Elecnor Australia Pty Ltd v Clough Projects Australia Pty Ltd

Case •

[2025] NSWSC 610

•

12 June 2025

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Elecnor Australia Pty Ltd v Clough Projects Australia Pty Ltd [2025] NSWSC 610
Hearing dates: 28-29 May 2025
Decision date: 12 June 2025
Jurisdiction:Equity - Commercial List
Before: Stevenson J
Decision:

Defendants’ cross-claim stayed

Catchwords:

COMMERCIAL ARBITRATION – arbitration agreement – stay of proceedings – proper construction of scope and effect of arbitration clause – where plaintiff and first defendant are parties to a joint venture deed – where deed included arbitration agreement with arbitral seat in Singapore – where first defendant’s rights in joint venture deed transferred to creditors’ trust administered by remaining defendants as trustees under deed of company arrangement – where plaintiff seeks declaratory relief and specific performance in relation to acquisition of first defendant’s interest in the joint venture – where first, second, and fifth defendants raise matters in defence of the proceedings and a cross-claim for contribution to a call on performance security – whether those claims are arbitrable – whether the proceedings involve any “matter” that is “capable of settlement by arbitration” pursuant to s 7(2)(b) of the International Arbitration Act 1974 (Cth)

COMMERCIAL ARBITRATION – arbitration agreement – stay of proceedings – whether arbitration agreement is null, void, inoperative or incapable of being performed – whether arbitration agreement “inoperative” pursuant to s 7(5) of the International Arbitration Act 1974 (Cth) – whether commencement of proceedings was a repudiation, waiver or abandonment of arbitration agreement

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 330 UNTS 3

Corporations Act 2001 (Cth)

International Arbitration Act 1974 (Cth)

UNCITRAL Model Law on International Commercial Arbitration

Cases Cited:

ABB Power Plants Ltd v Electricity Commission of New South Wales t/as Pacific Power (Supreme Court (NSW), Giles J, 5 August 1994, unreported) BC9402904

ABB Power Plants Ltd v Electricity Commission of New South Wales t/as Pacific Power (1995) 35 NSWLR 596

ACD Tridon v Tridon Australia [2002] NSWSC 896

Anzen Ltd v Hermes One Ltd [2016] UKPC 1

Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; [1973] HCA 36

Bridge Wholesale Acceptance Corporation (Aust) Ltd v Burnard (1992) 27 NSWLR 415

Broken Hill City Council v Unique Urban Built Pty Ltd [2018] NSWSC 825

Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66

Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1992] QB 656

Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45; [2006] FCAFC 192

Construcciones y Auxiliar de Ferrocarriles S.A. v CPB Contractors Pty Limited [2022] NSWSC 1264

Cook v Cook (1986) 162 CLR 376; [1986] HCA 73

CPB Contractors Pty Ltd v Celsus Pty Ltd [2017] FCA 1620

Dyna-Jet Pte Ltd v Wilson Taylor Asia Pacific Pte Ltd [2016] SGHC 238

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7

Ferris v Plaister; Stap v Grey (1994) 34 NSWLR 474

Fitzpatrick v Emerald Grain Pty Ltd [2017] WASC 206

Flint Ink NZ Ltd v Huhtamaki Australia Pty Ltd (2014) 289 FLR 30; (2014) 44 VR 64; [2014] VSCA 166

Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160

Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407

Inghams Enterprises Pty Limited v Hannigan [2020] NSWCA 82

John Holland Pty Limited v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61

Larkden Pty Ltd v Lloyd Energy Systems Pty Limited [2011] NSWSC 268

Lepcanfin Pty Ltd v Lepfin Pty Ltd (2020) 102 NSWLR 627; [2020] NSWCA 155

Mansfield (Liquidator) v Fortrust International Pty Ltd, in the matter of Palladium Investments International Pty Ltd (in liq) [2023] FCA 350

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37

New Cap Reinsurance Corporation Ltd v A E Grant [2009] NSWSC 662

PMT Partners Pty Ltd (In Liq) v Australian National Parks & Wildlife Service (1995) 184 CLR 301; [1995] HCA 36

Recyclers of Australia Pty Ltd v Hettinga Equipment Inc (2000) 100 FCR 420; [2000] FCA 547

Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; [2019] HCA 13

Siam Steel International Plc v Compass (Australia) Pty Ltd [2014] WASC 415

Siemens Limited v Origin Energy Uranquinty Power Pty Ltd (2011) 80 NSWLR 398; [2011] NSWSC 195

Siracusa v Siracusa [2022] ACTSC 94

Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332; [1990] HCA 8

WCX M4-M5 Link AT Pty Ltd v Acciona Infrastructure Projects Australia Pty Ltd (No 2) [2022] NSWSC 505

WDR Delaware Corporation v Hydrox Holdings Pty Ltd (2016) 245 FCR 452; [2016] FCA 1164

Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17

Zhang v Shanghai Wool and Jute Textile Co Ltd (2006) 201 FLR 178; [2006] VSCA 133

Texts Cited:

G B Born, International Commercial Arbitration (3rd ed, 2021, Wolters Kluwer)

P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Thomson Reuters

Category:Procedural rulings
Parties: Elecnor Australia Pty Ltd (Plaintiff/Cross-Defendant)
Clough Projects Australia Pty Ltd (First Defendant/Cross-Claimant)
Salvatore Algeri (Second Defendant/Cross-Claimant)
David Orr (Fifth Defendant/Cross-Claimant)
Representation:

Counsel:
J J Hutton SC / J K Kennedy (Plaintiff/Cross-Defendant)
J K Taylor SC / T O’Brien / D P Farinha (Defendants/Cross-Claimants)

Solicitors:
Gilbert + Tobin (Plaintiff/Cross-Defendant)
Arnold Bloch Leibler (Defendants/Cross-Claimants)
File Number(s): 2024/467526

JUDGMENT

  1. The plaintiff, Elecnor Australia Pty Ltd, and the first defendant, Clough Projects Australia Pty Ltd, are parties to a Joint Venture Deed dated 8 October 2020 (“the JV Deed”).

  2. The joint venture was created to undertake a large scale energy infrastructure project for NSW Electricity Operations Pty Ltd (“Transgrid”) involving the design and construction of a high voltage electricity transmission system between New South Wales and South Australia (“the Project”).

  3. To deliver the Project, Elecnor and Clough entered into an “Engineer, Procure and Construct Contract” with Transgrid on 2 June 2021 (“the EPC Contract”).

  4. The JV Deed defined and regulated the relationship between Elecnor and Clough and their rights, obligations and duties until completion or termination of the Project. It imposed on each party obligations of a quasi-fiduciary kind and obligations of good faith and reasonableness. It provided a mechanism whereby, if one party committed a “Material Default”, the non-defaulting party could compulsorily acquire the defaulting party’s interest in the joint venture. It contained dispute resolution clauses, including for executive negotiation and, relevantly, arbitration, with an arbitral seat in Singapore. I return to the terms of the JV Deed in more detail below. [1]

    1. From [14] below.

  5. On 31 October 2022, Clough failed to meet an obligation to provide a form of security under the EPC Contract. On 5 December 2022, it entered voluntary administration and, on 16 February 2023, a Deed of Company Arrangement (“DOCA”). Although the effect of the DOCA will be a matter of contention in these proceedings, there is no dispute that it converted creditors’ claims into claims against a trust to be administered by the administrators as trustees: the second and fifth defendants (“the Trustees”). The DOCA required that property of Clough and its related parties be transferred to the Trustees. There is a dispute as to the extent to which the DOCA transferred Clough’s interests under the JV Deed and EPC Contract to the Trustees.

  6. Shortly after the administrators were appointed, Elecnor exercised “step-in” rights under the JV Deed to carry on the business of the joint venture and complete the balance of the works under the EPC Contract.

  7. Contending that Clough had committed a “Material Default” under the terms of the JV Deed by failing to provide the required security under the EPC Contract, on 1 July 2024, Elecnor made an offer to purchase Clough’s interest in the joint venture for $1.00 (“the Offer to Purchase”). That set in train the contractual machinery in the JV Deed for the compulsory acquisition of Clough’s interest. The Trustees rejected the offer and did not take steps to comply with the acquisition process. The Trustees’ position is that the offer was invalid. They contend that the DOCA transferred Clough’s interest in the joint venture to them and precluded Elecnor from exercising any rights that Elecnor had under the JV Deed against Clough, including the right to acquire Clough’s interest.

  8. Elecnor commenced these proceedings against Clough and the Trustees on 16 December 2024 seeking a declaration that the DOCA did not cause Clough’s interest in the joint venture, the JV Deed, or the EPC Contract, to be transferred to the Trustees, and an order for specific performance of Clough’s obligations in relation to the compulsory acquisition process.

  9. After the proceedings were commenced, Clough and the Trustees gave formal notice to Elecnor that, on 14 February 2023, Transgrid had called on bank guarantees and insurance bonds totalling some $110 million that Clough had procured. They demanded that Elecnor pay half of that amount to the Trustees or Clough in satisfaction of contribution obligations under the JV Deed or general law and filed a cross-claim (the “Cross Claim”) asserting a money claim for half the amount: some $55 million (“the Securities Recovery Claim”).

  10. Clough and the Trustees also alleged in their Commercial List Response that in making the Offer to Purchase, Elecnor had breached its quasi-fiduciary and good faith obligations in the JV Deed (“the Bad Faith Breach Contention”).

  11. Elecnor contends that the Securities Recovery Claim and the Bad Faith Contention are arbitrable claims to be dealt with in accordance with the arbitration clause in the JV Deed (“the Arbitration Clause”).

  12. By amended notice of motion dated 6 May 2025, Elecnor seeks a stay of those claims pursuant to s 7(2) of the International Arbitration Act 1974 (Cth) (“the Act”) or, alternatively, art 8 of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”), or cl 23.2 of the JV Deed.

  13. Clough and the Trustees oppose the motion. They have filed a cross-motion seeking orders that, if Elecnor succeeds in obtaining a stay, Elecnor’s claims should also be stayed under the Act, the Model Law, or as a matter of case management.

The JV Deed

  1. Clause 2 of the JV Deed establishes an unincorporated and fully integrated joint venture, the objects of which are to execute the Project Documents [2] and jointly deliver the works under the EPC Contract. [3]

    2. Relevantly, the EPC Contract.

    3. JV Deed, cl 2(a).

  2. Clause 5 imposes obligations of a quasi-fiduciary kind on each party. It prohibits either party from making “an undisclosed profit from its position in relation to the [Project]” or misusing “its position in relation to the [Project] to obtain a personal benefit or profit”. [4] It also provides that the parties “must act in good faith towards each other for all matters relating to the Joint Venture and be fair, reasonable, honest and diligent in performing their respective obligations under [the JV Deed] and the [EPC] Contract”. [5]

    4. Ibid, cl 5(c)(i)-(ii).

    5. Ibid, cl 5(h).

  3. Elecnor and Clough each have a 50% interest in the joint venture and agree they are only liable to the other to the extent of their respective interest in the joint venture. [6] They agree to share in the joint venture as “tenants in common” including, relevantly, as to liabilities under any security. [7]

    6. Ibid, cl 6(b). There was an amendment to the parties’ respective interests in November 2022, whereby Elecnor and Clough had a 57% and 43% share in profits for the purposes of cl 14.3(a)(iv), but continued to share in liabilities, obligations, losses, costs, and expenses of the joint venture in accordance with the extent of their original interests (50% each): see Deed of Amendment No 2, cl 2.

    7. JV Deed, cll 6(a)-(b).

  4. Clause 13 deals with calls on financial security under the EPC Contract. Clause 13.2 provides:

“13.2 Calls on Security

(a)    Where:

(i)    [Transgrid] calls on Security under the [EPC] Contract; and

(ii)    the call is made on one or more party’s security (Primary Call Party) and in respect of any other party’s security no call, or a call of equal or lesser value taking into account is respective Participating Interest, is made (Secondary Call Party),

then:

(iii)    the parties must use their best endeavours to mitigate any loss suffered as a result of a call on any Security; and

(iv)    within two Business Days of a written demand by the Primary Call Party, the Secondary Call Party must, without limiting clause 7, pay the Primary Call Party an amount calculated by multiplying the Secondary Call Party’s Participating Interest by the total amount of the combined calls and subtracting the amount of the call made on the Secondary Call Party’s Security (if any).

(b)    Where [Transgrid] calls on Security based on an act or omission by a party which is a Material Default or unrelated to the Project (Responsible Party), then:

(i)    the Responsible Party must use its best endeavours to mitigate any loss suffered as a result of a call on any Security; and

(ii)   where the Primary Call Party is not the Responsible Party, then within five Business Days of a written demand by the Primary Call Party, the Secondary Call Party (also the Responsible Party) must, without limiting clause 7, pay the Primary Call Party 100% of the amount of the call on the Primary Call Party’s Security, plus any loss incurred by the Primary Call Party as a result of the call”. (Emphasis in original.)

Default

  1. As can be seen, the JV Deed provides mechanisms for dealing with a “Material Default” committed by a party.

  2. “Material Default” is defined to mean, relevantly:

“[(a)]    an act or omission of a party, its officers, employees (excluding Project Employees) or agents, which

…

(iii)    is a material breach by any party of any of its obligations under [the JV Deed] or the Project Documents which is capable of remedy and has remained unremedied for 15 Business Days from receipt of a notice from the Non-Defaulting Party which stipulates the breach and requires it to be rectified (or such longer period expressly stipulated by [the JV Deed] in relation to the circumstances);

…

[(b)]    a failure by a party to provide Security in accordance with [the JV Deed];

[(c)]    a failure by a party to make payment of:

(i)    the amount stated in a Late Payment Notice within 14 days of the Late Payment Notice; or

(ii)    its proportion of [costs or expenses incurred] in accordance with [the JV Deed];

(d)    a failure by a party to indemnify another party in accordance with clause 7 within 10 Business Days of receipt of a written demand for payment;

(e)   an Insolvency Event occurs in respect of a party”.

  1. “Insolvency Event” is defined to have the meaning given to it under the EPC Contract; [8] namely “in respect of a person, [where the] person is bankrupt or insolvent, goes into liquidation, winding-up or dissolution, or any act is done or any event occurs which is analogous”. [9]

    8. JV Deed, cl 1.1, definition of “Insolvency Event”; see definition of “Contract”.

    9. EPC Contract, cl 1.1.181, definition of “Insolvent”.

  2. Where a party commits a Material Default, the other party may issue a notice requiring the defaulting party to remedy the default within 10 business days, or a later period. [10] Failure to remedy the Material Default within that time entitles the non-defaulting party to take action under cl 21.3; including to complete the balance of the works under the EPC Contract without involvement of the defaulting party. [11] The non-defaulting party may also elect to treat the failure to remedy as an invitation from the defaulting party to receive an offer to purchase the defaulting party’s interest in the joint venture. [12] The non-defaulting party may make an offer, and the defaulting party may either accept or reject the offer price, but not the offer itself. [13] If the offer price is rejected, the purchase price must be determined by expert valuation and the non-defaulting party is required to pay that price 10 business days later. [14]

    10. JV Deed, cl 21.1.

    11. Ibid, cl 21.3(a)(ii).

    12. Ibid, cl 21.3(a)(iv).

    13. Ibid, cl 21.3(a)(iv)(B).

    14. Ibid, cl 21.3(iv)(C)-(E).

Management & dispute resolution

  1. Executive management of the joint venture is vested in a Steering Committee: an executive body comprised of up to two members from each party who have “overall control of the Joint Venture”. [15]

    15. Ibid, cl 10.1(b).

  2. The Steering Committee has specified functions, including to: [16]

“ … establish the business and general operational policies and procedures of the Joint Venture, including the Key Policies and Procedures and policies relating to the manner of communicating and engaging with the [Transgrid] as well as the submission of claims and referral of disputes to arbitration and/or litigation, and to implement those Key Policies and Procedures through the Project Director and Key Personnel…”.

16. Ibid, cl 10.2(a).

  1. The JV Deed provides for Key Personnel, appointed by the Steering Committee, to manage certain aspects of the joint venture. One such key person is the Project Director, who is responsible for the joint venture’s day-to-day management and operations. [17]

    17. Ibid, cl 11.2(a)(i).

  2. The JV Deed provides for a tiered and mandatory process to achieve consensual resolution of disputes. That process culminates in the Arbitration Clause. The Arbitration Clause provides for arbitration of unresolved disputes and thus for a resolution of such disputes that is binding on the parties.

  3. Thus:

  1. disputes between the parties “are to be referred in the first instance to the Project Director to decide in a reasonable and unbiased manner; [18]

    18. Ibid, cl 11.2(e).

  2. any decision of the Project Manager is subject to the approval of the Steering Committee; [19]

  3. the Project manager “must immediately” refer unresolved disputes to the Steering Committee; [20]

  4. if the Steering Committee cannot resolve the dispute, the Steering Committee “must” refer the dispute to the Chief Executive Officers of each party; [21]

  5. the Chief Executive Officers “must” meet and use their reasonable endeavours to resolve the dispute; [22] and

  6. if the parties have not resolved the dispute within a specified time of it being referred by the Steering Committee to the Chief Executive Officers, either party “may” submit the dispute to arbitration. [23]

    19. Ibid.

    20. Ibid.

    21. JV Deed, cl 23.2(a).

    22. Ibid, cl 23.2(b).

    23. Ibid, cl 23.3(a).

  1. The critical clauses are cll 23.2 and 23.3; the latter being the Arbitration Clause:

“23.2 Executive negotiation

(a)    If a dispute or difference in connection with [the JV Deed] or the Project (hereafter called a ‘dispute’) arises between the parties, which cannot be resolved by the Steering Committee, the Steering Committee must, by written notice, refer the dispute to the Chief Executive Officer of each party.

(b)    Within 10 Business Days of receipt of the notice from the Steering Committee, the Chief Executive Officers, or such other person nominated by the Chief Executive Officers with authority to agree a resolution of the dispute, must meet and use their reasonable endeavours to resolve the dispute.

23.3 Arbitration

(a)    If the parties have not resolved the dispute or agreed an alternative dispute resolution process within 45 days of the dispute being referred in writing [by] [24] the Steering Committee pursuant to clause 23.2 (or such longer period agreed between the parties), any party may, by written notice to the other parties, submit the dispute to arbitration in accordance with, and subject to, the Rules of Arbitration of the International Chamber of Commerce (ICC Rules) in effect on the date of [the JV Deed].

(b)    Despite any provision of the ICC Rules to the contrary the following principles will apply in the conduct of an arbitration, unless the parties otherwise agree:

(i)    one arbitrator will be appointed;

(ii)    the appointing authority will be the ICC;

(iii)    the seat of the arbitration will be Singapore;

(iv)    all proceedings will be conducted in the English language; and

(v)    the arbitrator’s award will be final and binding and enforceable in any legal jurisdiction;

…

(f)    The parties must continue to perform their obligations under [the JV Deed] and the Project Documents despite the existence of a dispute and/or any stage of the process in this clause 23[.]3 being followed, including the commencement of an arbitral proceeding.

(g)    Nothing in this clause 23[.]3 will prejudice the right of a party to seek urgent injunctive or declaratory relief in respect of a dispute or any matter arising out of or in connection with [the JV Deed] or the Project Documents.” (Emphasis in original.)

24. Both parties agreed that this was intended to read “by”, although the original text of the clause reads “to”; cl 23.2 refers only to the Steering Committee referring a dispute “to” the Chief Executive Officers.

  1. By cl 26.2 the parties agree that the JV Deed is governed and to be construed in accordance with the laws of New South Wales, and the parties submit to the “non-exclusive jurisdiction” of the Supreme Court of New South Wales.

Subsequent events

  1. I turn to a more detailed consideration of the relevant events.

First Material Default

  1. The EPC Contract requires the joint venture, as “Contractor”, to obtain and maintain performance securities for the benefit of Transgrid. [25] Each of Elecnor and Clough procured the issue of bank guarantees and insurance bonds in favour of Transgrid.

    25. EPC Contract, cl 4.2.

  2. On 31 October 2022, Clough failed to meet an obligation to provide its share of an advance payment guarantee of some $17.3 million, being one of the forms of security required by Transgrid under the EPC Contract. [26]

    26. See EPC Contract, cl 4.2.3.

  3. Contending that failure to be a Material Default under the terms of the JV Deed (“the First Material Default”), Elecnor issued a notice of default on 2 November 2022 requiring Clough to remedy the default within 10 business days. In response Clough requested that Elecnor not exercise its rights under cll 14.3 and 21. On 28 November 2022, the parties agreed to modify the JV Deed to provide that Elecnor would not exercise its rights in relation to that default for an agreed period.

Second Material Default

  1. On 5 December 2022, Clough’s directors determined that it was insolvent, or likely to become so, and resolved to appoint voluntary administrators.

  2. On 12 December 2022, the parties entered a Joint Venture Continuation Deed, so that Clough could continue to operate and provide employees to the Project while under administration. This was to occur by way of regular payments from Elecnor to Clough, [27] and the transfer or provision by Clough to Elecnor of money and information related to the Project. [28]

    27. Joint Venture Continuation Deed, cl 4.

    28. Ibid, cl 6.

  3. On 14 December 2022, Elecnor notified Clough that the appointment of administrators was an Insolvency Event under the JV Deed and a Material Default (“the Second Material Default”). Elecnor elected to exercise rights under cll 21.3 and 22.2 of the JV Deed to “step in and to proceed to carry on the business of the Joint Venture with sole full and absolute operational and financial control” and “to step in to take control of and exercise Clough’s rights in respect of the Steering Committee”.

  4. On 3 February 2023, Clough entered into a contract with Holding Construction Australia Pty Ltd (“the Purchaser”) for the sale of Clough’s business.

  5. By the DOCA, entered into on 15 February 2023, the Purchaser, Clough, and its related entitles (“the Clough Entities”) agreed to transfer specified assets and monies, including the purchase price from the sale to the Purchaser, to a Creditors’ Trust, in exchange for which the shares in the Clough Entities were to be transferred to the Purchaser. Creditors’ claims were converted into claims against that trust. [29] All “Trust Assets” were to be paid into the Creditors’ Trust Account or otherwise transferred to the Trustees. [30] “Trust Assets” were defined to include all rights in respect of specified bonds, including those called on by Transgrid, and any claims which Clough may have against any person. [31]

    29. DOCA, cl 5.1, 5.3(a).

    30. Ibid, cl 10.1.

    31. Ibid, definition of “Trust Assets”, read with definition of “Bonds”.

  6. It appears that the EPC Contract did not form part of the Trust Assets transferred to the Trustees and was not part of Clough’s ongoing business. Aside from a passing reference in Elecnor’s written submissions, that matter did not assume significance in argument before me.

Call on security

  1. On 14 February 2023, Transgrid drew down on all the bank guarantees and insurance bonds that were issued at Clough’s request in the amount of some $110 million. Transgrid did not draw down on any of the bank guarantees or insurance bonds procured by Elecnor.

Offer to Purchase

  1. On 1 July 2024, Elecnor made the Offer to Purchase Clough’s interest in the joint venture for $1.00, on the basis that Clough had failed to remedy the First and Second Material Defaults. Elecnor also put in issue the efficacy of any purported transfer or assignment of Clough’s rights in respect of the JV Deed to the Trustees on the basis that neither Elecnor nor Transgrid had consented to the transfer; a requirement under the terms of the JV Deed and the EPC Contract. [32]

    32. JV Deed, cl 19(a); EPC Contract, cll 1.7.1(a), (d).

  2. The Trustees and Clough responded on 8 July 2024:

“[T]he DOCA which effected the transfer [of Clough’s rights in respect of the JV Deed to the Trustees] is binding on all creditors of Clough including [Elecnor] pursuant to the Corporations Act 2001 (Cth). Nevertheless, for the avoidance of doubt, we confirm that we write this letter on behalf of the Trustees and on behalf of Clough.

In writing this letter, we confirm that:

1    We have not, in our capacity as either administrators or as trustees of the Creditors’ Trust adopted the [JV] Deed to date;

2    In sending this letter, the Trustees do not adopt the Joint Venture Agreement; and

3    We reserve all of the Trustees’ and Clough’s rights including our rights under the DOCA and the Creditors’ Trust Deed, including in respect of the matters set out in your Letter.

The Trustees and Clough do not accept:

1    [Elecnor’s] entitlement to make the offer purportedly contained in the Letter; and

2    the validity of the purported offer for the purposes of clause 21.3 of the [JV] Deed.

…

In the alternative, should the purported offer be valid for any reason, we confirm, on behalf of the Trustees and Clough that:

1    the offer contained in the Letter is rejected in its entirety; and

2    in the alternative, the Offer Price is rejected for the purposes of clause 21.3(a)(iv)(B)(II) of the [JV] Deed”. (Emphasis added.)

The proceedings

  1. Elecnor commenced these proceedings against Clough and the Trustees on 16 December 2024, claiming:

  1. a declaration that the DOCA did not cause any of Clough’s interest in the joint venture, the JV Deed, or the EPC Contract, to be transferred to the Trustees;

  2. an order that that the obligations under cl 21.3 and Schedule 3 of the JV Deed be specifically performed by Clough;

  3. in the alternative to (1) and (2), an order that the obligations under cl 21.3 and Schedule 3 of the JV Deed be specifically performed by Trustees;

  4. further directions as to the implementation of the order for specific performance;

  5. costs.

  1. On 7 March 2025, the solicitors for Clough and the Trustees wrote to Elecnor’s solicitors providing notification of Transgrid’s call and demanding payment of half the amount paid to Transgrid:

“[W]e act for the Trustees of the Clough Creditors’ Trust … Our clients reiterate that in sending this letter they expressly do not adopt the JV Deed.

…

On 14 February 2023, Transgrid made calls upon the totality of the performance securities provided by Clough … under the EPC Contract in the amount of [some $110 million].

…

As far as our client is aware, Transgrid has not drawn upon any of the performance securities provided by Elecnor under the EPC Contract.

…

Pursuant to clause 13.2(a)(iv) of the JV Deed, our client hereby demands payment from Elecnor in the amount of [some $55 million] within 2 (two) Business Days of the date of this letter.” (Emphasis added.)

  1. On the same day, Clough and the Trustees filed a Commercial List Response.

  2. In the List Response, the Clough and the Trustees contended, first, that Elecnor did not have a right to purchase Clough’s interest in the JV Deed because:

  1. the effect of the DOCA and the transfer of Trust Assets was that Elecnor could not purchase Clough’s interest in the joint venture from Clough;

  2. any right to purchase Clough’s “Participating Interest” in the joint venture under the terms of the JV Deed was a “claim” within the meaning of s 444D(1) of the Corporations Act 2001 (Cth) and the DOCA, and had thereby been extinguished and released; and

  3. any right to purchase based on the First or Second Material Default was unenforceable by reason of s 451E(4) of the Corporations Act. [33]

    33. Commercial List Response at [C28(c)]-[C28(e)].

  1. Second, in relation to Elecnor’s Offer to Purchase, Clough and the Trustees alleged that:

“ … in purporting to specify an Offer Price of ‘$1.00 (one dollar)’ in the purported Offer to Purchase, Elecnor:

(i)    sought to make an undisclosed profit or to misuse its position to obtain a personal benefit or profit;

(ii)    failed to act in good faith; and

(iii)    failed to be fair, reasonable, honest and diligent”. [34]

34. Ibid, [C29(d)].

  1. This is the Bad Faith Breach Contention.

  2. On 14 March 2025, Clough and the Trustees filed the Cross-Claim against Elecnor seeking judgment for some $55 million, being half the amount paid to Transgrid.

  3. This is the Securities Recovery Claim.

  4. On 26 March 2025, Elecnor’s solicitors wrote to the solicitors for Clough and the Trustees asserting that the matters raised in the Cross-Claim fell within the Arbitration Clause and that Elecnor did not consent to the matters in the Cross-Claim being resolved other than through arbitration, and foreshadowing an application for a stay under s 7(2) of the Act.

The issues

  1. The motion and the cross-motion require consideration of:

  1. the proper construction of the Arbitration Clause, both in terms of its scope and effect;

  2. the application of s 7(2)(b) of the Act, and, in particular, whether the proceedings involve any “matter” that is “capable of settlement by arbitration” pursuant to the Arbitration Clause; and

  3. if the proceedings involve arbitrable matters, whether Elecnor has, by commencing proceedings, repudiated, waived or abandoned any entitlement it may have to arbitrate those matters, rendering the Arbitration Clause “null and void, inoperative or incapable of being performed” within the meaning of s 7(5) of the Act.

The proper construction of the arbitration agreement

Principles

  1. The principles for the construction of arbitration clauses are not in dispute.

  2. Like any other clause of a commercial contract, an arbitration clause must be construed by reference to the language used by the parties, the circumstances known to them and the commercial purpose or objects to be secured by the contract. [35]

    35. Lepcanfin Pty Ltd v Lepfin Pty Ltd (2020) 102 NSWLR 627 at 647; [2020] NSWCA 155 at [80] (Bell P, as the Chief Justice then was, Payne and McCallum JJA agreeing), citing Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35] (French CJ, Hayne, Crennan and Kiefel JJ) and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [47] (French CJ, Nettle and Gordon JJ).

  3. When construing an arbitration clause in a commercial agreement, the particular clause or sub-clause must not be construed in isolation but as part of the contract as a whole. [36] Context and purpose thus play an important role in ascertaining the intended reach of an arbitral clause. [37]

    36. Inghams Enterprises Pty Limited v Hannigan [2020] NSWCA 82 at [57] (Bell P), citing Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; [1973] HCA 36 (Gibbs J) and Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 at 529; [2005] HCA 17 at [16] (Gleeson CJ, McHugh, Gummow and Kirby JJ, Callinan J agreeing).

    37. Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514 at 529; [2019] HCA 13 at [26] (Kiefel CJ, Gageler, Nettle and Gordon JJ); P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Thomson Reuters) at [29.460].

  4. Arbitration agreements are generally construed widely. [38]

    38. For example, Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45 at 87-8; [2006] FCAFC 192 at [164]-[167] (Allsop J, as his Honour then was, Finn and Finkelstein JJ agreeing).

The competing constructions

  1. The parties raise a number of alternative constructions concerning the scope and effect of the Arbitration Clause and its associated executive negotiation clause.

The scope of the Arbitration Clause

  1. Clough and the Trustees contend that the scope of the Arbitration Clause is limited to business, management and operational matters, or matters referred to but not resolved by the Steering Committee; and does not extend to claims by one party to the JV Deed against another such as the claims raised in these proceedings.

  2. This is said to arise from:

  1. the fact that one of the functions of the Steering Committee is to establish “business and general operational policies and procedures of the Joint Venture”; [39] and

  2. the provisions, to which I have referred, [40] concerning the initial involvement of the Project Director in the resolution of “disputes between the parties” and the referral of those disputes to the Steering Committee if unresolved. [41]

    39. JV Deed, cl 10.2(a).

    40. See [26]-[27] above.

    41. JV Deed, cl 11.2(e).

  1. For the reasons that follow, I do not accept this contention.

The effect of the Arbitration Clause

  1. Three competing constructions are advanced by the parties as to the effect of the Arbitration Clause.

  2. First, Clough and the Trustees contend that, if the Arbitration Clause is engaged, it is non-mandatory. That is, it permits arbitration but does not stipulate arbitration as the only form of dispute resolution and gives a party the choice to arbitrate or litigate (“the Permissive Construction”). That is said to arise from the use in the Arbitration Clause of the word “may” and the absence of any express term prohibiting the parties from litigating disputes, coupled with the governing law clause in cl 26.2.

  3. Second, Clough and the Trustees contend, alternatively, that the clause prescribes arbitration as the mandatory procedure for the resolution of disputes between the parties (“the Mandatory Construction”). It is in this context that Clough and the Trustees assert that Elecnor has repudiated, waived or abandoned the arbitration agreement. I return to this below. [42]

    42. At [127] below.

  4. There is an obvious tension between these two posited contentions.

  5. Third, Elecnor contends that the clause gives either party the choice to litigate or require submission to arbitration (“the Elective Construction”). That is, while cl 23.3 does not prevent both parties from agreeing to litigate, if one party insists on its right to arbitration, then cl 23.3 mandatorily applies.

  6. For the reasons that follow, I favour the Mandatory Construction, subject to the dispute in question being arbitrable, but do not accept that Elecnor has repudiated, waived, or abandoned the arbitration agreement.

The scope of the arbitration agreement

  1. I do not accept Clough and the Trustees’ submission that cll 23.2 and 23.3 are limited to “business and general operational” matters.

  2. That construction does not follow from either the provisions dealing with the functions of the Steering Committee or those dealing with the Project Director’s limited ability to resolve disputes or refer them to the Steering Committee.

  3. As to the first, the functions of the Steering Committee are expressed broadly: it has “overall control” of the Joint Venture [43] and is to “carry out such other functions expressly required under [the JV Deed] or as necessary to ensure the proper management of the Joint Venture”. [44] Although one of its specified functions is to “establish the business and general operational policies and procedures of the Joint Venture”, [45] that does not imply a limitation to deal only with such matters, however they may be defined.

    43. JV Deed, cl 10.1(b).

    44. Ibid, cl 10.2(j).

    45. Ibid, cl 10.2(a).

  4. As to the second, there is nothing in the text of cl 23.2 which suggests that it is limited to disputes which are first referred to the Project Director and then referred by the Project Director to the Steering Committee failing resolution. [46] As any decision by the Project Director is subject to the approval of the Steering Committee in any event, it appears likely that more substantial or contested disputes would be referred immediately to the Steering Committee.

    46. Ibid, cl 11.2(e).

  5. That construction is also contradicted by the wide ambit of the definition of “dispute” in cl 23.2, which also applies in cl 23.3. Clause 23.2(a) refers to “a” dispute or difference arising between the parties “in connection with [the JV Deed]”. That definition is broad enough to encompass substantial claims between the parties, such as those in these proceedings. To import from earlier clauses, such as cl 10.2(a), a limitation on cll 23.2 and 23.3 to apply only to “business and general operational” disputes, and not substantive disputes, would be to give the Arbitration Clause a restricted, rather than liberal, construction. It would also permit the resolution of different disputes in different fora, with the identity of the appropriate tribunal being determined by fine shades of difference as to whether or not a particular dispute concerned business, management, or operational matters . [47]

    47. See Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 at 165 (Gleeson CJ, Meagher and Sheller JJA agreeing).

The effect of the Arbitration Clause

  1. I do not accept the Permissive Construction of the Arbitration Clause. Acceptance of that construction would mean that one party could choose to litigate any dispute under the JV Deed, with the other being unable to require that dispute to be submitted to arbitration. On that construction, the Arbitration Clause would “serve virtually no meaningful purpose” and would “give rise to procedural uncertainties and confusion”. [48] Arguably there would be no agreement to arbitrate at all. [49]

    48. G B Born, International Commercial Arbitration (3rd ed, 2021, Wolters Kluwer) at §5.04[D][5].

    49. The Act, s 3(1), definition of “arbitration agreement”, read with Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 330 UNTS 3, art II(1).

  2. As for the Elective Construction, it is true that parties can agree to have their dispute arbitrated if an election is made, or some event occurs, or if some condition is satisfied. [50] But I do not read cl 23.3 as conferring on the parties a choice to litigate with a requirement to submit to arbitration only if the other party later elects to arbitrate. That was the construction preferred by the Privy Council in Anzen Ltd v Hermes One Ltd [51] of a similar arbitration clause, on which Elecnor placed significant emphasis; but not one with which I agree. [52]

    50. See, for example, PMT Partners Pty Ltd (In Liq) v Australian National Parks & Wildlife Service (1995) 184 CLR 301 at 310; [1995] HCA 36 (Brennan CJ, Gaudron and McHugh JJ).

    51. [2016] UKPC 1.

    52. I must give respectful attention to a decision of the Privy Council but am not bound to follow it: see, for example, Cook v Cook (1986) 162 CLR 376 at 390; [1986] HCA 73 (Mason, Wilson, Deane and Dawson JJ); P Herzfeld and T Prince, Interpretation (supra) at [33.470].

  1. Here, as I have set out above, the JV Deed establishes a compulsory multi-tiered framework for the non-binding resolution of disputes “in connection with” the JV Deed or the Project; having at its apex arbitration in Singapore on specified terms.

  2. That framework involves, first, the disputes must be referred to the Project Director; second, disputes that the Project Director is unable to resolve must be referred to the Steering Committee; third, disputes that the Steering Committee cannot resolve must be referred to the parties’ Chief Executive Officers. None of the Project Director, the Steering Committee, nor the Chief Executive Officers has the power under the JV Deed to impose on either party a particular result; that is, none can determine the dispute. The Project Director has power to “decide” disputes “in a reasonable and unbiased manner”. But that is subject to approval by the Steering Committee, which does not itself have power to determine a contested dispute.

  3. If either party wishes to obtain a determination that will be binding on them, the JV Deed gives them only one choice. Under the Arbitration Clause, that party “may … submit the dispute to arbitration”. Care has been taken, in subcll (b)-(f), to prescribe the manner in which that arbitration should be conducted. Seen in that context, my conclusion is that the Arbitration Clause should be construed such that the use by the parties of the word “may” invokes a choice between arbitrating the dispute in Singapore or taking it no further.

  4. That is the conclusion reached by the Court of Appeal in relation to a similar arbitration clause in ABB Power Plants Ltd v Electricity Commission of New South Wales t/as Pacific Power. [53] The Court upheld Giles J’s conclusion that:

“I do not think that [the arbitration clause] so far as it says the dispute ‘may be referred to arbitration’ is intended to give a choice between curial litigation to resolve the dispute, on the one hand, or referring the dispute to arbitration, on the other hand. That, it seems to me would not be consistent with the scheme of [the clause], with the care with which the conduct of an arbitration has been spelt out, or with the agreement confining interest to be awarded by an arbitrator, all of which seemed to me to point to arbitration as the next step, if invoked, being the sole next step.” [54]

53. (1995) 35 NSWLR 596 at 599 (Handley JA) and 611 (Sheller JA).

54. ABB Power Plants Ltd v Electricity Commission of New South Wales t/as Pacific Power (Supreme Court (NSW), Giles J, 5 August 1994, unreported) BC9402904 at 9.

  1. I think that is the better way of construing the Arbitration Clause.

  2. The majority of the High Court took a similar approach in PMT Partners Pty Ltd (In Liq) v Australian National Parks & Wildlife Service,[55] when also dealing with a multi-tiered dispute resolution clause containing an arbitration agreement.

    55. (supra) at 311 (Brennan CJ, Gaudron and McHugh JJ).

  3. A court will normally require clear words in a contract before concluding that the parties did not intend to have all their disputes resolved by one tribunal. [56] Whether that is so because of the application of a presumption, or simply as the result of the normal constructional process, has been the cause of some debate. [57] The prevailing view, with which I agree, is that it would follow as a result of the orthodox process of construction of commercial agreements, particularly because those agreements should be construed so as to avoid a commercially inconvenient result. [58]

    56. See Construcciones y Auxiliar de Ferrocarriles S.A. v CPB Contractors Pty Limited [2022] NSWSC 1264 at [46] (Ball J, as his Honour then was) and the authorities cited therein.

    57. Ibid; see also Inghams Enterprises Pty Limited v Hannigan (supra) at [56]ff (Bell P); Lepcanfin Pty Ltd v Lepfin Pty Ltd (supra) at 649-51; [91]-[95] (Bell P, Payne and McCallum JJA agreeing).

    58. Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at 618; [2009] NSWCA 407 at [19] (Allsop P).

  4. On Elecnor’s construction, the Elective Construction, each party has agreed that, if it goes to the expense of commencing proceedings in court, but the other party makes a subsequent election to arbitrate that claim, it must abandon the litigation in favour of arbitration. That is not a commercially convenient result and not one which reasonable persons in the position of the parties could have intended. The construction I favour has the result that the parties have agreed a process for resolving disputes between them which arrives at a singular, predictable point: arbitration. That is likely to be what reasonable persons in the position of these parties would have intended in the context of an agreement relating to a significant infrastructure project, during the course of which the potential for regular disputation would have been obvious to each.

  5. There is no textual or contextual suggestion in the JV Deed that the parties intended a choice to litigate disputes falling within the scope of the Arbitration Clause. Clause 23.3(f) expressly refers to the “commencement of an arbitral proceeding” as being part of the cl 23.3 process. While cl 23.3(a) allows the parties to agree an “alternative dispute resolution process”, that does not bespeak litigation.    Although it would be open for the parties to agree to litigate a particular dispute, that would more properly constitute a waiver or variation of the Arbitration Clause.

  6. What I have said assumes, of course, that the dispute in question is arbitrable. I return to this below. [59]

    59. From [109].

  7. During argument, much was sought to be made of the exception for urgent injunctive or declaratory relief in cl 23.3(g) and the parties’ submission to the non-exclusive jurisdiction of this Court in cl 26.2. In my opinion, all that can be drawn from those provisions is that the parties have recognised that there may be disputes which are not arbitrable and thus do not fall within the terms of the Arbitration Clause. [60] Submission to the non-exclusive jurisdiction of this Court serves to remove uncertainty as to where, and under what law, such proceedings, or other litigation following arbitration, may be brought. [61]

    60. See Fitzpatrick v Emerald Grain Pty Ltd [2017] WASC 206 at [76]-[80] (Martin CJ).

    61. See G B Born, International Commercial Arbitration (supra) at §5.04[D][4][c].

  8. For those reasons, my conclusion is that, on the proper construction of the Arbitration Clause, it provides for arbitration as the mandatory procedure for resolving arbitrable disputes between the parties of the kind referred to in cll 23.2 and 23.3.

Application of the Act

  1. That brings me to the question of whether s 7 of the Act requires that any part of these proceedings be stayed.

  2. The Act gives effect to Australia’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 330 UNTS 3 (“the Convention”), adopted in 1958 by the United Nations Conference on International Commercial Arbitration.

  3. Section 7 of the Act provides, relevantly:

“7 Enforcement of foreign arbitration agreements

(1)    Where:

(a)    the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a Convention country;

…

this section applies to the agreement.

(2)    Subject to this Part, where:

(a)    proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement are pending in a court; and

(b)    the proceedings involve the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration;

on the application of a party to the agreement, the court shall, by order, upon such conditions (if any) as it thinks fit, stay the proceedings or so much of the proceedings as involves the determination of that matter, as the case may be, and refer the parties to arbitration in respect of that matter.

(3)    Where a court makes an order under subsection (2), it may, for the purpose of preserving the rights of the parties, make such interim or supplementary orders as it thinks fit in relation to any property that is the subject of the matter to which the first‑mentioned order relates.

(4)    For the purposes of subsections (2) and (3), a reference to a party includes a reference to a person claiming through or under a party.

(5)    A court shall not make an order under subsection (2) if the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed.” (Emphasis in original.)

  1. It is common ground that the Arbitration Clause is an “arbitration agreement” to which s 7 applies. The Arbitration Clause is also an “arbitration agreement” for the purposes of s 3(1) of the Act. [62] The procedure in relation to an arbitration under the Arbitration Clause is governed by the law of Singapore. Singapore is a party to the Convention and so a “Convention country” for the purposes of the Act. [63]

    62. The Act, s 3(1), definition of “arbitration agreement”, and Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 330 UNTS 3, art II.

    63. Ibid, s 7(1); see s 3(1), definition of “Convention country”.

  2. Although Elecnor alternatively relied on art 8 of the Model Law, [64] argument before me focused on s 7(2) of the Act. The parties proceeded on the basis that there is no material difference between the two.

    64. Which has the force of law in Australia by reason of s 16 of the Act.

  3. While the Trustees are not signatories to the JV Deed, under s 7(4) of the Act a person is deemed to be a party to an arbitration agreement, even if they are not a signatory to it, where that person claims “through or under” a party to the arbitration agreement. I return below to the question of whether the Trustees claim “through or under” a party to the Arbitration Clause. [65]

    65. See [121] below.

  4. Once s 7(2) is engaged, unless the Court finds that the arbitration agreement is “null and void, inoperative or incapable of being performed” under s 7(5), a stay is mandatory: there is no discretion involved. [66]

    66. Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 at [43] (Martin CJ, McLure P and Buss JA agreeing); Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (supra) at 58, [35] (Allsop J, Finn and Finkelstein JJ agreeing).

  5. The question of whether s 7(2) is engaged requires identification of a “matter” and consideration of whether:

  1. the proceedings involve the determination of that “matter”;

  2. that “matter” falls within the scope of the arbitration agreement;

  3. the “matter” is arbitrable, in that it:

  1. is “capable of settlement by arbitration”; and

  2. arises in proceedings between “parties” to the arbitration agreement.

Identification of the “matter”

  1. Section 7(2) operates to require a stay in relation to a “matter” that is capable of settlement by arbitration in pursuance of the arbitration agreement.

  2. A “matter” in the context of s 7(2)(b) is a right or liability in dispute which is susceptible of settlement as a discrete controversy. It is not necessary that the dispute be co-extensive with the total controversy between the parties in a proceeding or the claims raised by those parties. [67]

    67. Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332 at 351; [1990] HCA 8 (Deane and Gaudron JJ).

  3. Identification of the s 7(2) “matter” directs attention to the substance of the dispute; not to matters of form. It is necessary to consider not only the questions for determination in the proceeding and the manner in which the claim is pleaded, but also the “underlying subject matter upon which the pleadings, including the defence, are based”. [68] The meaning of a “matter” is also influenced by the construction of the arbitration agreement itself, and the question of whether the dispute is one that falls within the scope of that agreement. [69]

    68. Recyclers of Australia Pty Ltd v Hettinga Equipment Inc (2000) 100 FCR 420 at 426; [2000] FCA 547 at [18] (Merkel J); see also WDR Delaware Corporation v Hydrox Holdings Pty Ltd (2016) 245 FCR 452 at 470; [2016] FCA 1164 at [106] (Foster J).

    69. Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (supra) at 105, [235] (Allsop J, Finn and Finkelstein JJ agreeing).

  4. Mr Hutton SC, who appeared with Mr Kennedy for Elecnor, [70] submitted that the Securities Recovery Claim and Bad Faith Breach Contention are separate “matters” each capable of settlement by arbitration.

    70. For convenience, and without intending any disrespect to Mr Kennedy, I will henceforth refer only to Mr Hutton.

  5. Mr Hutton identified three controversies said to arise on Elecnor’s Commercial List Statement and Clough and the Trustees’ List Response, which he contended were not arbitrable. They are whether:

  1. the rights of Elecnor under cl 21.3 of the JV Deed are incapable of being enforced by reason of the DOCA;

  2. s 451E of the Corporations Act precludes Elecnor from exercising any rights against Clough under cl 21.3 of the JV Deed; and

  3. Elecnor has engaged cl 21.3 of the JV Deed.

  1. Ms Taylor SC, who appeared with Mr Farinha for Clough and the Trustees, [71] submitted that the proceedings, including the matters in Clough and the Trustees’ List Response and the Cross-Claim, involve only one matter: a “single interlocking controversy as to outstanding rights and obligations under the JV Deed”.

    71. Again, for convenience, and without intending any disrespect to Mr Farinha, I will henceforth refer only to Ms Taylor.

  2. Ms Taylor accepted that the “controversy between the parties arose out of Elecnor’s offer to buy out Clough’s interest in the Joint Venture”, whereas the relief sought by Elecnor was directed to performance of the obligation of either Clough or the Trustees under cl 21.3 in relation to the compulsory acquisition of Clough’s interest in the joint venture.

  3. However, Ms Taylor submitted that Clough and the Trustees’ Cross-Claim forms part of the “matter” in the proceedings. Ms Taylor submitted that this was so because, in support of its claim for specific performance, Elecnor has alleged that it is ready and willing to “perform the terms of the JV Deed insofar as they remain to be performed” and “to do all matters and things on its part to be done”; and that this allegation puts in issue Elecnor’s compliance with its obligation to contribute to calls on security in cl 13.2. Ms Taylor submitted that, in that sense, the Cross-Claim is responsive to Elecnor’s case that it is ready, willing and able to perform.

  4. I think that puts the matter too broadly.

  5. In my opinion, looking at the substance of the disputes between the parties, there are two s 7(2) “matters”. The first is a dispute or controversy about the engagement and enforcement of the compulsory acquisition process set out in cl 21.3 of the JV Deed, of which the Bad Faith Breach Contention forms part (“the Clause 21.3 Matter”). The second is a dispute or controversy in relation to Clough’s entitlement to contribution for the call on its security by Transgrid that forms the basis of the Cross-Claim (“the Call Contribution Matter”).

  6. This is for four reasons.

  7. First, it is clear that the substantive controversy between the parties, at least until the Cross-Claim was filed, related to Elecnor’s entitlement compulsorily to acquire Clough’s interest in the joint venture under cl 21.3. Rather than being separate “matters”, the additional “controversies” identified by Elecnor [72] should be seen as part of that substantive matter; issues going to the arbitrability of that matter.

    72. See [97] above.

  8. Second, I do not see the Bad Faith Breach Contention as being a discrete controversy separate from that substantive controversy. An allegation raised in defence can be, or form part of, a “matter”. [73] Although the Bad Faith Breach Contention is, in effect, an allegation of breach of the JV Deed by Elecnor, it is responsive to and intrinsically connected with Elecnor’s Offer to Purchase. It is thus part of the substantive controversy relating to cl 21.3, such that it would not be susceptible to settlement as a discrete controversy. Indeed, the allegation appears to go to the heart of the question of whether Elecnor’s Offer to Purchase was valid and effective to set in train the compulsory acquisition process in cl 21.3. The Bad Faith Breach Contention is thus part of the substantive controversy in Elecnor’s claim and part of the same “matter”.

    73. Flint Ink NZ Ltd v Huhtamaki Australia Pty Ltd (2014) 289 FLR 30 52-3; (2014) 44 VR 64 at 85-6; [2014] VSCA 166 at [87]-[89] (Nettle JA, as his Honour then was).

  9. Third, the position is different with respect to Clough and the Trustees’ claim for contribution in the Cross-Claim. That is a dispute which, as Ms Taylor accepted, is separate from the Bad Faith Breach Contention in the sense that it is not a response to Elecnor’s Offer to Purchase and involves the exercise of different rights, both contractual and equitable. And, as submitted by Mr Hutton, it may involve different factual and legal issues, such as set-off claims and factual matters to do with the performance of both parties in carrying out the Project up to the call being made on the performance security, particularly in view of cl 13.2(b) of the JV Deed. Seen in that way, it is a “right or liability in controversy” that is “susceptible of settlement as a discrete controversy”; [74] and thus, its own s 7(2) “matter”.

    74. Tanning Research Laboratories Inc v O’Brien (supra) at 351 (Deane and Gaudron JJ).

  10. Fourth, and finally, it does not follow from Elecnor’s allegation that it is ready and willing to perform the terms of the JV Deed that any unperformed or ongoing obligations under the JV Deed are called into issue and thus form part of one “interlocking controversy”. The existence of unperformed or ongoing contractual obligations may be relevant to the nature and availability of the relief sought by Elecnor; [75] but do not dictate how to identify the “matter” for the purposes s 7(2) of the Act. Performing that task in the manner I described compels the conclusion that the parties’ dispute about payment in respect of calls on security under cl 13.2 is a “matter” of its own.

    75. See Bridge Wholesale Acceptance Corporation (Aust) Ltd v Burnard (1992) 27 NSWLR 415 at 423 (Clarke JA, Mahoney and Meagher JJA agreeing); cf Siracusa v Siracusa [2022] ACTSC 94 at [30]-[31] (Kennett J).

Are the matters within the scope of the arbitration agreement?

  1. It follows that the Clause 21.3 Matter and the Call Contribution Matter, insofar as they involve disputes about the compulsory acquisition process and the provisions for contribution to calls on security, fall within the scope of the Arbitration Clause. There is a question about whether the defences raised by Clough and the Trustees under the DOCA and Corporations Act are “in connection with [the JV Deed] or the Project”, [76] so as to fall within the scope of cl 23.3, but, having regard to my conclusion below as to the non-arbitrability of the Clause 21.3 Matter, [77] it is unnecessary to resolve that question.

    76. See, for example, Mansfield (Liquidator) v Fortrust International Pty Ltd, in the matter of Palladium Investments International Pty Ltd (in liq) [2023] FCA 350 at [21] (Mansfield J), in relation to statutory claims exercisable by a trustee in bankruptcy; New Cap Reinsurance Corporation Ltd v A E Grant [2009] NSWSC 662 at [87] (Barrett J), in relation to statutory claims exercisable by a liquidator.

    77. See [110] below.

Are the matters capable of settlement by arbitration?

  1. Generally, any dispute or claim which can be the subject of an enforceable award is capable of being settled by arbitration. [78]

    78. Larkden Pty Ltd v Lloyd Energy Systems Pty Limited [2011] NSWSC 268 at [62] (Hammerschlag J, as the Chief Judge in Equity then was).

  1. However, the Clause 21.3 Matter is not capable of settlement by arbitration. It does not merely involve the resolution of a private dispute between Elecnor and Clough or the Trustees. It invokes and involves questions as to the efficacy of the DOCA and the provisions of Pt 5.3A of the Corporations Act. It raises questions about the efficacy of the transfer by the DOCA of Clough’s interest in the JV Deed to the Trustees and the extent of the interest so transferred. Those questions may affect the rights of creditors. There may be a “legitimate public interest” in seeing a dispute of that type “resolved by public institutions or in accordance with structures that are established by parliament rather than institutions and structures established by the parties”. [79]

    79. Siemens Limited v Origin Energy Uranquinty Power Pty Ltd (2011) 80 NSWLR 398 at 407; [2011] NSWSC 195 at [38] (Ball J, as his Honour then was); see also Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (supra) at 97-8, [200] (Allsop J, Finn and Finkelstein JJ agreeing); ACD Tridon v Tridon Australia [2002] NSWSC 896 at [189]-[194] (Austin J).

  2. The Call Contribution Matter, on the other hand, is capable of settlement of arbitration. It is a private dispute that does not involve questions as to the operation of provisions of the Corporations Act. Although creditors may be interested in the outcome of that claim, as it may increase the Trust Assets, it would not have the potential to affect the substantive rights of creditors to the same extent as the Clause 21.3 Matter.

The process point

  1. The parties have not followed the tiered dispute resolution process that I have described.

  2. In oral submissions, Ms Taylor submitted, for the first time, that because that process had not been followed, the ability of either party to submit a dispute to arbitration has not arisen and none of the “matters” in the proceeding are “capable of settlement of arbitration”.

  3. I do not accept that submission.

  4. Non-compliance with a preliminary procedure in a tiered dispute resolution clause is not a reason to refuse a stay under s 7(2) of the Act unless the non-compliance impacts the operability of the arbitration agreement.

  5. If a merely procedural non-compliance had the effect contended for by Ms Taylor, a party could bypass its contractual bargain to submit a dispute to arbitration simply by commencing proceedings before all preliminary steps have been completed. [80]

    80. See WCX M4-M5 Link AT Pty Ltd v Acciona Infrastructure Projects Australia Pty Ltd (No 2) [2022] NSWSC 505 at [119] (Rees J); Siam Steel International Plc v Compass (Australia) Pty Ltd [2014] WASC 415 at [45] (Le Miere J); Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1992] QB 656 at 669 (Staughton LJ, Woolf and Neill LJJ agreeing).

  6. Ms Taylor did not suggest that the non-compliance rendered the agreement “inoperative”. Nor did Ms Taylor submit that the agreement has been frustrated by any inability on Clough’s part to perform or participate in the cl 23.2 process. The submission was that the effect of the non-compliance was that, in the events that have happened, none of the parties has the right to arbitrate until the cl 23.2 process is followed.

  7. But the fact that the cl 23.2 process has not been followed to date does not mean that it is now incapable of occurring. If Ms Taylor’s submission were acceded to, its only consequence would be a limited stay of the proceedings to enable the process to be followed. [81] That is not a course for which I understood either party to be contending. As Mr Hutton submitted, such a stay would be “pointless”.

    81. See, for example, the comments of Rees J in WCX M4-M5 Link AT Pty Ltd v Acciona Infrastructure Projects Australia Pty Ltd (No 2) (supra) at [112]-[113], [119]-[120], referring to John Holland Pty Limited v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 (Hammerschlag J, as the CJ in Eq then was) and Broken Hill City Council v Unique Urban Built Pty Ltd [2018] NSWSC 825 at [31] (Hammerschlag J).

  8. The parties did not fully canvass before me whether, in the events that have happened, including Elecnor having exercised step in rights and Clough’s rights being transferred under the DOCA, compliance with the cl 23.2 process would be of any practical utility in achieving a consensual resolution. However, it does not appear likely to be a useful exercise.

  9. In the circumstances, I do not accept that non-compliance with the cl 23.2 process has the effect that the matters in this proceeding are not capable of settlement by arbitration.

Do the matters arise in proceedings between parties to the arbitration agreement?

  1. There is a question ­as to whether the Trustees are claiming “through or under” Clough in relation to the Clause 21.3 Matter, within the meaning of s 7(4) of the Act, such that it arises in proceedings between “parties” to the arbitration agreement. [82]

    82. The Act, s 7(2)(a).

  2. A person claims “through or under” a party to an arbitration agreement when an “essential element” of that person’s claim or defence is a right or interest vested in or exercisable by a party to the arbitration agreement. [83] That may occur when the person “takes its stand upon a ground which is available to” the party to the arbitration agreement, and “stands in the same position vis-à-vis” that party. [84] The position is different where the person’s claim or defence is a cause of action available to him or her alone.

    83. Tanning Research Laboratories Inc v O’Brien (supra) at 342 (Brennan and Dawson JJ); Rinehart v Hancock Prospecting Pty Ltd (supra) at 539-40, [66] (Kiefel CJ, Gageler, Nettle and Gordon JJ).

    84. Rinehart v Hancock Prospecting Pty Ltd (supra) at 543-4, [73] (Kiefel CJ, Gageler, Nettle and Gordon JJ).

  3. Here, the Trustees deny that they have adopted the JV Deed. Their List Response puts in issue matters arguably going beyond those which are available to Clough, such as defences in relation to the effect of the DOCA on the transfer of Clough’s rights and interests and the operation of provisions of the Corporations Act. These matters suggest that the Trustees are not claiming “through or under” Clough in relation to the Clause 21.3 Matter. As I have concluded that the Clause 21.3 Matter is not capable of settlement by arbitration, it is not necessary for me to resolve this.

  4. However, the Call Contribution Matter arises in proceedings between “parties” to the arbitration agreement. Clough is a signatory to the arbitration agreement. To the extent the Trustees bring the Cross-Claim, they do so “through or under” Clough as an “essential element” of that claim “was or is vested in or exercisable by” Clough under the terms of the JV Deed. [85]

Is the arbitration agreement “inoperative”?

85. Ibid at 539-40, [66] (Kiefel CJ, Gageler, Nettle and Gordon JJ); Tanning Research Laboratories Inc v O’Brien (supra) at 342 (Brennan and Dawson JJ).

  1. As I favour the Mandatory Construction of the Arbitration Clause, it is necessary to consider Clough and the Trustees’ contention that no stay should be ordered because the arbitration agreement is “inoperative”. [86]

    86. The Act, s 7(4).

  2. An arbitration agreement will be “inoperative” when it ceases to have contractual effect under the general law of contract. [87] This can occur by way of, for example, repudiation, waiver, and abandonment. [88] Because of the doctrine of separability, under which an arbitration clause is considered to be a contract independent of the underlying contract in which it is contained, the repudiation, waiver, or abandonment can have specific operation in relation to the arbitration clause in question. [89]

    87. Dyna-Jet Pte Ltd v Wilson Taylor Asia Pacific Pte Ltd [2016] SGHC 238 at [162]-[166] (Vinodh Coomaraswamy J); CPB Contractors Pty Ltd v Celsus Pty Ltd [2017] FCA 1620 at [62]-[68] (Lee J).

    88. Ibid.

    89. See, for example, Ferris v Plaister; Stap v Grey (1994) 34 NSWLR 474; Model Law, art 16(1).

  3. Clough and the Trustees contend that the commencement of these proceedings constitutes a repudiation, waiver, or abandonment by Elecnor of the arbitration agreement, rendering it “inoperative” such that no stay of the Cross-Claim should be ordered.

  4. I do not accept that the commencement of these proceedings by Elecnor was repudiatory in nature. The test is “whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it”. [90] Elecnor’s proceedings concern a non-arbitrable matter and were commenced in circumstances where the status of the Trustees as “through or under” parties was in issue. Seen in that light, the commencement of the proceedings did not objectively evince a repudiatory intent.

    90. Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at 135; [2007] HCA 61 at [44] (Gleeson CJ, Gummow, Heydon and Crennan JJ).

  5. Nor do I consider there to have been any waiver of the arbitration agreement. This is not a case where a party has waived its right to arbitrate an arbitrable dispute in the sense of having intentionally and unequivocally abandoned it. [91] As Mr Hutton submitted, waiver does not operate as a blunt instrument. I do not accept that by commencing proceedings of this kind, and of this content, Elecnor waived its right to arbitrate what is in substance a different matter raised in the Cross-Claim. That is particularly so when a demand for contribution under cl 13.2 of the JV Deed, which is an essential requirement for the crystallisation of any obligation on the part of Elecnor to contribute, had not yet been made by Clough when the proceedings were commenced.

    91. Zhang v Shanghai Wool and Jute Textile Co Ltd (2006) 201 FLR 178 at 185, 187; [2006] VSCA 133 at [14], [16] (Chernov JA, Ashley JA and Bongiorno AJA agreeing).

  6. For the same reasons, I do not accept that Elecnor has abandoned the arbitration agreement.

  7. The Arbitration Clause is not “inoperative” by reason of any repudiation, waiver, or abandonment by Elecnor.

The cross-motion

  1. The effect of my reasons is that, by reason of s 7(2) of the Act, I must stay the Cross-Claim but not any aspect of the main proceedings.

  2. That leaves for consideration Clough and the Trustees’ cross-motion, and whether Elecnor’s claim should be stayed pending the determination of any arbitration.

  3. Having concluded the main proceedings do not raise an arbitrable matter to which s 7(2) applies, the only basis on which now to stay the proceedings would be for case management under s 67 of the Civil Procedure Act 2005 (NSW).

  4. I see no reason why such a stay should be granted. Resolution of the controversy between the parties as to the acquisition of Clough’s interest will not depend on the outcome of the arbitration of the Trustees’ claim for contribution for the call on Clough’s security. If anything, the latter would depend on the former, where any declarations made by the Court would resolve the question of the effect of the DOCA on the transfer of Clough’s rights under the JV Deed.

Conclusion

  1. I propose to order that the Cross-Claim be stayed.

  2. The parties should confer and agree on the orders necessary to give effect to this judgment.

  3. If there is a dispute as to the form of those orders, including as to costs, the parties should confer on a timetable for brief written submissions. I will deal with the matter on the papers.

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Endnotes

Decision last updated: 12 June 2025

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