise response in terms that have resulted in the interlocutory application for summary judgment and to strike out. The Employer asserts that the Acciona parties’ assertions rely on without prejudice communications that would be inadmissible. When that material is disregarded, the defence is without basis and cannot be maintained: CReply [4]-[6], [13]-[15]. The Employer also asserts that the defence to its claims for equitable relief cannot succeed: CReply [7]-[12].
So, in the interlocutory application, the Employer seeks to have paras 11–20, 27(2) and 27(3) of the concise response and para 4 and para 5 of the statement of cross-claim struck out on the ground that the assertions in these paragraphs are based on statements made in communications that are prima facie confidential and subject to without prejudice privilege. Further, the document does not identify any basis for considering that the privilege has been lost (waived), disclosure falls within an exception, or otherwise that the communications are not subject to without prejudice privilege. The Employer submits that the material is thereby one or more of scandalous, frivolous, vexatious or an abuse of process.
The Acciona parties contend that the statement asserted in para 12 of the concise response falls outside without prejudice privilege because it was not an admission with respect to the subject matter of the dispute, but is an objective fact. As an objective fact it may be asserted and proved by any admissible evidence. Further, and in any event, the Employer’s assertions regarding the alleged unconscionable conduct of the Acciona parties had the effect of ‘pleading into relevance’ without prejudice communications between the parties.
Are the asserted statements of insolvency sustainable or justified?
At common law, communications genuinely aimed at negotiating a settlement of an existing dispute are prima facie confidential and subject to without prejudice privilege: Quad Consulting Pty Ltd v David R Bleakley & Associates Pty Ltd (1990) 27 FCR 86 at 89-90; Rodgers v Rodgers [1964] HCA 25; (1964) 114 CLR 608 at 614; Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 at 1299-1300. It is a joint privilege that cannot be waived by one party unilaterally: Re Turf Enterprises Pty Ltd [1975] Qd R 266 at 267; Walker v Wilsher (1889) 23 QBD 335 at 337. Subject to certain exceptions, it operates to prevent disclosure of the without prejudice communication to third parties and to prevent them from being admitted into evidence: Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2011] 1 AC 662 at [19]–[29]; Unilever Plc v Procter & Gamble Co [2000] 1 WLR 2436 at 2441-2442, 2444-2446, 2448-2450; Rush & Tompkins at 1299-1301; Pihiga Pty Ltd v Roche [2011] FCA 240: (2011) 278 ALR 209 at [80]–[97]. The rationale of without prejudice privilege has been explained in many authorities. The privilege exists to serve the public interest in the administration of justice in promoting the settlement of disputes without calling in aide the courts: Pihiga at [86]; Reynolds v JP Morgan Administrative Services Australia Limited (No 2) [2011] FCA 489; (2011) 193 FCR 507 at [30].
At common law, without prejudice privilege operates primarily as a rule of evidence. Subject to certain exceptions, evidence of explicit or implicit admissions made in the course of without prejudice communications are not admissible in evidence. The privilege may also preclude compulsory production of documents evidencing without prejudice communications to third parties by way of discovery, subpoena or other compulsive court processes. The privilege may also provide a basis for a joint holder of the privilege to restrain disclosure of the communications to third parties.
Subject to certain exceptions, evidence in proceedings in this Court is not to be adduced of a communication that was made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute: s 131(1)(a) of the Evidence Act. In general, s 131 of the Evidence Act only applies to the admissibility of evidence. Common law principles apply to circumstances in which the privilege is claimed to object to production of documents or restrain disclosure to third parties: Esso Australia Resources Ltd v Federal Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49 at [16]-[17] (Gleeson CJ, Guadron and Gummow JJ).
Allegations made in pleadings, or similar documents, in this Court are not evidence of the facts stated in those documents. While concise statements must include a certificate signed by the lawyer who prepared the document that any factual and legal material available to the lawyer provides a proper basis for the matters set out in the document, the facts stated in the document are not verified by oath or affirmation: see, e.g., Laws v Australian Broadcasting Tribunal [1990] HCA 31; (1990) 170 CLR 70 at 85-86 (Mason CJ and Brennan J, Gaudron and McHugh JJ agreeing); Berry v CCL Secure Pty Ltd [2017] FCA 1546 at [200] (Rares J). Therefore, objection cannot be taken to facts asserted in a pleading, even if the pleading purports to state evidence not facts, on the ground that the fact pleaded is not admissible evidence under s 131(1)(a) of the Evidence Act (or at common law).
Nonetheless, there may be circumstances in which, by reason of the nature of the allegation, there is no reasonable prospect of proving the fact pleaded by admissible evidence. That there is no such reasonable prospect may be apparent on the face of a pleading or may be demonstrated by evidence on the application. If the allegation manifestly cannot be proved by admissible evidence it may be appropriate to strike out the pleading as an abuse of process: r 16.21(1)(f) of the Rules.
In this case, paras 11, 12 and 15 of the concise response evidently assert matters relating to communications that are, on the face of the pleading, prima facie confidential and subject to without prejudice privilege. However, in the case of para 13 and para 14, it is not clear on the face of the pleading whether or not they form part of without prejudice communications referred to in paras 11, 12 and 15.
The Employer relies on an affidavit of Edward John Nicholas affirmed 8 May 2024. In that affidavit Mr Nicholas deposes uncontradicted facts to the effect that there have been without prejudice negotiations between the parties as alleged in para 11 of the concise response and that the matters referred to in paras 11, 12, 14 and 15 were the subject of those negotiations. However, the extent to which the HZI parties were also parties to those negotiations and the communications asserted in the concise response is a matter of controversy. The Employer submits that the evidence of Mr Nicholas is relevant to the strike-out application because it is a complete answer to any contention that there has been ‘consent’ to disclosure of the communications as the HZI parties have not so consented.
Generally, an application to strike out a pleading is to be approached on the basis that all the facts alleged in it are taken to be proved. Consequently, in general, evidence contradicting or relating to the facts pleaded is not of assistance to determine whether the pleading should be permitted to stand. Abuse of process is an exception to the general approach. Therefore, in the circumstances of this case and for the purposes of the interlocutory applications presently before me only, I accept the uncontradicted evidence of Mr Nicholas that there were negotiations of the kind concerning the subject matter referred to in paras 11–15 of the concise response.
Otherwise, the evidence of Mr Nicholas regarding the truth of the specific matters asserted in paras 11–15 of the concise response is ambiguous. However, having regard to the Employer’s objection to the Acciona parties’ raising and relying on the contents of the without prejudice communications between the parties, I take Mr Nicolas’ evidence to neither confirm nor deny the truth of the specific facts asserted in paras 11–15 insofar as they concern the substance or purport of without prejudice communications because, to address the substance of the communications, would be inconsistent with the Employer’s objections to the admissibility of evidence of those communications in the proceedings. Thus, regarding the assertions in the concise response, there is evidence confirming the existence and subject matter of the negotiations but mere assertion regarding the substance of communications between the parties in the course of those negotiations.
In support of the Employer’s application to strike out it relies on the following observations the Court made in Pigozzo v Mineral Resources Ltd [2022] FCA 1166 at [170].
Accepting the material facts and particulars pleaded to be true, a pleading may be one or more of frivolous, vexatious, oppressive or otherwise an abuse of process if it contains allegations founded on communications that prima facie the pleading party has no right to disclose and a duty to keep confidential and to which legal professional privilege or without prejudice privilege attach. Permitting such a pleading to stand would bring the administration of justice into disrepute in that the Court would be permitting a party that is prima facie in breach of a duty of confidence to take advantage of its own wrong. That abuse is all the more acute where the information is also privileged.
The critical feature of that passage is that the abuse of process lies in a party asserting facts, which assuming them to be true, reveal unjustified use (i.e., misuse) of confidential information. That abuse is more acute where the information is also self-evidently privileged because, as explained in Pigozzo, the public interest in the proper administration of justice for which the privilege exists (legal professional privilege or without prejudice privilege) would be undermined ‘if a pleading were permitted to disclose, without justification, communications that are prima facie confidential and privileged’: Pigozzo at [171] (underlining added). Where, on the other hand, the asserted facts, assuming them to be true, indicate that disclosure of the confidential information is alleged to fall within an exception or is otherwise justified no question of abuse of process arises from the facts asserted in the pleading alone.
The Acciona parties contend that the assertion that the Employer made statements from which insolvency may be inferred is justified for two reasons. First, the communications are not prima facie subject to without prejudice privilege because, although made in the context of negotiations to settle disputes between the parties, the communications were about objective facts ascertained during the negotiations that may be proved by direct evidence. It was not a communication in the form of an express or implied admission about a fact that related to the subject matter of the disputes. For these reasons, the Acciona parties submit that the statement would be admissible and not covered by without prejudice privilege at a trial and, therefore, asserting the statements made in the negotiations is permissible. Secondly, the Acciona parties contend that the Employer has, by its concise statement, made the subject matter of the parties’ negotiations relevant because the Employer alleges that the Acciona parties refused to provide replacement Bank Guarantees as a means of exerting illegitimate pressure on the Employer in the context of the without prejudice negotiations which was unconscionable and in contravention of s 21 of the ACL. In support of the first reason, the Acciona parties rely on Airtourer Co-operative Ltd v Millicer Aircraft Industries Pty Ltd [2004] FCA 948 and Euromark Ltd v Smash Enterprises Pty Ltd [2019] VSC 299. In support of the second, they rely on Verge v Devere Holdings Pty Ltd [2009] FCA 832; (2009) 258 ALR 464.
Airtourer concerned an interlocutory application for security for costs. The moving party relied on a statement made during a conversation to the effect that the other party had no money and did not mind if the moving party was successful in the main proceedings. The statement was made during a discussion initiated for the purpose of negotiating settlement of the main proceedings. The responding party objected to the moving party relying on evidence of the statement in the interlocutory proceedings for security for costs on the basis of s 131(1)(a) of the Evidence Act. Beaumont J heard evidence on the voir dire and concluded that two distinct items emerged from the discussion: (1) an attempt by the moving party to compromise the main proceedings at a figure arrived at as a commercial settlement; and (2) a statement by the responding party that, because it was insolvent, it could not consider the commercial settlement. Beaumont J considered that the discussion had a double aspect similar to the context considered by the High Court in Field v Commissioner for Railways (NSW) [1957] HCA 92; (1957) 99 CLR 285 and concluded, by application of common law principles, that the statements made by the responding party were not admissions to which without prejudice privilege applies; but rather, they were objective facts ascertained during the course of negotiations. Further, Beaumont J considered that s 131(1)(a) of the Evidence Act had not altered the common law position considered in Field: Airtourer at [30]-[36].
Euromark also concerned an interlocutory application. Affidavit evidence was adduced on an application for orders to dismiss, strike out or stay the main proceedings. Objection was taken, under the equivalent provision in Victorian legislation to s 131(1)(a) and s 131(1)(g) of the Evidence Act, to the admissibility of a letter and financial statements that were exhibits to an affidavit. The letter was marked ‘without prejudice save as to costs’ and included a statement to the effect that certain financial statements were enclosed ‘on a confidential basis and for the sole purpose of seeking to resolve this dispute’. Justice Kennedy considered that these provisions were the statutory form of the without prejudice exclusion considered in Field. Justice Kennedy concluded that the exhibit fell outside s 131(1)(a) because the correspondence was sent to confirm statements made in earlier correspondence that the relevant party had ‘no money’ such that it could not pay anything to the other party. No settlement offer or admission was contained in the communication. It was not a communication directly ‘in connection with’ an attempt to negotiate a dispute. Further, if it were such a communication, the financial statements contained objective facts rather than admissions of the kind referred to in Field.
Field concerned an action for damages Mr Field brought against the Commissioner for Railways for personal injury he sustained alighting from a train. The Commissioner’s solicitors sent a letter to Mr Field’s solicitors marked ‘without prejudice’ opening negotiations for settlement of the proceedings on a compromise and requesting that Mr Field be examined by a medical specialist appointed on behalf of the Commissioner. Through further correspondence marked ‘without prejudice’ an appointment was made for Mr Field to attend on a medical practitioner. In the course of that examination, he gave an account of the manner in which he sustained his injuries and stated that ‘he stepped out of a slowly moving train as it had overrun the platform’. No settlement was made and at trial Mr Field was asked during his cross-examination, without objection, if he had given that version of events to the specialist to which he answered in the negative. The Commissioner called the specialist and objection was taken to the specialist giving evidence of the prior inconsistent statement on the ground that the communication to the specialist was subject to without prejudice privilege. The objection was overruled and that ruling was upheld on appeal, ultimately, to the High Court.
The majority at 291-292 (Dixon CJ, Webb, Kitto and Taylor JJ) explained the rationale for without prejudice privilege in the following terms:
… As a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them. The law relieves them of this embarrassment so that their negotiations to avoid litigation or to settle it may go on unhampered. This form of privilege, however, is directed against the admission in evidence of express or implied admissions. It covers admissions by words or conduct. For example, neither party can use the readiness of the other to negotiate as an implied admission. It is not concerned with objective facts which may be ascertained during the course of negotiations. These may be proved by direct evidence. But it is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission. … (Emphasis added.)
The emphasised parts of this passage provide the foundation for the proposition that the common law application of without prejudice privilege is concerned with admissions and not objective facts. Relevantly, it is admissions concerning the subject matter of the dispute the subject of the negotiations that are not admissible in evidence.
In Rush & Tompkins Lord Griffiths (with whom all the other Law Lords agreed) (at 1300) observed that the common law rule is not absolute and resort may be had to without prejudice material for a variety of reasons when the justice of the case requires it. One example given was that the court will not permit the phrase ‘without prejudice’ to be used to exclude an act of bankruptcy: Re Daintrey; Ex parte Holt [1893] 2 QB 116. In that case a debtor sent a letter marked ‘without prejudice’ to his creditor in which he offered to compound a debt due from him to the creditor. In the letter he also stated that he was unable to pay his debts and would suspend payment unless the composition was accepted. In proceedings by which the creditor petitioned for sequestration orders to be made against the debtor, the Court of Appeal held that while the offer of composition was not admissible and was subject to without prejudice privilege, the admission that he was unable to pay his debts was admissible because it was evidence of an act of bankruptcy. A notice of an act of bankruptcy could not be given ‘without prejudice’ because it might have prejudicially affected whether or not the creditor accepted the terms of composition: Daintrey at 120. Having regard to the High Court’s reasons in Field and the application of those reasons in Airtourer and Euromark, Daintrey may be regarded as a further example where a statement (in that case comprising an act of bankruptcy) was not relevantly an admission concerning the subject matter of the dispute, but was a statement about an objective fact.
The Employer submits that Airtourer and Euromark must be viewed in light of Liu v Fairfax Media Publications Pty Ltd [2012] NSWSC 1352; (2012) 84 NSWLR 547 in which, it submits, Beech-Jones J cast doubt on Airtourer and, in particular, the proposition that s 131 of the Evidence Act is limited to admissions. Liu concerned an appeal from an associate judge by which Mr Liu was ordered to produce certain documents to Fairfax Media. Under the applicable rules of procedure, the obligation to produce documents for inspection excluded documents that contained privileged information to which s 131 of the Evidence Act 1995 (NSW) applied. The associate judge rejected Mr Liu's claim that the documents should not be produced because they fell within s 131(1). The main proceedings were a defamation suit by Mr Liu against Fairfax Media. The documents in question formed part of exchanges between Mr Liu and ASIC for the purpose of attempting to settle anticipated proceedings against Mr Liu by ASIC. Fairfax Media sought to have the associate judge’s decision upheld on, amongst others, the ground that the s 131(1) on its proper construction only operates to preclude adducing evidence concerning admissions made during settlement discussions and not other statements. Fairfax Media’s contention was founded on an application of the common law principles derived from Field and then applying those principles to s 131(1) as nothing in the Evidence Act indicated an intention to depart from those principles. Beech-Jones J rejected that contention and said that to the extent that Airtourer decided to the contrary he disagreed: Liu at [42]-[80].
I accept that there are competing first instance authorities regarding the extent to which s 131(1) is coterminous with common law principles as explained in Field. Nonetheless, given the divergent approach to the application of s 131(1), in the absence of binding appellate authority, it is reasonably arguable that s 131(1) is limited to admissions of the kind referred to in Field. Also, despite the evident width of the expression, that the asserted statement falls outside the meaning of ‘communication … in connection with an attempt to negotiate a settlement of the dispute’ if it was a communication intended to induce or encourage acceptance of offered terms of settlement: see, e.g., Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 3) [2009] FCA 1075; (2009) 259 ALR 541 at [58]-[65] (Foster J) and the authorities there cited. In any event, the Employer made no submission that the asserted statement could not be proved by admissible evidence at trial. The Employer accepted that, for the purposes of the strike out application, the question as to whether the assertion was sustainable was to be determined by application of common law principles.
As to the application of those principles, the Employer submits that the assertions are not in the nature of objective fact ascertained in the negotiations and are different from the statements made in Airtourer and Euromark which spoke to a then ‘present’ state of affairs and used expression such as ‘I do not have funds’ or ‘no money’ whereas the assertion in para 12 of the concise response speaks to the future and the necessity to obtain additional finance in the future.
I accept that there is a difference between a statement as to a present fact and a statement of an opinion or prediction about a future event. However, implicit in a statement of opinion or prediction is a present statement to the effect that there is a reasonable basis for that opinion or prediction. Here, the asserted statement was about the ability to ‘continue to fund the Project’ and that was ‘dependent on … obtaining additional finance’. That statement is also an implicit statement about the present state of the Employer’s finances. It is not a statement that, at the time it was made, the Employer was not able to pay its debts as and when they fell due, but it was a statement, at least in part, about its present parlous financial position. To that extent, it is reasonably arguable that the asserted statement in para 12 is a statement of objective fact and not an admission made in connection with the subject matter of the parties’ dispute the subject of the negotiations and, as such, falls outside the common law concept of without prejudice privilege.
Otherwise, the solvency or insolvency of the Employer is a matter of objective fact. It may be ascertained with or without evidence of what was said during negotiations between the parties. There is no suggestion that the Acciona parties are not permitted to use statements about the solvency of the Employer, even if made in confidence and inadmissible, to take steps to protect themselves from the potential consequences of the Employer’s insolvency or raise a defence or prosecute a claim based on an allegation of insolvency. Insolvency may be proved by other evidence. Thus, the asserted statement, even if evidence of it be inadmissible, would be sufficient to allow the allegations in paras 16–20 of the concise response and paras 4–5 of the statement of cross-claim to be made.
It follows that, it is reasonably arguable, that evidence of the statements asserted in para 12 of the concise response fall outside the common law concept of without prejudice privilege and, therefore, the paragraph should not be struck out on the ground that the asserted statements are founded on confidential without prejudice communications. For the same reason, there are no grounds for striking out para 13 and para 14.
Paragraph 11 and para 15 are in a different category. These paragraphs disclose to an extent the substance of subject matter of settlement discussions and at least two terms of the Employer’s settlement proposals. Therefore, these paragraphs disclose communications that are prima facie confidential and subject to without prejudice privilege. Moreover, they contain allegations that may be considered implicit, if not explicit, admissions by the Employer relating directly to the subject matter of the parties’ disputes.
A central plank of the Employer’s case is that the Acciona parties have failed to provide replacement Bank Guarantees as a means of applying illegitimate pressure on the Employer in the settlement negotiations. The Employer accepts that Bank Guarantees form part of the subject matter of the negotiations. However, the Employer contends that the subject of replacement of the Bank Guarantees and the communications about that replacement are separate from the settlement negotiations. Nonetheless, if replacement Bank Guarantees form part of the subject matter of the dispute between the parties or the terms upon which it may be resolved, the nature of what has been communicated about Bank Guarantees and other matters in the settlement negotiations may well provide important context or information that has a bearing on whether a conclusion should be reached that refusing to provide replacement Bank Guarantees amounts to ‘illegitimate’ pressure. It may also place the matters asserted in paras 14–18 of the concise statement into a different context. Therefore, while the Employer may not rely directly on communications made during the negotiations, its allegations may have indirectly raised them where it would be or may be misleading or unfair to exclude communications and (or) conduct during without prejudice negotiations.
The Employer submits that, as without prejudice is a joint privilege, there can be no consent to disclosure of communications covered by the privilege without all holders of the privilege consenting. Therefore, even if the Employer has made without prejudice communications relevant, the Acciona parties are not permitted to rely on them for their defence without the ‘consent’ of the HZI parties. In support of that submission the Employer relies on Mr Nicholas’ affidavit in which he deposes that the facts asserted in para 10 and para 11 of the concise response are not correct in that the negotiations included representatives of the HZI parties as well as the Acciona parties.
Mr Nicholas deposes the facts at a very high level of generality. The facts are stated as conclusions without any statement of the facts upon which the conclusions are based. For example, there are no statements of when or in what circumstances representatives of the HZI parties were involved in negotiations or what disputes were the subject of those negotiations. In short, Mr Nicholas’ evidence does not provide any firm evidentiary basis for making findings about who was involved in the negotiations and does not rise much, if at all, above bare assertion.
The Acciona parties also read an affidavit of Kon Nakousis sworn 20 May 2024. That affidavit exhibits the correspondence referred to in para 11 of the concise response. Objection was taken to the admissibility of that evidence apparently under s 131(1)(a) of the Evidence Act on the interlocutory application. In response to that objection, the Acciona parties sought to tender the exhibits for the limited purpose of adducing evidence to prove that these communications did not involve the HZI parties apparently on the basis of s 132(2)(g) of the Evidence Act. Namely, the Court is likely to be misled by Mr Nicholas’ evidence unless the exhibits to Mr Nakousis’ affidavit are adduced to contradict or qualify Mr Nicholas’ evidence. The exhibits were received provisionally on the basis that I would rule on the admissibility of them in these reasons.
The Court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might cause or result in undue waste of time: s 135 Evidence Act. I refuse to admit exhibits KN‑1, KN-2, KN-3, KN-4, KN-5 and KN-6 of Mr Nakousis’ affidavit into evidence on the interlocutory applications on that ground for the following reasons.
First, if the negotiations involved the Employer, the Acciona parties and the HZI parties, the assertion in the concise response cannot involve the ‘disclosure’ of confidential information to a party that is not entitled to ‘know’ that information. Preventing disclosure or publication of the assertions in the concise response beyond those parties may be a ground for ordering suppression or non-publication, but assertion of the fact of a communication to all parties to which that communication was made does not, on the face of it, involve breach of confidence. Second, the assertion in para 10 of the concise response is that the Employer and the Acciona parties have been engaged in negotiations directed to the settlement of disputes under the EPC Contract. For the purposes of an application to strike out, I am to assume that fact is proved, therefore, Mr Nicholas’ affidavit on that subject is of no real assistance. Third, to the extent that the Employer relies on the facts deposed in Mr Nicholas’ affidavit to contradict the facts asserted in the concise response, for the reasons already given, his evidence is of little weight and is not dipositive of the factual question. Fourth, as to the purpose for tendering the exhibits to Mr Nakousis’ affidavit, it is not appropriate to attempt to resolve conflicting or competing affidavit evidence on an interlocutory application such as this: Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729 at 734; Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618 at 622. For these reasons evidence contradicting or affirming the facts asserted in the concise response is of no real assistance in resolving the question of whether there is justification for raising matters the subject of without prejudice communications as a defence in the proceedings. Therefore, the exhibits are of minimal, if any, probative value on the application and consideration of the conflicting evidence might cause or result in undue waste of time.
As already mentioned, for the purposes of the strike out application, I must assume that the negotiations in question were limited to the Employer and the Acciona parties as asserted in para 10. Taking into account the function of a concise statement and the nature of the allegations made in the concise statement and concise response, it is reasonably arguable that the communications between the parties in without prejudice negotiations are relevant to the extent that these communications concerned the provision of replacement Bank Guarantees: Verge at [44]. Through paras 11–15, read with para 27, of the concise response, the Acciona parties allege, in substance, that replacement Bank Guarantees formed part of the negotiations and their conduct in refusing to provide replacement guarantees must be viewed in the context of what was said and done during those negotiations. In those circumstances, it is reasonably arguable, that proof of the negotiations should not be rendered impossible by the ‘without prejudice’ rule. In such a case, the subject matter of the proceedings, an alleged contravention of s 21 of the ACL, is not the same as the subject matter of the dispute between the parties at the time of the negotiations: see, e.g., Quad Consulting at 93. If a party prosecuting a cause of action under the ACL would not be precluded from alleging a contravention of the ACL by reason of conduct that took place during without prejudice negotiations, a party defending an ACL claim should also not be precluded from defending that claim where conduct during negotiations is relevant to the question of whether or not there was a contravention of the ACL. These are sufficient matters to justify asserting the conduct is relevant to the Acciona parties’ defence and to ‘plead’ the facts. The question of the admissibility of evidence of those facts and the effect of s 131(1) of the Evidence Act, the need for consent of the HZI parties and the basis upon which that evidence may be admitted can be dealt with at trial: Verge at [44], citing Western Australia v Southern Equities Corporation Ltd (in liq) (1996) 69 FCR 245 at 249-250 (French J).
It follows that I do not consider that para 11 of the concise response should be struck out on the ground that it asserts matters that are manifestly founded on evidence that would not be admissible. On the other hand, there does not appear to be any ground for contending that the facts alleged in para 15 have any relevance to the defence of the ACL claim. Nor do the allegations in that paragraph contain an admission of the kind asserted in para 12. Nevertheless, given that there is evident justification for the other assertions, determining the admissibility of evidence of that assertion pre-emptively based on the contents of a concise statement would not be appropriate. Except for the rare case in which the position is self-evident on the face of the pleading, questions about the admissibility of the evidence of facts asserted in pleadings or other documents is best left to trial. Accordingly, para 15 will not be struck out notwithstanding that the justification for matters asserted in that paragraph are not obvious. Having regard to these conclusions, para 27(2) and para 27(4) should also not be struck out.
Disposition
Paragraph 2 and para 3 of the interlocutory application for summary judgment and to strike out will be dismissed.
APPLICATION FOR SUPPRESSION AND NON-PUBLICATION
The Employer applies for suppression and non-publication orders of paras 11–20, 27(2) and 27(3) of the concise response, para 4 and para 5 of the statement of cross-claim, paras 3, 4 and 14 of the concise reply, various paragraphs of submissions and affidavits filed in the proceedings and the transcript of the hearing on 28 May 2024 that make reference to communications during the parties’ negotiations on the ground that it is necessary to prevent prejudice to the proper administration of justice. The facts deposed in paras 10, 11 and 12 of Mr Nicholas’ affidavit are relevant to this application in that they provide evidence that there were without prejudice negotiations between the Employer and the Acciona parties (and some evidence that these also involved the HZI parties) and the subject matter of those negotiations is identified in paras 11–15 of the concise response. However, as already mentioned, there is no evidence as to the substance of the communications or the truth or otherwise of the assertions in the concise statements. Neither the Acciona parties nor the HZI parties made submissions on the application. No other interested party appeared and made submissions. In effect, there was no contradictor on the application.
The Employer contends that it may be necessary in the proper administration of justice to prevent disclosure of commercially sensitive information in certain circumstances. The Employer submits that: ‘the publication of unsubstantiated allegations in question would cause irreparable harm to the [Employer]. Such harm would, in the very nature of commercial life, cause significant disruption, even if only through conduct from speculation, to the [Employer’s] current contractual arrangements with third-party stakeholders, including its financiers, energy off-takers, regulators, councils, [and] services providers.’ There is virtually no evidence in support of that submission. In effect, it is to be inferred from the recitals to the EPC Contract and Financier Side Deed and the terms of those documents and ‘the very nature of commercial life’. Nonetheless, I accept that an allegation made in open court to the effect that a company is insolvent or is unable to pay its debts as and when they fall due is likely to cause embarrassment, damage to reputation and may have financially harmful consequences for that company.
On the application of a party to the proceedings, the Court may prohibit or restrict the publication or disclosure of information lodged with or filed in the Court and may make such orders as it thinks appropriate to give effect to such an order: ss 37AF(1)(b)(iv), 37AF(2) and 37AH of the Federal Court Act. The Court may make a suppression or non-publication order on the ground that it is necessary to prevent the proper administration of justice: s 37AG(1)(a). In deciding whether to make such an order the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice: s 37AE. But, the concept of open justice is not absolute and must, on occasion, be balanced with other considerations such as avoiding prejudice to the proper administration of justice. Nevertheless, an order restricting the ordinary open justice approach ‘is not lightly made’: Minister for Immigration and Border Protection v Egan [2018] FCA 1320 at [4] (Allsop CJ).
Justice Wigney summarised the Court’s approach to suppression and non-publication orders in Rush v Nationwide News Pty Ltd [2018] FCA 357; (2018) 359 ALR 473 as follows.
(1)A suppression or non-publication order should only be made in exceptional circumstances: at [186] (and the authorities there cited).
(2)In general, parties and witnesses have to accept the embarrassment and damage to their reputation and possible consequential loss which can be inherent in involvement in litigation. It is the price of open justice that allegations about individuals are aired in open court. If a party, the response can be made in the same open forum: at [187]–[188] (and the authorities there cited).
(3)The Rules providing that pleadings are ordinarily available for public inspection is an important part of the system of open justice. There is no reason for supposing that members of the public will not appreciate that allegations in pleadings are untested and may turn out to be proved false or incorrect: at [189]–[191], [194] (and the authorities there cited).
(4)The principle of open justice demands and requires that the public are able to follow and understand all stages of a proceeding, including interlocutory steps such as the striking out of part of a pleading: at [195].
(5)There is no reason that the principles of open justice that apply to s 37AF and s 37AG should not apply equally to r 2.32 and r 16.21(2): at [199]–[200].
(6)In exceptional cases, striking out manifestly scandalous and vexatious material may justify suppression or non-publication and (or) removal of the pleading or part of the pleading from the Court file: at [196], [200].
The Employer submits that, in an appropriate case, it may be necessary in the interests of justice to make a suppression and (or) non-publication order to prevent disclosure and (or) publication of confidential and commercially sensitive information: Motorola Solutions Inc v Hytera Communications Corporation Ltd (No 2) [2018] FCA 17 at [8] (Perram J) and the authorities there cited. Examples taken from other authorities upon which the Employer relies include:
(a)information that would be of value to trade rivals the disclosure of which would be prejudicial to the moving party: Australian Competition and Consumer Commission v Cement Australia Pty Ltd (No 2) [2010] FCA 1082 at [16]-[24] (Greenwood J);
(b)information disclosed to the Court for the purposes of liquidators obtaining approvals under s 477(2B) of the Corporations Act 2001 (Cth) that, if disclosed, may prejudice the company (in liquidation) in respect of ongoing legal proceedings: Lindholm (liquidator), in the matter of Aviation 3030 Pty Ltd (in liq) [2021] FCA 1244 at [28]-[30], [33], [35]-[36] (Anderson J);
(c)information obtained from third parties subject to confidentiality provisions used for the purpose of administering a settlement scheme and in the preparation of parts of the evidence used in support of applications for approval of the settlement of representative proceedings under s 33V of the Federal Court Act: Cantor v Audi Australia Pty Limited (No 5) [2020] FCA 637 at [265], [268], [273] (Forster J).
The Employer also submits that suppression and non-publication orders have been made in the context of applications under s 33V with respect to events that took place during mediation or settlement discussions that resulted in the settlement for which approval of the Court was being sought: Cantor at [265], [268], [274]. The basis for such an order, as Anastassiou J explained in Clime Capital Limited v UGL Pty Limited (No 2) [2020] FCA 257 at [22], was that the information was disclosed to the Court in accordance with express orders preserving the confidentiality of the material for the purpose of a settlement approval. In those circumstances, his Honour said confidentiality orders to preserve the privileged material should be made as a matter of course. That reasoning has no application to the orders the Employer seeks in this case.
As has already been addressed, a pleading may be struck out as an abuse of process if on the face of the document the allegations made in it involve unjustified misuse of confidential information. There, the public interest in the proper administration of justice concerns avoiding abuse of the court’s processes not disclosure of confidential information per se because the pleading is mere assertion and may, or may not, disclose or publish truly confidential information. Therefore, as Snaden J observed in Naude v DRA Global Limited [2023] FCA 493 at [25]-[29], the relevant prejudice to the administration of justice that necessitates suppression or non-publication must arise from disclosure or publication of the information not the putative breach of confidence. In Pigozzo the Court was satisfied that a non-publication order was necessary to prevent prejudice to the proper administration of justice because the statement of claim in that case contained general, unclear and ambiguous allegations of serious impropriety which, accepting the pleaded facts as true, were founded on misuse of confidential information that was subject to legal professional privilege and without prejudice privilege. In the exceptional circumstances of that case, permitting publication, reporting and wide dissemination of such allegations risked undermining the public interest in the administration of justice that underpins the common law right to legal professional privilege and the rationale of without prejudice privilege: Pigozzo at [206]-[209]. The circumstances of this case are quite different.
Where the performance of the obligation sought to be enforced is dependent on earlier performance of an obligation of the moving party there is little difficulty in identifying the inequity of ordering performance of an obligation in circumstances in which the moving party is in breach or is not ready and willing to perform at the time a mandatory order is sought. Likewise, where the moving party has fully performed or executed all its obligations under the contract, there is little difficulty in concluding that, subject to inadequacy of damages or a relevant discretionary factor, it would generally be equitable to require the other party to perform the promised, yet unperformed, obligation. Burns Philp Trust Co is an example of such a case. In that case, a company issued certain securities (notes) to noteholders as part of consideration for acquiring from the noteholders shares held in another company. The company and a trustee made a trust deed relating to the notes a term of which gave the trustee a right to inspect the register of the company for the purpose of exercising its office as trustee under a trust deed. The company refused to allow the trustee to inspect the register. The court enforced the obligation by mandatory order and observed that the consideration for the promise ‘in the form of the transfer by the noteholders of their shares in the company “taken over”, was entirely executed’: Burns Philp Trust Co at 497. Where the moving party has completely performed its obligations no question of readiness and willingness to perform future obligations arises.
A more difficult question arises where an obligation is sought to be enforced in circumstances in which the moving party has not performed all obligations under the contract and it is alleged that the moving party is not ready and willing to perform those obligations in the future. In these circumstances, there may be difficulty in identifying the ‘consideration for the undertaking’ sought to be enforced to which Lord Radcliffe made reference in Australian Hardwoods. In the absence of a clear link, such as the performance of work and payment for that work, the consideration for many kinds of obligations in a contract may not be identified or identifiable and, in substance, the consideration consists of the parties’ mutual promises within the terms of the contract as a whole. Further, not all such mutual promises or obligations may be regarded as dependent or interdependent in the sense that non-performance by one party would, by implication, absolve the other of its obligation to perform: Newcombe v Newcombe (1934) 34 SR (NSW) 446 at 450-451 (Jordan CJ).
Nonetheless, it is clear that the absence of readiness and willingness to perform dependent future obligations will generally provide a discretionary basis to refuse injunctive relief. ‘Probably the true rule is that an injunction should not be granted which compels, in substance, the defendant to perform his side of the agreement when the continuance of his obligation to do so depends upon the future conduct of the plaintiff in observing conditions to be fulfilled by him’: JC Williamson Ltd v Lukey (1931) 45 CLR 282 at 299 (Dixon J). Likewise, generally, specific performance of a contract will not be refused where the moving party has breached or is unwilling to perform a term that is not interdependent and (or) is non-essential to performance of the contract: Green v Sommerville [1979] HCA 60; (1979) 141 CLR 594 at 608-609 (Mason J, Murphy and Aickin JJ, agreeing). However, these general principles do not necessarily mean that enforcement of an independent and (or) non-essential obligation should be ordered in circumstances in which the moving party is not ready and willing to perform other future substantive obligations or essential albeit non-dependent terms. For instance, in circumstances in which a contract is severable, as opposed to entire, and specific performance of a severable part of the contract could otherwise be ordered, the court may nevertheless treat that contract as entire if treating it as severable does not meet the justice of the case: Wilkinson v Clements (1872) LR 8 Ch App 96 at 111 (Sir Mellish LJ).
It is important to keep in mind that the well-established principles and discretionary factors are derived from equitable principles and maxims that are of more general application. Thus, it has been said that readiness and willingness to perform may be regarded as an exemplification of the equitable maxim ‘He who comes to equity must come with clean hands’: Green v Sommerville at 611 (Mason J). It may also be regarded as an application of the maxim ‘He who seeks equity must do equity’: Telstra Corporation Ltd v First Netcom Pty Ltd [1997] FCA 860; (1997) 78 FCR 132 at 136 (Lockhart, Beaumont and Hill JJ); Equity Doctrines & Remedies at [3-055], [3-085]. Having regard to these and other potentially relevant equitable principles and maxims, it is at least reasonably arguable that unreadiness and unwillingness of the moving party to perform future substantive obligations or essential albeit non-dependent terms of a contract may provide discretionary grounds for refusing to enforce a particular term or obligation of the contract against the responding party. Much, of course, depends upon the particular facts and circumstances of any given case, but in such a case the moving party may not be regarded as ‘doing equity’ if it is not ready and willing to perform its bargain as a whole. There is also a sense in which it may be futile to compel performance of a discrete term in circumstances in which the moving party is not in a position to perform the contract as a whole. As to futility generally, see, Equity Doctrines & Remedies at [20-145].
Hardship is another discretionary factor that may be invoked to refuse injunctive relief or specific performance. In Coles Supermarkets Australia Pty Ltd v Australian Retail Freeholds Pty Ltd (1996) 16 WAR 282, in the context of proceedings to restrain a breach of a restrictive term of a lease that would have had the effect of preventing the landlord redeveloping a shopping centre, Anderson J (at 288-289) observed:
It is accepted that there is always a discretion to withhold an injunction and it would be a relevant consideration if enforcement of covenants would cause undue hardship to the defendant or to others. As to considerations of hardship I think the following passage in I C F Spry, Equitable Remedies (4th ed, 1990) p 195 correctly states the law:
''It must not be forgotten that if damages are inadequate an applicant is prima facie entitled to specific performance of a valid and enforceable contract. Specific performance is not refused merely because inconvenience or even hardship to the defendant would be caused thereby. But if the hardship suffered by the defendant, if specific enforcement took place, would be so much greater than the detriment that would be suffered by the plaintiff if he were confined to remedies and damages that it would be unreasonable and oppressive to grant relief, specific enforcement is denied. In these regards there must be a balancing of the interests of the parties; and indeed, the court takes into account other matters as well, such as the manner in which the grant of relief would affect third persons or any advantage that the plaintiff may have taken of the defendant at the time of entry into the material agreement, in order to determine what course is most reasonable in all the circumstances.''
It is not difficult to think how that doctrine might be applied by the courts justly to decline specific performance of covenants in a shopping centre lease. If the lessor proposed some minor alteration to the configuration of the car park so as to cure, say, a drainage problem seriously affecting other tenants, and if the alteration could have no practical effect on the plaintiff's tenancy the court would probably not assist the plaintiff to stop the works. But that is a very different case from the case under consideration. Here the hardship pointed to as likely to flow from the grant of an injunction is really the first defendant's inability to take advantage of a particular commercial opportunity, that is, to obtain a price for the centre enhanced by a redevelopment which cannot be undertaken except in breach of its covenants with the plaintiff. I do not think that is a sufficient hardship. I accept Mr Macaw QC's submission: that what must be shown is hardship amounting to an injustice which would be inflicted on the first defendant by holding it to its bargain with the plaintiff in a manner which would be unreasonable. What must be shown is that in all the circumstances, including hardship to the defendant and third parties, it is unfair and unreasonable to hold the defendant to his contract, recognising that fairness runs down both sides of the case: see Suttor v Gundowda Pty Ltd ( 1950) 81 CLR 418 at 439; ANZ Executors & Trustees Ltd v Humes Ltd [1990] VR 615 at 635.
Thus, hardship in the relevant sense may arise where there is a significant disparity between the benefit to the party seeking enforcement of the term and the burden to the party if required to perform. In Co-operative Insurance (at 15) Lord Hoffman made reference to the potential injustice for the moving party to be enriched at the expense of the other party. Also, to the consequence that it may place the moving party in a position in which it can bargain with the other party so as to extract from that party a release from the obligation at a ‘price’ exceeding common law damages and approaching the loss that the other party would sustain from performance. The court should ‘not, by granting a mandatory injunction, to deliver over the Defendants to the Plaintiff bound hand and foot, in order to be made subject to any extortionate demand that he may by possibility make’: Isenberg v East India House Estate Co Ltd (1863) 3 De GJ & Sm 263 at 273. After citing that passage, Lord Hoffman went on to observe (at 15-16):
It is true that the defendant has, by his own breach of contract, put himself in such an unfortunate position. But the purpose of the law of contract is not to punish wrongdoing but to satisfy the expectations of the party entitled to performance. A remedy which enables him to secure, in money terms, more than the performance due to him is unjust.
There are other established discretionary factors that may be invoked, in substance, as defences to injunctive relief or specific performance which do not appear to have any relevance to the issues raised in these proceedings. These are discussed in Equity Doctrines & Remedies at [20-055]-[20-060] (personal services or relationships), [20-065]-[20-085] (continual supervision), [20-085]-[20-090] (mistake or misrepresentation), [20-140] (impossibility of performance), [20-150]-[20-165] (lack of mutuality), [20-170] (laches or delay) and [20-175] (unenforceability). Mention is made of them here simply to emphasise the discretionary nature of the equitable relief that the Employer seeks to have ordered summarily.
What emerges from the principles to which reference has been made is that, in the context of an application for summary judgment, the discretionary nature of injunctive relief and specific performance renders it difficult, where a factor is raised against the exercise of the discretion, to reach the conclusion that there is no prospect of defending a claim for equitable relief unless it is clear that the factor is of no import to the claimed relief. That difficulty is all the more apparent when it is appreciated that it is usually necessary to apply the applicable principles in a fact-specific manner that achieves the ends of equity.
Are clauses 6.7(d) and 6.7(g) specifically enforceable?
The principal issue concerning the availability of specific performance or a mandatory injunction is the inadequacy of damages. Separately, there is a question as to whether a mandatory injunction should be ordered compelling the Acciona parties to provide a Bank Guarantee that, in theory, requires the co-operation and agreement of a third-party bank in order for it to comply with that order. However, I do not consider that issue to provide a ground for refusing relief because any order may be made in a conditional form that addresses that concern.
As to the adequacy or inadequacy of damages the Employer’s primary submission is that damages cannot be adequate because the obligation to deliver Bank Guarantees extends to guarantees that name the Security Trustee as a beneficiary. In general, where the applicable term is for the benefit of a third party damages will not be regarded as an adequate remedy for the promisee. The Acciona parties submit that the Security Trustee only has a right to call on the Performance Bond, in effect, as agent of the Employer and, therefore, in truth, it is not a third party. Further, the insolvency of the contractor has been considered in certain authorities as the reasons that damages would not be an adequate remedy for the employer where the employer has sought a mandatory injunction to require the contractor to provide bank guarantees. The Acciona parties contend that the opposite is the case here, on the assumed facts, and the Employer (by its controller, administrator or liquidator, in due course) should be left to its common law remedy for damages as there is no suggestion that the Acciona parties are insolvent.
Relevantly, damages may be regarded as an inadequate remedy where the provision of the contract sought to be enforced confers a benefit on a third party or damages for breach of contract would be nominal or negligible: Coulls v Bagot's Executor & Trustee Co Ltd [1967] HCA 3; (1967) 119 CLR 460 at 478 (Barwick CJ), 503 (Windeyer J); see, also, Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444 at 478 where Lord Diplock explains that nominal or negligible damages is the foundation for ordering specific performance in favour of a purchaser in a sale of land contract. Having regard to these principles there are at least two reasons why damages would be an inadequate remedy for the Acciona parties’ breach of cl 6.7(d)(iv)(B) and cl 6.7(g) of the EPC Contract.
First, the Performance Bond is a Bank Guarantee that must be in favour of the Employer and the Security Trustee: cl 6.1(a)(ii) and cl 6.8. Further, the Security Trustee has an express right to call on a Bank Guarantee: cl 6.7(a). In cl 6B of the Financier Side Deed the EPCC acknowledge and agree that the Security Trustee may have direct recourse to the Bank Guarantees in accordance with cl 6.7(a) of the EPC Contract. Therefore, the obligation to provide the Performance Bond is, at least in part, an obligation that is for the benefit of the Security Trustee which is not a party to the EPC Contract. However, in this case, the extent to which the existence of third-party rights renders damages inadequate is diminished because the obligation is also owed directly to the Employer. Further, the EPC Contract is governed by the law of Western Australia: cl 45.14(a). Section 11(2) of the Property Law Act 1969 (WA) provides a third party with a direct right to enforce (and damages for breach) contractual provisions for its benefit. Nonetheless, it is evident that the Employer itself will not be fully or completely compensated insofar as loss or damage flowing from the breach is suffered by the Security Trustee. To that extent, the Employer’s loss or damage would be nominal.
The Acciona parties submit that the Security Trustee’s rights are as agent and not truly as a third party because, while it has a right to call on the Bank Guarantees, all of the obligations associated with the Bank Guarantees fall on the Employer. I do not accept that submission.
While not all the security instruments were in evidence, it may be inferred from the recitals and terms of the EPC Contract and Financier Side Deed that the Security Trustee holds a security interest in the EPC Contract. That is, the contractual rights have been transferred (in equity if not in law) to the Security Trustee as security for the performance of certain secured obligations. The benefit of a contract may be assigned, but not the burden. Therefore, it is consistent with the Security Trustee’s security interest that it may exercise the right to call, but does not have the burden of repayment and so forth. That the Security Trustee has an independent right to be a beneficiary of the Bank Guarantees and to have recourse to them is also consistent with the text of the relevant provisions of the EPC Contract and Financier Side Deed. It is also consistent with commercial common sense that the Security Trustee, as the secured party with a security interest, should have an independent right to call on the Bank Guarantees as part of its security interest. Therefore, there is nothing in the text of the EPC Contract or its context purpose or aim to suggest that the Security Trustee’s rights are limited to a right as an agent of the Employer as opposed to the third party rights of a person with a security interest in the EPC Contract.
Second, as already mentioned, the provision of the Performance Bond and other Bank Guarantees forms part of a contractual mechanism regulating interim payments or advances under the EPC Contract up to the Final Certificate and (or) resolution of any Dispute the subject of a Dispute Notice. The consequence of a failure to provide the Performance Bond means that the Employer will be deprived of that risk allocation mechanism and its right to an interim payment, by way of calling on the Performance Bond, of the amount of any bona fide Claim it has against the Acciona parties. The Employer’s damages for the loss of the ‘interim payment’ are unlikely to be significant because, if vindicated in the dispute, it will ultimately obtain an award of damages, most likely with interest, against the EPCC. If not vindicated, it will not obtain an award of damages or interest and, if a call has been made, it would have to repay any overpayment it has received from calling on the Performance Bond. Therefore, damages are likely nominal for breach of cl 6.7(d) and (or) cl 6.7(g) and would not be an adequate remedy. Specific performance (by way of a mandatory injunction) would provide a better means of doing justice.
In Ewing International LP v Ausbulk Ltd (No 2) [2009] SASC 381; (2009) 267 LSJS 107 (at [28]-[29], [151], [194], [347]-[377]) Layton J applied the principles to which I have referred to order specific performance of a contract that required the provision of a replacement bank guarantee pending the determination of a dispute between the parties by arbitration. Damages were not considered an adequate remedy in that case because the contractor (the party which was to provide the guarantee) was insolvent. For similar reasons, in Liberty Mercian Ltd v Cuddy Civil Engineering Ltd [2014] EWHC 3584 (TCC) a remedy equivalent to specific performance was ordered for the failure of a party to a construction contract to provide a performance bond: Liberty Mercian v Cuddy [2014] EWHC 3584 (TCC) at [18]; see, also, Liberty Mercian Ltd v Cuddy Civil Engineering Ltd [2013] EWHC 4110 (TCC) at [51]-[55]. These authorities are illustrations of the application of the principles in the particular circumstances of those cases.
The absence of any suggestion that the Acciona parties are insolvent is not a reason for considering that damages are an adequate remedy, it simply removes insolvency of the EPCC as a consideration as to why damages are not adequate. Security against the insolvency of the EPCC is only one element of the risk allocation the Bank Guarantees afford. The other is prompt payment of the Employer’s bona fide Claim pending resolution of the Dispute. While damages would be an adequate remedy if the Employer makes a Claim and is ultimately vindicated on that Claim, damages are not an adequate remedy for the loss of the benefit of the promised risk allocation mechanism in the meantime.
In all the circumstances is it just to enforce clause 6.7(d) and clause 6.7(g)?
As already mentioned, due to the discretionary nature of final injunctive relief it is difficult, except in a very clear case, to reach the conclusion that there is no reasonable prospect of defending the claim where, as here, the respondent to the application has raised a factual issue that might have a bearing on the exercise of the discretion. Relevantly, the Acciona parties allege that the Employer is insolvent and that provides a discretionary reason for refusing relief because it must be assumed that the Employer is not ready and willing to perform its future obligations under the EPC Contract and the Acciona parties are in the process of taking steps to have the EPCC exercise its right to terminate that contract.
As to whether the EPCC’s contingent right to terminate the EPC Contract provides reasonable grounds for a defence, I accept the Employer’s submissions to the effect that the contingent right is, on the facts asserted in the concise response, speculative. In any event, as already mentioned, termination of the EPC Contract does not necessarily mean that all Bank Guarantees must be returned to the EPCC. Therefore, in that sense, delivery of the Performance Bond to the Employer is not futile or likely futile even if the Employer is not able to perform its future obligations under the contract. Therefore, I do not consider the assumed insolvency provides a basis to refuse equitable relief on the ground of that performance is essentially futile because termination of the obligation to provide replacement Bank Guarantees is imminent.
As to the assertion of insolvency and its implications for future performance of the EPC Contract more broadly, it is more difficult to dispense, at the threshold, with the contention that absence of the ability of the Employer to perform its essential future obligation under the EPC Contract to pay the balance of the Contract Price provides reasonable prospects for defending the claim for a mandatory injunction or specific performance.
Relying on Laing Management Ltd v Aegon Insurance Co (UK) Ltd [1997] 86 BLR 70; (1997) 55 Con LR 1, cited in Dennys M and Clay R, Hudson’s Building and Engineering Contracts (13th ed, Sweet & Maxwell Ltd, 2015) at [11-091], the Employer submits that insolvency does not usually constitute an act of repudiatory or anticipatory breach of contract at common law. That is because the appointment of a controller (receiver or receiver and manager), administrator or liquidator does not necessarily evince an intention not to be bound by the terms of a contract, as the controller, administrator or liquidator may decide to continue to perform the contract. The contract may be performed with the backing of secured creditors or through a deed of company arrangement or some other mechanism. Additionally, insolvency can have varying degrees of severity ranging from insufficient liquidity that may be resolved through the provision of further financial accommodation or capital raising to hopeless insolvency with little or no prospect of trading out of financial difficulty. Therefore, the assumed present insolvency of the Employer does not provide a basis for making the further assumption that the Employer will not have the ability to perform its future obligations under the EPC Contract when the time comes for performance of those obligations. However, that does not mean that there is no reasonable prospect of the Acciona parties demonstrating on the balance of probabilities that the Employer will not be able to perform in the future.
Therefore, the real question is whether assuming the Employer does not and will not have the ability to perform its future obligations under the EPC Contract, would that fact provide a discretionary defence to the equitable relief the Employer claims. That assumed fact means the Employer will not be able to pay any amounts certified as due as interim payments or any amount certified as due in the Final Certificate. Separately, if there is a Dispute Notice and that dispute is resolved in favour of the Acciona parties, the Employer will not be able pay further amounts due to the Acciona parties in debt or for damages for breach of contract or repay any amount paid through the Employer having recourse to a Bank Guarantee.
On the assumption of a true inability of the Employer to perform its future substantive and essential obligations I am troubled by the notion that Equity would insist on the Acciona parties performing an independent obligation to deliver Bank Guarantees that forms part of contract machinery that is intended to affect the parties’ rights on an interim and temporary basis when the effect of the mandatory order would be to arm the Employer with the ability to render interim rights effectively permanent and final rights of negligible or much diminished value. While the EPCC accepted the risk at the outset that the Employer would become insolvent and retain the right to have recourse to Bank Guarantees while insolvent, on the assumed facts, the Employer comes to Equity knowing that the risk is now a reality. The question is whether in the assumed circumstances it would be more just to leave the Employer to its rights at common law given that its damages for the breach are likely minimal, whereas the potential for harm to the Acciona parties is significant. These circumstances appear to raise, at least, the spectre of hardship and whether the Employer as a party seeking equity is doing equity. For these reasons, I am not satisfied that on the assumed facts alone the Acciona parties have no reasonable prospect of defending the Employer’s claimed equitable relief.
Should defence of the contract claim be made conditional?
Notwithstanding that I am not satisfied the Employer should have summary judgment for the equitable relief claimed, the practical effect of refusing that relief at this time may be to determine the proceedings finally in the Acciona parties’ favour. Given the nature of the issues raised by an allegation of insolvency, I apprehend that there will be a need for discovery and expert evidence to determine that question which will run in parallel with the proceedings on the cross-claim. In the circumstances, it is highly unlikely that a judgment would be delivered in the proceedings before the end of this year or before the apparent current estimated date for completion of the work under the EPC Contract. As a consequence, if the Employer is ultimately successful in the proceedings, refusing relief at this time may make such a victory pyrrhic. Accordingly, there is a risk that refusing relief will result in an unjust outcome.
Section 23 of the Federal Court Act confers power on the Court to make orders of such kinds, including interlocutory injunctions, as it thinks appropriate. Although there has been a degree of difference of view in the past, it is now settled that the principles applicable for the grant of a mandatory interlocutory injunction are the same as the principles that apply for a prohibitory interlocutory injunction: see, e.g., Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105 at [76]-[85] (Newnes JA, McLure P and Corboy J, agreeing). Those principles are well-established and need not be restated at any length.
The Full Court set out the ‘correct approach’ in Samsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156; (2011) 217 FCR 238 at [52]-[74]. Applicants must first show that they have a prima facie case in the sense of ‘a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial’: Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 at [65] (Gummow and Hayne JJ, Gleeson CJ and Crennan J agreeing at [19]). This is commonly referred to as a serious question to be tried. What will be sufficient will depend on ‘the nature of the rights [the applicant] asserts and the practical consequences likely to flow from the order he seeks’: Beecham Group Ltd at 622. Secondly, a party must also demonstrate that the balance of convenience and justice favour the grant of an injunction.
There are certain kinds of cases in which, for the purpose of seeing where the balance of convenience lies, it is desirable for the Court to evaluate the strength of the applicant’s case for final relief. One class of case where that principle applies is where the decision to grant or refuse an interlocutory injunction will in a practical sense determine the substance of the matter in issue: Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 536 (McLelland J). The grant of a mandatory interlocutory injunction in favour of the Employer would have that effect. However, as already mentioned, refusal to grant an injunction may also have that effect. For the reasons already given, I am satisfied that the Employer has a relatively strong case for final relief.
In the circumstances the observations of Hoffmann J in Films Rover International Ltd v Cannon Film Sales Ltd [1986] 1 WLR 670 at 680 are pertinent:
… I think it is important in this area to distinguish between fundamental principles and what are sometimes described as ‘guidelines’, ie useful generalisation about the way to deal with the normal run of cases falling within a particular category. The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the court may make the ‘wrong’ decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’ in the sense I have described. The guidelines for the grant of both kinds of interlocutory injunctions are derived from this principle.
Having regard to the applicable principles and the matters referred to earlier in these reasons I am satisfied that it is appropriate, subject to appropriate safeguards to preserve the status quo, to make an order for interlocutory mandatory injunction compelling the Acciona parties to deliver to the Employer replacement(s) of the Performance Bond. It is the course which carries the lower risk of injustice should it turn out that I have made the ‘wrong’ decision in the sense Lord Hoffman describes in Films Rover International.
Disposition
Subject to hearing the parties on the final form of the orders, I will make orders along the following lines:
(1)The lawyers representing the Employer and the Acciona parties in the proceeding must open a bank account with an Australian trading bank registered pursuant to the Banking Act 1959 (Cth) in their joint names (Stakeholder Account).
(2)Any funds paid into the Stakeholder Account be held on trust by the account holders for the benefit of the Employer and the Acciona parties pending determination of the party entitled to the funds.
(3)Any payment out of the Stakeholder Account be subject to and at the direction of the Court.
(4)Upon each of the Employer and the Security Trustee undertaking to the Court that, if it has recourse to the Performance Bond, it must direct the issuer bank to pay the amount demanded under the Performance Bond into the Stakeholder Account; the Acciona parties do all things reasonably necessary to procure one or more irrevocable and unconditional bank guarantee in favour of the Employer and the Security Trustee in the form set out in Schedule 20 to the EPC Contract or in a form other approved by the Employer in the aggregate sum of AUD 38,631,149.64 and, thereafter, immediately deliver such bank guarantee(s) to the Employer (Performance Bond).
Additionally, I will hear the parties on the extent to which, having regard to these reasons, the declaratory relief sought concerning the breach of contract is necessary and appropriate. I will also hear the parties on the question of costs.
I certify that the preceding one hundred and eighty-seven (187) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill. Associate:
Dated: 12 July 2024
SCHEDULE OF PARTIES
WAD 72 of 2024 Respondents
Fourth Respondent:
HITACHI ZOSEN INOVA AG SWITZERLAND STATE REGISTERED COMPANY NUMBER CHE-105.894.972
Fifth Respondent:
HITACHI ZOSEN INOVA AUSTRALIA PTY LTD ACN 603 901 382
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