Vestas - Australian Wind Technology Pty Ltd v Lal Lal Wind Farm Nom Co Pty Ltd
[2020] VSC 554
•1 September 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TECHNOLOGY ENGINEERING AND CONSTRUCTION LIST
S ECI 2020 03161
| VESTAS - AUSTRALIAN WIND TECHNOLOGY PTY LTD (ACN 089 653 878) | First Plaintiff |
| ZENVIRON PTY LTD (ACN 612 344 313) | Second Plaintiff |
| v | |
| LAL LAL WIND FARM NOM CO PTY LTD (ACN 625 768 774) as agent for the LAL LAL WIND FARMS PARTNERSHIP | Defendant |
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JUDGE: | DELANY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 August 2020 |
DATE OF JUDGMENT: | 1 September 2020 |
CASE MAY BE CITED AS: | Vestas – Australian Wind Technology Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2020] VSC 554 |
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PRACTICE AND PROCEDURE – Discovery from prospective defendant – Alleged breach of building contract by private communications between Principal and Principal’s Representative – Summons for injunction and discovery from prospective defendant in respect of same substantive cause of action – Injunction application resolved by undertakings – Whether sufficient information to commence proceeding – Necessary inference from injunction application – Applicant’s prior statements disclose sufficient information – Application dismissed – Australian Broadcasting Commission v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199, Owners of cargo lately laden on board the vessel Siskina v Distos Compania Naviera SA (1977) 3 All ER 803 applied – Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd [2003] FCA 174, Pandolfo v Finadri [2018] VSC 211 considered – Alex Fraser Pty Ltd v Minister for Planning [2018] VSC 391 applied – Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 32.05.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr N Pane QC with Ms F Cameron | Pinsent Masons |
| For the Defendant | Mr D Batt QC with Mr B Mason | Herbert Smith Freehills |
HIS HONOUR:
The application
By originating motion dated 4 August 2020, the plaintiffs, who are the contractor (‘Contractor’) named in agreements with the defendant as principal (‘Principal’) seek orders as follows:
[1] In accordance with r 32.05 of the Supreme Court (General Civil Procedure) Rules 2015, the Defendant make discovery to the Plaintiffs of all documents passing between the Defendant as Principal (including any person acting on behalf of the Defendant and specifically including the solicitors for the Defendant) and the Principal’s Representative in connection with the exercise of the Principal’s Representative’s Certification Role under the EPC Contract dated 27 April 2018 between the parties (EPC Contract).
[2] The Defendant (including any person acting on behalf of the Defendant and specifically including the solicitors for the Defendant) be restrained from communicating privately with the Principal’s Representative in connection with the exercise of the Principal’s Representative’s Certification Role under the EPC Contract.
By summons dated 5 August 2020, the Contractor seeks the same relief against the Principal as in the originating motion, except that in the summons, the primary relief claimed is pre-action discovery pursuant to r 32.05 and the claim for injunctive relief is expressed to be made further or in the alternative. The Contractor has not instituted a substantive proceeding and there is no statement of claim and no generally endorsed writ in which a substantive claim for relief is articulated.
In support of the summons, the Contractor relies upon the affidavit of Matthew Croagh sworn 3 August 2020. In opposition to the application, the Principal relies upon the affidavit of Merryn Jill Quayle sworn 10 August 2020.
Prior to the hearing, both parties filed written submissions and bundles of authorities. Supplementary bundles of authorities were provided on behalf of both parties. The Principal provided an aide memoire in support of its oral submissions and the Contractor responded to that aide memoire.
The EPC Contract
The EPC Contract comprises:[1]
(a) an agreement dated 27 April 2018 between the Contractor and the Principal in its capacity as trustee for the Lal Lal Wind Farms Asset Trust entitled ‘Engineering, procurement, and construction contract for the Lal Lal Wind Farm’ (‘Agreement’); and
(b) an agreement dated 15 June 2018 between the Contractor, the Principal and others entitled ‘Novation and Amendment Deed – EPC Contract’.
[1]References to clauses of the EPC Contract are references to clauses of the Agreement unless otherwise specified. Where capitalised terms are used without definition in these Reasons those terms are used in the sense defined in the EPC Contract.
Clause 31 of the EPC Contract is concerned with the Principal’s Representative. By clause 31.1(a), the Principal may from time to time appoint an individual to exercise any functions of the Principal under the Agreement (‘Principal’s Representative’). By clause 31.1(c), the Principal’s Representative may act in its absolute discretion as the agent of the Principal. An act or omission of the Principal’s Representative is deemed to be an act or omission of the Principal except where the Principal’s Representative is performing a Certification Role (31.1(g)(i)).
Clause 31.2 concerns the Certification Role of the Principal’s Representative. It is central to the dispute between the parties. It provides that:
When performing a Certification Role, the Principal’s Representative must act honestly, reasonably and make fair determinations in accordance with the agreement.
The Certification Role is defined relevantly to include the following:
the responsibility of the Principal’s Representative to determine:
(1)…
(2)Contract Price reductions due to defective Materials and Equipment or Works under clause 10.8;
(3)the valuation of Variations under clause 12.4(b)(3);
(4)adjustment to the Contract Price under clause 12.5(b)(3);
(5)extensions of time under clause 13.3(f);
(6)the value of any Delay Costs under clause 13.10(a);
(7)the matters and amounts stated in any Payment Certificate under clause 19.3;
(8)whether Practical Completion – Elaine and Practical Completion – Yendon have been achieved in accordance with clause 21.2;
(9)whether Final Completion has been achieved in accordance with clause 21.3(c).
Mr Pane QC, who appeared with Ms Cameron on behalf of the Contractor submitted, and it may be accepted, that the defining common feature of each of these tasks is that they determine the respective rights, obligations and entitlements of the parties under the EPC Contract.
Clause 39 is titled ‘Notification of Claims’. Clause 39.1 provides, in substance, that the Contractor must give the Principal and the Principal’s Representative notice pursuant to clause 39.2 if it wishes to make a Claim in respect of any matter (including a breach of the Agreement by the Principal) under, arising out of, or in connection with the works or the Agreement. Clause 39.2 details what is required for any such notice, including that the notice provide particulars concerning the matter in respect of which the Claim is based, the legal basis for the Claim, whether based on a provision of the Agreement or otherwise, the facts relied upon in support of the Claim in sufficient detail to permit verification and details of the amount (if any) claimed and how calculated.
’Claim’ is relevantly defined in clause 1.1 of the EPC Contract to mean:
any claim, action, demand or proceedings by the Contractor, any Government Agency or any other third party against:
1.the Principal;
2.any of the Principal’s Related Bodies Corporate (including the employees, agents, consultants, officers and contractors of those Related Bodies Corporate); or
3.the Principal’s Personnel (including the employees, agents, consultants, directors, related bodies corporate, and contractors of the Principal’s Representative),
for any
4.Loss;
5.increase in the Contract Price or for payment of money (including damages); or
6.extension of time to the Date for Practical Completion – Elaine or the Date for Practical Completion – Yendon,
7.under, arising out of, or in connection with this Agreement or the Works, including any such claim….
Clause 39.4 provides:
If the Contractor fails to give a notice in accordance with clause 39.2, the Principal is not liable for, or in connection with, any Claim (and the Contractor is not entitled to make any Claim) arising out of, or in connection with, the relevant matter to which clause 39.1 applies.
The EPC Contract contains a dispute resolution process. Clause 31.5 provides that if the Contractor disagrees with any notice, decision, direction or determination of the Principal’s Representative, or any failure to decide, direct or determine as required by the Agreement, then the Contractor may refer that matter for dispute resolution under clause 40 of the EPC Contract. Clause 40 provides that if a Dispute arises, the parties must ensure that their Senior Representatives confer and, acting in good faith, seek to resolve the Dispute.
‘Dispute’ is defined to mean:
any dispute, difference or disagreement arising between the parties relating to the interpretation of this Agreement or any matter arising out of, or in connection with, this Agreement or the Works.
If a Dispute is not resolved, then depending upon its nature, it may be referred to expert determination (clause 40.3) or may be referred to meditation (clause 40.4). Where a dispute is referred to mediation, if the Dispute is not wholly resolved within 20 days or later date as agreed, either party may commence legal proceedings to resolve the Dispute (clause 40.5(a)).
Clause 40.5(c) provides:
Subject to clause 40.6, a party must not commence legal proceedings in relation to a Dispute unless the Dispute has been referred to the Senior Representatives under clause 40.2 and the party has complied with the procedure for resolving the Dispute under clauses 40.2, 40.3 in respect of a Technical Dispute or a Certification Dispute and, to the extent the parties agree to refer the Dispute to mediation under clause 40.4, clause 40.4.
Clause 40.6 provides:
Nothing in this clause 40 prejudices either party’s right to commence legal proceedings to seek urgent injunctive or urgent declaratory relief in respect of a Dispute.
Work under the EPC Contract
The work to be performed under the EPC Contract has two components, the Yendon works and the Elaine works. The Contractor was required to achieve Practical Completion of the of the Yendon works by 24 July 2019 and of the Elaine works by 19 September 2019 (Item 4 of Schedule 1).
The Contractor’s work remains incomplete. The Contractor has made at least 27 claims for extension of time to the dates for Practical Completion, none of which have been allowed by the Principal’s Representative. The Contractor has not given notification of a Claim under clause 39.1 in respect of any of the Principal Representative’s assessment of those extension of time claims.
On 2 September 2019, the Principal issued notice to the Contractor under clause 13.7(c) demanding payment of Delay Liquidated Damages – Yendon in the amount of $3,278,476.18. On 1 May 2020, the Principal issued the Contractor with a further notice pursuant to clause 13.7(c) demanding payment of Delay Liquidated Damages in the amount of $38,458,627.07 (including the earlier amount of $3,278,476.18). On 4 June 2020, the Principal issued the Contractor with a notice under clause 13.7(c) in respect of Delay Liquidated Damages in the amount of $7,845,648.20. The Contractor’s liability to pay Liquidated Damages has reached the Delay Liquidated Damages cap of 15% of the contract price, being approximately $46.4 million (item 10 of Schedule 1 to the Contract).
On 30 June 2020, an adjudication determination was made under the Building and Construction Industry Security of Payment Act 2002 (Vic) that the Contractor was entitled to an adjudicated amount in its favour of $38,458,627.07. On 13 July 2020, the Principal paid the Contractor that amount, and on 14 July 2020, the Principal had recourse to the Contractor’s Performance Security in the amount of $30,847,425.
The grounds upon which the Principal relied in having recourse to the Performance Security on 14 July 2020 included payment of Delay Liquidated Damages which the Principal claimed were due and payable under the EPC Contract. The Contractor has not issued any notice for the purposes of clause 40 of the EPC Contract in respect of the Principal having recourse to the Performance Security.
The application for preliminary discovery: the principles & the issues
Rule 32.05 of the Supreme Court (General Civil Procedure) Rules 2015 provides that:
Discovery from prospective defendant
Where—
(a)there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description the applicant has ascertained;
(b)after making all reasonable inquiries, the applicant has not sufficient information to enable the applicant to decide whether to commence a proceeding in the Court to obtain that relief; and
(c)there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had in that person’s possession any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist the applicant to make the decision—
the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).
As can be seen, there are three components which must be satisfied by the Contractor before an order for preliminary discovery will be made:
(a) first, there is reasonable cause to believe the applicant has or may have the right to obtain the relief;
(b) second, after making all reasonable inquiries, the applicant does not have sufficient information to enable it to decide whether to commence a proceeding to obtain that relief; and
(c) third, there is reasonable cause to believe the respondent has or is likely to have documents the inspection of which by the applicant would assist the applicant to make the decision.
On the hearing of the application, Mr Batt QC who appeared with Mr Mason for the Principal informed the Court that the Principal does not contend that r 32.05(a) has not been satisfied. The Principal also does not contest that the requirement as to the likelihood of documents being held by persons as provided for in r 32.05(c) is satisfied. The dispute between the parties is confined to whether not the criteria in r 32.05(b) are made out.
There is no divergence between the parties in relation to the principles to be applied on the r 32.05 application. The issue is the application of the principles to the facts.
The decision of Derham AsJ in Pandolfo v Finadri[2] is accepted by the parties as providing a helpful summary of the relevant principles:
[2][2018] VSC 211 (citations in original) (‘Pandolfo’).
18.The rule must be given the fullest scope its language will reasonably allow.[3]
[3]Paxus Services Ltd v People Bank Pty Ltd [1990] FCA 500; (1990) 99 ALR 728, 733 (Burchett J); Beston Parks Management Pty Ltd v Sexton [2008] VSC 392, [52] (Hollingworth J) (‘Beston Parks’).
19.An applicant does not have to prove that there will be a real benefit in making the order, but simply that there may be some benefit. The benefit may be the preparation of an appropriate pleading and the avoidance of substantial amendments following discovery. Alternatively, the avoidance of unnecessary litigation.[4]
[4]Beston Parks [2008] VSC 392, [53]; see also Australian Football League v Stadium Operations Ltd [2009] VSC 264, [3] (Warren CJ) (‘AFL v SOL’).
20.The principles relevant to the first criterion are as follows:
(a)the applicant is not required to show it that has a prima facie case that it has a right to relief;[5]
[5]Plzen Pty Ltd v P&O Wharf ManagementPty Ltd [2007] VSC 318, [17(e)] (‘Plzen v Wharf Management’).
(b)it is also not necessary to show precisely what cause of action the applicant may have; such a requirement would defeat the object of the rule;[6]
[6]Schmidt v Won [1998] 3 VR 435, 465; Beston Parks Management Pty Ltd v Sexton [2008] VSC 392, [53] (‘Beston Parks’); United Energy Ltd v Energy Risk Management Pty Ltd [1998] VSC 133, [32] (‘United Energy’).
(c)rather, it merely needs be shown that the facts are such that it may reasonably be believed that the applicant may have a right to obtain relief;[7]
[7]Schmidt v Won [1998] 3 VR 435, 465; Beston Parks [2008] VSC 392, [53].
(d)the test for determining whether the applicant has ‘reasonable cause to believe’ is an objective test;[8]
[8]Plzen v Wharf Management [2007] VSC 318, [17(c)].
(e)the word “may” indicates that the applicant’s belief does not have to amount to a firm view that there is a right to relief.[9]
[9]Beston Parks [2008] VSC 392, [53].
21.The second criterion is governed by the following principles:
(a)the requirement is primarily concerned with whether, as an objective fact, an applicant has sufficient information to determine whether to commence proceedings.[10] The fact that an applicant for preliminary discovery already has enough evidence to establish a prima facie case against a proposed defendant does not mean that the applicant has sufficient information to enable it to decide whether to commence a proceeding.[11] An applicant in that position may nevertheless ‘need information to know whether the cost and risk of litigation is worthwhile.’[12] For example, an applicant with sufficient information to plead a prima facie case may prudently wish to obtain preliminary discovery about ‘what defences are available to the respondent and the possible strength of those defences, or to determine the extent of the respondent’s breach and the likely quantum of any damages award’;[13]
[10]Beston Parks [2008] VSC 392, [55].
[11]B J Bearings Pty Ltd v Whitehead [2016] VSC 44, [19(2)].
[12]Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2008] FCAFC 133; (2008) 169 FCR 435, 443; B J Bearings Pty Ltd v Whitehead [2016] VSC 44, [19(2)].
[13]St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147, 154 [26(f)] (citations omitted); B J Bearings Pty Ltd v Whitehead [2016] VSC 44, [19(2)].
(b)it is for the court to determine whether an applicant has sufficient information available to it; the applicant’s own assertion that it does not is neither determinative nor strictly necessary;[14]
[14]Beston Parks [2008] VSC 392, [81].
(c)accordingly, an application cannot succeed if the applicant has sufficient information (objectively assessed) but is unable to determine whether to commence proceedings due to subjective factors, for example, an overly cautious nature;[15]
(d)courts have, however, approved litigants taking a cautious, conservative or prudent approach by applying for preliminary discovery under the rule.[16] This approach is consistent with the policy underlying the rule.[17] It is also consistent with the policy underlying the Civil Procedure Act 2010 (Vic) (‘CPA’) generally, and the ‘proper basis certification’ requirements in s 42 of the CPA in particular;[18]
(e)if there is evidence that an applicant has in fact decided to commence proceedings, the application must fail.[19] In determining whether an applicant has in fact already decided to commence a proceeding, irrespective of the outcome of the application, the Court should not give too much weight to posturing in correspondence prior to the making of the application, particularly correspondence alleging the existence of a strong case but nevertheless seeking preliminary discovery by letter prior to making a formal application to the Court;[20]
(f)what constitutes ‘reasonable inquiries’ is a question of fact, to be considered in all the circumstances of the particular case.[21]
…
23.Where each element of the rule is satisfied, the Court will ordinarily exercise its discretion in favour of the applicant.[22]
[15]Beston Parks [2008] VSC 392, [55].
[16]AFL v SOL [2009] VSC 264, [59]-[61]; United Energy [1998] VSC 133 [103].
[17]AFL v SOL [2009] VSC 264, [61]; B J Bearings Pty Ltd v Whitehead [2016] VSC 44, [19(3)].
[18]B J Bearings Pty Ltd v Whitehead [2016] VSC 44, [19(3)].
[19]Beston Parks [2008] VSC 392, [56].
[20]AFL v SOL [2009] VSC 264, [59]–[62]; B J Bearings Pty Ltd v Whitehead [2016] VSC 44, [19(4)].
[21]Hatfield v TCN Channel Nine Pty Ltd [2010] NSWCA 69; (2010) 77 NSWLR 506, 528 [86]; B J Bearings Pty Ltd v Whitehead [2016] VSC 44, [19(5)].
[22]AFL v SOL [2009] VSC 264, [76].
In the course of argument, Senior Counsel for the Contractor emphasised the following:
(a) First, the words of r 32.05(b) are critical. The fact that the plaintiff has ’reasonable cause to believe’ does not preclude an applicant for r 32.05 discovery from succeeding on an application. As Riordan J observed in Alex Fraser Pty Ltd v Minister for Planning:[23]
[23][2018] VSC 391, [54(b)] (citations in original) (‘Alex Fraser’).
It would be incongruous if the jurisdiction to order preliminary discovery could not be enlivened because of the lack of evidence, which is the very cause of the application. The purpose of the Rule is to allow an applicant, who has inadequate proof of any cause of action, to discover whether or not evidence is available[24] that will impact (positively or negatively) on the possible proceeding.[25]
[24]Schmidt v Won [1998] 3 VR 435, 445 (Ormiston JA, with whom Charles and Batt JJA agreed); Paxus Services Ltd v People Bank Pty Ltd [1990] FCA 500; (1990) 99 ALR 728, 733 (Burchett J).
[25]Telstra Co Ltd v Minister for Broadband, Communications and the Digital Economy &Anor [2008] FCAFC 7; (2008) 166 FCR 64, 80 [60] (French, Weinberg and Greenwood JJ). See also Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2008] FCAFC 133; (2008) 169 FCR 435, 442 [31]–[32] (Heerey, Gyles and Middleton JJ).
(b) Second, the question to be addressed is whether it is reasonable for the proposed plaintiff to take its decision without the information that a pre-action discovery order would provide being available. In Glezer v Deals.com.au,[26] Vickery J referred with approval to Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd,[27] including the following passages on which the Contractor placed specific reliance:
[26][2014] VSC 202, [16].
[27][1996] FCA 1500 (‘Alphapharm’).
4.In my view, the objective aspect of para 6(b) invokes a notion of ‘reasonable sufficiency’, the question raised being whether it is reasonable that the applicant for an order be required to take its decision without having the information to become available from inspection of the document or documents of which discovery is sought.
…
8.Contrary to a submission of Eli Lilly, in my opinion r6 is not necessarily rendered unavailable by the fact that the applicant already has available evidence establishing a prima facie case for the granting of relief. This is made clear by the reference in para(a) to the existence of ‘reasonable cause to believe that the applicant has ... the right to obtain relief ...’. It would impose an artificial constraint on r6, not supported by its terms or purpose, to exclude, a priori, all cases in which the insufficiency of the information possessed by the applicant to enable a decision to be made whether to litigate is due to a matter of ‘defence’ which would defeat the prima facie case.
(c) Third, the Court will order pre-action discovery in order that the plaintiff can make an informed decision. In United Energy Gillard J said of r 32.05:
The mischief which the rule seeks to address is the avoidance of a situation where a prospective plaintiff does not have all the relevant documentation to enable him and his advisers to make a decision whether he has a good cause of action or not, but nevertheless issues a proceeding and subsequently gains access to relevant documents in the possession of the opposing party, only to find he does not have a cause of action.[28]
[28][1998] VSC 133, [28].
The Contractor submits it has reason to believe that it may have a cause of action against the Principal for breach of the EPC Contract by reason of the Principal’s interference with the Principal’s Representative’s exercise of his Certification Role under the EPC Contract, but that:
(a) after making all relevant enquiries;
(b) it does not have sufficient information to decide whether to commence a proceeding to obtain that relief.
In response, the Principal contends:
(a) first, that the material before the Court demonstrates as an objective fact that the Contractor has sufficient information to determine whether to commence proceedings;
(b) secondly, there is no utility in the Contractor being allowed preliminary discovery; and
(c) thirdly, the Contractor has not made ‘all reasonable inquiries’ to obtain the information required.
Concerning the sufficiency of the information, the Principal relies on:
(a) earlier correspondence and notices from the Contractor pursuant to clauses 39.1 and 39.2 of the EPC Contract; and
(b) the claim for injunctive relief made by the Contractor in the proceeding.
A critical issue between the parties is whether or not there is a tension between the two aspects of the Contractor’s claim for relief, pre-action discovery and an interlocutory injunction. The Principal contends that when seeking an interlocutory injunction, the Contractor must have satisfied itself that it had a prima facie case in respect of communications between the Principal and the Principal’s Representative regarding the Certification Role. It is submitted that the fact the Contractor is seeking an interlocutory injunction necessarily conveys that it has concluded it has sufficient information to determine whether to commence proceedings.
In response, Senior Counsel for the Contractor contended that there is no difficulty about the existence of such a tension. He placed reliance upon the following statement in Pandolfo:
an applicant with sufficient information to plead a prima facie case may prudently wish to obtain preliminary discovery about ‘what defences are available to the respondent and the possible strength of those defences, or to determine the extent of the respondent’s breach and the likely quantum of any damages award’.[29]
[29][2018] VSC 211, [21(a)].
In support of its second contention, the no utility argument, the Principal refers to the dispute resolution provisions in the EPC Contract. It argues that by reason of clause 39.4 the Contractor is out of time to challenge previous determinations and is precluded from so doing. In those circumstances it is contended that there is no utility in the proposed proceeding, with the consequence that the orders sought should not be made.
The Contractor does not agree that on a proper construction of clause 39.4, failure to give notice within time has the effect of shutting out the Contractor from future Claims. It submits that even if that were so, if the Principal’s Representative has acted in breach of clause 31.2 when performing the Certification Role, the determinations made by the Principal’s Representative cannot stand.
In relation to the third ground of opposition, the asserted failure to make all reasonable enquiries, the Principal says that the Contractor has initiated a Dispute under clause 40 claiming a contractual right to be provided with documents. Those documents are the same documents that it seeks under r 32.05. There having not yet been a mediation of that Dispute as provided for in clause 40 the Principal contends that the Contractor cannot be said to have made ‘all reasonable enquiries’ as required by r 32.05(b).
The Contractor contends that on a proper construction of clause 40, the language of which the Principal properly concedes to be ‘convoluted’, it cannot be said that mediation is a pre-condition to the right to bring proceedings otherwise curtailed by clause 40.5(c).
Finally, the Principal contends that as a matter of discretion, even if each of the elements of r 32.05 are satisfied, the Court should nevertheless refuse to make the order sought. In relation to the discretion, the Principal relied upon the non-completion of the contractual dispute resolution process, the submission that the ambit of what is sought too broad and beyond the purpose of the rule, and upon the proposition that preliminary discovery would serve no useful purpose because by clause 39.4, no proceeding could be initiated. In addition the Principal submitted that the application for pre-action discovery, combined with an interlocutory injunction application was an attempt by the Contractor by collateral means to circumvent the contractual mechanism which, as provided for in clauses 40.5(c) and 40.6 limits recourse to a court other than relevantly for urgent injunctive relief.
Background to the Dispute: Communications between the parties
The Contractor says it became concerned about the possibility of the Principal being improperly involved in the exercise of the Principal’s Representative’s Certification Role when it discovered a reference to ‘HSF comments’, being a reference to Herbert Smith Freehills (‘HSF’), the solicitors for the Principal, in the document properties of three documents issued by the Principal’s Representative when performing the Certification Role (‘HSF documents’). In March 2020 the Contractor began corresponding with the Principal’s Representative about the possibility of interference by the Principal with the independence of the Principal’s Representative in the performance of his Certification Role.
On 11 May 2020, the Contractor’s solicitors Pinsent Masons sent two letters: one to the Principal; and another to the Principal’s Representative (‘11 May Letter’). The letter to the Principal’s Representative identified two issues said to give rise to concerns that there ‘may’ have been interference.[30] The first issue referred to was the HSF documents. The second issue was the use of language in correspondence from the Principal’s Representative which described functions to be carried out by the Principal’s Representative in the exercise of the Certification Role as having been carried out by the Principal. In support of the second issue, the letter states as follows:
Despite the fact that pursuant to clause 19.3 of the Contract the Principal’s Representative (acting in the Certification Role) is to issue Payment Certificates ‘to the Contractor and the Principal’ … correspondence from the Principal’s Representative includes the following statement:
‘In accordance with clause 19.3, the Principal provides the enclosed payment certificate to the Contractor’.
[30]Exhibit MEC-13 at 1.4, 1.5 and 2.1.
The same two matters relied upon in from the 11 May Letter as giving rise to concerns on the part of the Contractor as to interference by the Principal with the exercise by the Principal’s Representative in the Certification Role in breach of clause 31.2 are relied upon in support of the pre-action discovery application:
(a) The HSF documents; and
(b) Correspondence issued by the Principal’s Representative, in particular, four letters, dated 17 December 2018, 28 May 2019, 11 October 2019 and 29 April 2020, in which the Certification Role was described as having been carried out by the Principal.
In its written submissions the Contractor referred to the 17 December 2018 letter from the Principals’ Representative parts of which read:
(a) ‘the Principal provides the enclosed payment certificate’; and
(b) is ‘pleased to advise that the Principal is now willing to approve the following milestone claims’.
that is, in contrast to a reference in the same letter to ‘the Principal’s Representative’s initial correspondence in relation to this claim’.
The Court was taken to the letter dated 28 May 2019 in which the Principal’s Representative wrote:
The Principal provides the enclosed payment certificate [and the] Principal expresses its intention to rightfully … set-off future costs related to the above work scope from future payments to the Contractor as [it] is entitled under clause 43.3.
The Contractor contends in support of its r 32.05 application, and in earlier correspondence, that such statements cannot be explained away as a slip or erroneous reference to the Principal in place of the Principal’s Representative.
The 11 May Letter referred to ‘serious matters going to the heart of the Principal’s Representative’s duties under the Contract’. The letter of the same day sent to the Principal, repeated the reference to ‘matters … very serious in nature, going to the heart of the basis upon which the Principal and the Contractor contracted for the Project’ and went on to refer to interference with the Principal’s Representative’s certification function as possibly amounting to repudiatory conduct under the Contract.
The office of the Principal’s Representative responded on 21 May 2020, asserting that the inferences drawn and referred to were incorrect and that the references to ‘Principal’ were ‘in fact typographical errors and should refer to the Principal’s Representative’.
By letter dated 1 June 2020, Pinsent Masons dismissed the explanation provided as being ‘not sustainable and serves to severely undermine the parties’ relationship’. The letter explained why, in the view of the Contractor, the references to ‘Principal’ were not typographical errors.
On 1 June 2020 Pinsent Masons corresponded with HSF in terms including the following:
[5]Absent an innocent explanation, and together with your refusal to provided [sic] the material requested, the evidence set out at Section 2 of the Letter to the Principal’s Representative suggests that there may have been interference with the Principal’s Representative’s exercise of the Certification Role. We note that no explanation is offered for the refusal to provide the material requested.
…
[8]Our client’s view is that the refusal to respond in a meaningful way to our 11 May Letter and a failure to provide the documents requested is a separate and further breach of the Contract.
Between 1 June 2020 and 4 August 2020, when the Contractor issued the originating process, there were a number of requests by or on behalf of the Contractor for an explanation from the Principal, both as to the existence of the HSF document references and as to the use of language in letters from the Principal’s Representative. Such requests were framed on the basis of claimed interference with the Principal’s Representative in the certification role and alleged breach of the EPC Contract by that interference.[31]
[31]The 11 May Letter says ‘might reasonably infer’ interference; exhibit MEC-19 letter of 4 June 2020 a cl 39.2(a) Notice says ‘apparent interference … as set out in 11 May Letter’; exhibit MEC-23 letter of 11 June 2020 letter says ‘has interfered’, and later ‘our client considers that the Principal has interfered’; exhibit MEC-26 clause 39.2(b) Notice says the ‘Claim arises out of a breach of contract by way of interference’; exhibit MEC-28 letter of 8 July 2020 says there is ‘a clear and reasonable basis for contending there has been interference … any comments by HSF to the PR in exercise of the Certification function … not simultaneously communicated to the Contractor constitute interference’; the exhibit MEC-30 10 July 2020 letter, and later exhibit MEC-34 14 July 2020 letter, request information and documents, but do so on the basis of ‘the legal basis … set out’ in earlier correspondence, and give notice that if the Contractor does not receive confirmation that the documents will be provided, the Contractor will commence proceedings.
As the submissions on behalf of the Principal highlight, the correspondence and documents emanating from the Contractor or from its legal representatives was not tentatively framed.
On 4 June 2020 the Contractor gave formal notice of a Claim (as defined in clause 1.1 – see at [10]–[11] above) pursuant to clause 39.2(a) of the EPC Contract (‘Clause 39.2(a) Notice’). The subject matter of the Claim was described as follows:
the matter in respect of which the Claim will be based is the apparent interference by the Principal and / or the Principal’s solicitors with the Principal’s Representative’s exercise of the Certification Role under the Contract, as set out in our correspondence to the Principal’s Representative dated 30 March 2020 and 11 May 2020 and our correspondence to the Principal’s solicitors dated 11 May 2020.
On 3 July 2020, the Contractor followed up the Clause 39.2(a) Notice with a notice providing the particulars of the Claim in order to seek to satisfy the requirements of clause 39.2(b), including the legal basis for the Claim and the facts relied upon in support of it. The particulars provided include the following:
(a)The Claim arises out of a breach of contract by way of interference by the Principal and / or the Principal’s solicitors with the Principal’s Representative’s exercise of the Certification Role under clause 31.2 of the Contract.
(b)The following table sets out the particulars concerning the manner in respect of which the Claim is based … .
The Principal referred the Court to two further letters. The first, a letter dated 11 June 2020 from Pinsent Masons to HSF, the second, a letter from the Contractor to the Principal, the Principal’s Representative and to the Security Trustee dated 8 July 2020. Taken together the two letters include the following statements:
(a)As you are aware, our client considers that the Principal has interfered with the Principal’s Representative’s discharge of his obligations in connection with the Certification Role under the EPC Contract.
(b)To be clear, having considered the responses provided by the Principal’s Representative and the Principal’s solicitors, our client considers that the matters raised show that there has been interference in the Certification Role.
(c)Without limitation, references to “HSF comments” in the document properties of correspondence issued in the exercise of the Certification Role provide a clear and reasonable basis for contending that there has been interference with that function by the Principal’s solicitors’.
(d)To be clear, any comments provided by HSF to the Principal’s Representative in the exercise of the Certification Role which are not simultaneously communicated to the Contractor constitute interference. Respectfully, in the present circumstances, without explaining the meaning of “HSF comments” in the document properties and providing the documents which contain the HSF comments, a denial of interference is not tenable.
(e)If there is no basis to the concerns we have raised, the questions can be easily answered and the production of documents will confirm this.
(f)Our client considers that the responses from the Principal’s solicitors and the Principal’s Representative to our correspondence on this matter constitute separate and further breaches of the EPC Contract which compound the earlier interference in the exercise of the Certification Role.
(g)To be clear, any comments provided by HSF to the Principal’s Representative in the exercise of the Certification Role which are not simultaneously communicated to the Contractor constitute interference. Respectfully, in the present circumstances, without explaining the meaning of “HSF comments” in the document properties and providing the document which contain the HSF comments, a denial of interferences is not tenable.
(h)Taken in the round, our client considers that the Principal’s interference in the Certification Role (including insofar as it concerns denial of extensions of time), the evasive and dismissive responses provided to our client when it squarely raised this issue, the failure to provide the documents and information requested and to which the Contractor is entitled, the subsequent demand for Delay Liquidated Damages is unconscionable. Further, our client considers that the effect of the Principal’s conduct is, without limitation, such that the purported certification of extensions of time and demands for Delay Liquidated Damages are void and of no effect.
In the course of argument the Contractor submitted it was acting with caution in seeking pre-action discovery. No such caution was evident in the communications extracted above. The correspondence from Pinsent Masons is not at all tentative as to the existence of impermissible interference in the Certification Role amounting to breach. Breach is said to occur upon the provision of any comments provided by HSF which are not simultaneously copied to the Contractor. These letters leave the reader in no doubt that in the eyes of the Contractor the effect of the Principals’ conduct is such that the ’certification of extensions of time and demands for Delay Liquidated Damages are void and of no effect’.
The letter dated 11 June 2020 also asserts that the failure to provide the correspondence between the Principal and the Principal’s Representative constitutes a further breach of the EPC Contract. The Contractor took action acted based upon that further asserted breach of the EPC Contract when on 17 July 2020 it gave a Notice of Dispute to the Principal. The subject matter of the Notice of Dispute is as follows:
Whether there exists an obligation for documents passing between the Principal (including those acting for or on behalf of the Principal including the Principal’s solicitors) and the Principal’s Representative in connection with the Principal’s Representative’s exercise of the Certification Role to be disclosed to the Contractor.
The Principal replied to the Notice of Dispute on 24 July 2020. Following further communications between the parties, a meeting of the Senior Representatives of the parties took place on 4 August 2020. The Dispute was not resolved as a result of those processes. There is no evidence to suggest that the dispute has been referred to mediation pursuant to clause 40.4 by either party. It is common ground that no mediation of that Dispute has taken place.
The injunction application
The Contractor did not give prior notice of its application for injunctive relief before issuing the proceeding on 4 August 2020. On 6 August 2020, once on notice, the Principal proposed mutual undertakings in relation to future communications with the Principal’s Representative regarding the performance of the Certification Role. The Contractor rejected that proposal on the same day.
It is not necessary to resolve the controversy between the parties as to the appropriateness of mutual undertakings or as to the grant of injunctive relief. That is so because at the hearing on 11 August 2020, without any admission as the necessity to do so, the Principal offered to give undertakings to the Court, in substance, as sought by the Contractor in paragraph 2 of the summons and originating motion.
During the course of the hearing the Principal by its counsel undertook to the Court as follows:
The defendant undertakes to the Court that it, and any person acting on its behalf including its solicitors, will not communicate privately with the Principal’s Representative in connection with the exercise hereafter of the Principal’s Representative’s Certification Role under the EPC Contract.
Upon that undertaking being given, it is appropriate that the Contractors’ application for injunctive relief, in paragraph 2 of the summons and paragraph 2 of the originating process be dismissed.
Is there a tension between the Injunction Application and the r 32.05 Application?
To determine whether there is a tension between the claim for pre-action discovery and the claim for injunctive relief, and whether or not any such tension is material for the purposes of r 32.05, requires the Court to consider three matters. First, what the Contractor would have needed to establish in order to make out its claim for an interlocutory injunction; second, the evidence relied upon by the Contractor in support of that claimed relief; and third, the identification with as much precision as possible, how the proposed substantive case for the Contractor is likely to be framed. Each of these matters directly arising by reason of the injunction application inform resolution of the question posed by r 32.05(b), namely, whether the Contractor already has sufficient information to enable it to decide to commence such a proceeding.
Ordinarily, as stated in Pandolfo at [20(a)] and (b), the applicant for pre-trial discovery is not required to show a prima facie case.[32] It is also not necessary in the usual case for the applicant to show precisely what cause of action the applicant may have. But this is not the ordinary or usual case. Here the application for pre action discovery is coupled with an application for an interlocutory injunction.
[32][2018] VSC 211.
In ABC v O’Neill Hayne and Gummow JJ, with whom Gleeson CJ and Crennan J agreed, discussed the prima facie case that must be out to support the grant of an interlocutory injunction:
The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:
“The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief ... The second inquiry is ... whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.”
By using the phrase ‘prima facie case’, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:
“How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks.”[33]
[33][2006] HCA 46; (2006) 227 CLR 57, 81 [65]–[72], 68 [19] (Gleeson CJ and Crennan J agreeing) (citations omitted).
As required by ss 41 and 42 of the Civil Procedure Act 2010 (Vic), the Contractor, and the legal practitioner acting on its behalf, Mr Croagh, filed an overarching obligations certificate and a proper basis certification at the time of filing the originating motion. The proper basis certificate certifies, as provided in s 42(1A) that ‘on the factual and legal material available’ at the time of issue there exists a proper basis for the claim made by the document being filed.
Given the certificates and the requirements of s 42(1A) of the Civil Procedure Act, the Court must proceed on the basis that, so far as the injunction claim is concerned, it is the opinion of the Contractor and its legal adviser, that ’if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief’.
The prima facie case is one, in the broad, of alleged interference by the Principal in the independent discharge by the Principal’s Representative of the clause 31.2 Certification Role. The Contractor seeks an order that the Principal ‘be restrained from communicating privately with the Principal’s Representative in connection with the Principal’s Representative’s Certification Role under the EPC Contract’. The Contractor argues that at least five occasions remain for the exercise of the Certification Role under the EPC Contract, and, unless restrained, whilst not so articulated in the written submissions, there is an unacceptable risk of future interference by the Principal such that an injunction should be granted.
The Contractor relies upon evidence of past conduct as the basis for the grant of an injunction. The very same evidence that has led the Contractor to conclude that it has reasonable cause to believe that ’if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief’ is the same evidence that has led the Contractor to conclude that it ‘has or may have the right to obtain relief’ in a substantive proceeding as provide for in r 32.05(a).
That evidence comprises the HSF documents and the correspondence from the Principal’s Representative identified in the letters from Pinsent Masons of 11 May 2020. Those same two categories of communications are relied in support of the r32.05(a) criteria — the existence on the part of the Contractor of ‘reasonable cause to believe’ that it has or may have the right to obtain relief.
What precisely is the substantive case that the Contractor is having difficulty, absent pre-action discovery, in deciding to bring? An application for an interlocutory injunction cannot be brought in a vacuum, divorced from any substantive claim. In ABC v Lenah Game Meats Pty Ltd Gummow and Hayne JJ said:[34]
The basic proposition remains that where interlocutory injunctive relief is sought in a Judicature system court, it is necessary to identify the legal (which may be statutory) or equitable rights which are to be determined at trial and in respect of which there is sought final relief which may or may not be injunctive in nature.
[34][2001] HCA 63; (2001) 208 CLR 199, 241 [91] (citations omitted).
In The Siskina, in a passage upon which the Principal relied, the House of Lords said:
A right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent upon a pre-existing cause of action against the defendant… The right to obtain an interlocutory injunction is merely ancillary and incidental to the pre-existing cause of action. It is granted to preserve the status quo pending the ascertainment by the court of the rights of the parties and the grant to the plaintiff of the relief to which his cause of action entitles him, which may or may not include a final injunction.[35]
[35]Owners of cargo lately laden on board the vessel Siskina v Distos Compania Naviera SA (1977) 3 All ER 803, 824 (‘The Siskina’).
The identification of the substantive case to which the injunction sought in the Origination Motion might go in aid is complicated by the absence of a statement of claim or a generally endorsed writ that articulates the claim for the relief to be sought at trial. If the injunction application had not been resolved it would have been necessary for the Contractor to undertake to issue a substantive proceeding in order to obtain the interlocutory injunction sought by the Originating Motion and summons.[36]
[36]Ibid, ABC v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199, 241.
The identification of the substantive case that the Contractor would have brought is to be found in the Contractor’s written submissions (emphasis added):
The impartial exercise of the Certification Role under clause 31.2 of the EPC Contract similarly requires the Principal’s Representative not to have private communications with the Principal (or those acting on the Principal’s behalf) regarding the Principal’s Representative’s determinations. The evidence produced by the Contractor indicates that such communications have, more probably than not, occurred. Based on the authorities referred to above, the communications must be disclosed in order to dispel the reasonable inference arising from this evidence that the Principal’s Representative may not have acted independently.
The submission identifies a substantive case that contends that any private communication whatsoever between the Principal’s Representative and the Principal as to the Certification Role is sufficient to amount to a breach of the duty of independence.
The written submissions are consistent with references in earlier correspondence and notices under the EPC Contract to a ‘no private communications’ case. The correspondence of 8 July 2020 expressly complains of comments by HSF not copied to the Contractor. The 23 July 2020 clause 39.2(b) notice, alleging a breach that may amount to a repudiatory breach of contract relies as one of four matters upon the following (emphasis added):
the Principal’s Representative has not given disclosure to the Contractor of every communication between the Principal’s Representative and the Principal.
Similarly, passages from the authorities upon which the Contractor relied to identify the relevant duty focus on a ‘no private communications’ obligation.
In oral submissions the Contractor began by drawing attention to the importance of the Certification Role under the EPC Contract, in other contracts, often described as the role of superintendent. As discussed by Emmett J in Leighton Contractors Pty Ltd v Page Kirkland Management Pty Ltd,[37] the role of the Principal’s Representative in performance of the Certification Role under arrangements such as contemplated by the EPC Contract is of great importance.
[37][2006] FCA 288, [20].
What is required of the Principal’s Representative when performing the Certification Role in order to satisfy the obligation to act honestly and reasonably and to make a fair determination was discussed by Warren CJ in Kane Constructions Pty Ltd v Sopov.[38]Quoting from the Contractor’s written submissions (footnotes omitted, emphasis added):
[38][2005] VSC 237.
15. Her Honour extracted a set of indicia of interference with a superintendent’s exercise of independent certification functions, including, relevantly:
a)when the superintendent allows judgment to be influenced, or where judgment and conduct are controlled by the principal;
b)when the superintendent acts in the interest of one of the parties and by their directions;
c)when there is not sufficient firmness in order to decide questions based on his or her own opinion; and/or
d)where the superintendent considers the assent of the principal to be necessary, has ceased to be a free agent, and (critically to the present case) ‘does not give full disclosure of every communication between the superintendent and the principal’.
The Contractor referred to the following passage in Sopov (emphasis added):
[623]… where the superintendent considers the assent of the principal to be necessary, has ceased to be a free agent and does not give full disclosure of every communication between the superintendent and the principal. Finally, the superintendent may lose independence without actually intending to do so or even without knowledge they have done so.
The following paragraph is also relevant:
[624]In relation to the principal, interference will arise where there is an attempt to lead the superintendent astray in the interests of the principal; and where there is correspondence and communication of an improper character between the principal and the superintendent. In relation to the contractor, interference will arise where the contractor has no knowledge of the interfering conduct so as to prevent the builder raising the point.
In written submissions the Contractor relied upon Hickman v Roberts.[39] An architect acting as superintendent was found to have deferred his decision making to the directions of the principal. Lord Atkinson held that the contractor could not be taken to have accepted the process of certification in which the architect was not acting independently, stating:
[I]n order that that should be effective, there ought, in my view, to have been a full and ample disclosure of every communication which had passed between [the architect] and the building owners.[40]
[39][1913] AC 229.
[40]Ibid, 238.
These passages provide support for the proposition that any private communication is sufficient to undermine the independence of the Principal’s Representative when acting in the Certification Role so as to amount to actionable breach. Consistent with its written submissions and earlier correspondence and Notices, this is the case that I understand the Contractor would wish to bring for final relief in support of which it sought an interlocutory injunction. It is also the same case that the Contractor would wish to consider bringing, in respect of which it seeks pre-action discovery.
The Contractor submitted that the injunction was directed to concerns as to future conduct and not as to the past and that as a result, there was no tension between to two claims. I do not agree. Both rely upon the same evidence. The substantive claim is the same claim.
The Contractor has already formed the view that there is sufficient evidence and a proper basis to bring its claim for injunctive relief. If it were to be granted such relief it would be required to undertake to issue a proceeding. That being the case, the Contractor does not require pre-action discovery in order to decide whether to commence a proceeding. It made that decision when it issued the originating motion. The fact that the injunction application has now resolved without determination does not change that, nor does the fact that pre-action discovery was sought on the summons ‘further or alternatively’.
For the reasons set out above, I accept the submission on behalf of the Principal that the fact the Contractor is seeking an interlocutory injunction necessarily conveys that it has sufficient information available to it now to determine whether to issue a proceeding.
Further reasons for sufficiency of information
Given the application for injunctive relief based upon interference by the Principal with the Principal’s Representative’s Certification Role, as discussed above, I consider that the Contractor already has sufficient information to enable it to decide whether or not to commence a proceeding. For that reason, the application must be dismissed. However, there are other independent reasons why that is the case.
In support of the proposition that the Contractor has sufficient information to enable it to decide whether to commence a proceeding, the Principal relied upon statements in correspondence and notices given pursuant to the EPC Contract by the Contractor.
There are a number of references in the correspondence and notices that support a finding that the Contractor already has sufficient information upon which to base a decision whether to commence a proceeding. That is, leaving the decision to issue the injunction application to one side, the Contractor as appears from these communications, has evidently formed the view that it has sufficient information to issue a substantive proceeding for breach.
Contrary to submissions on behalf of the Contractor, correspondence prior to the application was not hedged as to breach, or otherwise on the quantum or content of communications between the Principal or its solicitors on the one hand, and the Principal’s Representative on the other. As the letter from the Contractor to the Principal, the Principal’s Representative and the Security Trustees of 8 July 2020 referenced above stated:
To be clear, any comments provided by HSF to the Principal’s Representative in the exercise of the Certification Role which are not simultaneously communicated to the Contractor constitute interference. Respectfully, in the present circumstances, without explaining the meaning of “HSF comments” in the document properties and providing the document which contain the HSF comments, a denial of interferences is not tenable.
Statements made by Pinsent Masons on behalf of the Contractor in the 11 June 2020 letter to HSF were similarly unequivocal:
The failure to provide the documents and information requested and to which the Contractor is entitled, the subsequent demand for Delay Liquidated Damages is unconscionable. Further, our client considers that the effect of the Principal’s conduct is, without limitation, such that the purported certification of extensions of time and demands for Delay Liquidated Damages are void and of no effect.
The statements in these letters are important, first because they signify a belief on the part of the Contractor that any communication which is not copied to the Contractor constitutes a breach and second, because they convey the Contractor’s view that the effect of that conduct is to render determinations by the Principal’s Representative void and of no effect.
I accept, as held by Chief Justice Warren in Australian Football League v Stadium Operations Ltd,[41] that the language of breach used in correspondence does not mean that a party has already decided to issue a proceeding. But as observed by Warren CJ in that case, the plaintiff’s submission to that effect distracts from the relevant enquiry, which is whether the plaintiff has sufficient information to commence a proceeding.[42] The plaintiff also relied upon Glezer v Deals.com.au for support for the proposition that it did not have sufficient information and was entitled to have more information before deciding whether to issue proceedings. Glezer may be distinguished, because the nature of the proposed proceeding, in which allegations of fraud would be made, was critical to Justice Vickery’s reasoning. His Honour said:
Further, I am satisfied that objectively speaking, the proposed plaintiff did not have sufficient information to decide whether to commence a proceeding in this Court given the very serious allegations which are likely to be the foundation of his claims.[43]
[41]AFL vSOL [2009] VSC 264, [62]–[63]. See also Glezer v Deals.com.au [2014] VSC 202, [34]–[45], see esp [43]–[45].
[42]Ibid [63].
[43]Glezer v Deals.com.au [2014] VSC 202, [45].
The Contractor submitted that if no notice of claim is given within time, by reason of clause 39.4 the Contractor would be shut out. It was submitted on behalf of the Contractor that the clause 39 notices were given so as to prevent waiver under clause 39.4. It was submitted that the notice of 4 June 2020 did no more than foreshadow a claim and was couched in terms of ‘the apparent interference by the Principal’. Further, that whilst the 3 July 2020 notice listed both the legal basis and in factual particulars listed seven different items of communication, the legal basis for the claim was expressed on the basis that the Principal’s Representative ‘appears to have been influenced’.
The 4 June 2020 clause 39.2(a) notice contained the following statements:
Pursuant to clause 39.2(a)(1) of the Contract, the Contractor hereby gives notice to the Principal and the Principal's Representative that the Contractor proposes to make a Claim in respect of a matter under, arising out of, or in connection with the Works or the Agreement (Notice of Claim).
In accordance with clause 39.2(a)(2) of the Contract, the matter in respect of which the Claim will be based is the apparent interference by the Principal and / or the Principal’s solicitors with the Principal's Representative’s exercise of the Certification Role under the Contract, as set out in our correspondence to the Principal’s Representative dated 30 March 2020 and 11 May 2020 and our correspondence to the Principal’s solicitors dated 11 May 2020. Copies of this correspondence are annexed to this Notice of Claim at Appendices 1, 2 and 3, respectively.
Pursuant to clause 3.1(a) of the Tripartite Agreement, the Contractor hereby provides the Security Trustee with a copy of the Notice of Claim. The Contractor confirms that the Notice of Claim is a notice of or relating to a Principal Default (as that term is defined in the Tripartite Agreement), in that it concerns (without limitation), the occurrence of a breach of the Contract by or in relation to the Principal which would entitle the Contractor to accept repudiation of the Contract.
Under the Tripartite Agreement, ‘Principal Default’ is defined as ‘the occurrence … of any breach of, or default under, a Relevant Contract, by or in relation to, the Principal which entitles … a Relevant Party to terminate, rescind or accept repudiation’. Clause 3.1(a) provides that the parties ‘must provide the Security Trustee with a copy of any notice of or relating to any Principal Default … at the same time it gives such notice to the Principal’.
The Contractor is correct that having sufficient information to make a Claim under the EPC Contract does not necessarily mean that the Contractor has sufficient information to decide whether to commence a proceeding. They are two quite different decisions. It is also true, as the Contractor submits, that the language of clause 39.2 and the notices given by the Contractor pursuant to it, are equivocal as to the issue of whether a proceeding will be brought.
But the reader of the 4 June 2020 notice is left in no doubt that the Contractor has sufficient information to bring a proceeding. By reference to the correspondence of 30 March and 11 May 2020, the Contractor identifies the clause of the Contract alleged to have been breached. The clause 39.2(b) notice particularises the breach in significant detail. The breach is alleged to be such as to entitle the Contractor to accept repudiation of the EPC Contract. It is described as a Principal Default within the meaning of the Tripartite Agreement. The clause 39.2(a) notice was given to the Security Trustee as notice of a Principal Default. The language used in the clause 39.2(a) notice, the significance of such a notice in accordance with clause 39 and the fact the notice was copied to each of those persons, are all consistent with the proposition that the Contractor has sufficient information to bring a proceeding.
As stated above, it was submitted on behalf of the Principal that an application for an interlocutory injunction necessarily involves the existence of a prima facie underlying case and that having determined to bring such an application the Contractor cannot satisfy the r 32.05(b) criteria. Further, that having initiated the proceeding seeking injunctive relief, that there is no substance to the argument that the Contractor is being ‘cautious’ in determining whether or not to bring a proceeding.
Responding to these arguments the Contractor submitted that the existence of a prima facie case did not disentitle it to an order pursuant to r 32.05. That is undoubtedly the case, as was recently observed in Pandolfo.[44] Relying upon Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd,[45] the Contractor submitted that an order for pre-action discovery should nevertheless be made so as to enable it:
(a) to evaluate the extent of the breaches by the Principle’s Representative and, also;
(b) the strength of defences that might be available when what is currently known by the Contractor to have occurred is seen in context.
[44][2018] VSC 211, [21(a)].
[45][2003] FCA 174 (‘Baulderstone’).
In Baulderstone the applicant alleged that the respondent procured the superintendent to act unfairly and in breach of duty when assessing claims under the contract. [46] The critical evidentiary basis for the contention was a letter written by the respondent in its capacity as the principal. The contractor did not have a copy of the letter before it issued the proceeding. Finkelstein J dismissed the claim. His Honour did so after considering the context in which the letter in question was written:
95.In effect, BHPL says that this letter was written to procure, and that it did procure, Mr Crawford to act unfairly when he assessed the claims.
96As with all things in this case, Qantas’ letter must be considered in its context. The context is that on 15 March 1998 (a Sunday), Cliftons, which had some difficulty in considering an aspect of BHPL’s claim and had sought additional information from BHPL, advised Qantas that it was assessing the claim and requested Qantas to comment on the unresolved issue. Cliftons also advised Qantas that it would be seeking the advice of the quantity surveyor. Qantas was asked to respond urgently.
97When viewed in this light the letter of 24 March cannot have attributed to it the character of an improper communication between the owner and the independent certifier. Put differently, there was nothing improper in Cliftons seeking information from Qantas about matters raised in BHPL’s claim which Cliftons believed required clarification. Nor was there anything improper for Qantas to respond to that invitation. Moreover, when considered in this context, Qantas’ response cannot be construed as an impermissible attempt to undermine the independence of Cliftons. The letter itself acknowledged the existence of that independence.
[46]Ibid.
The Contractor submitted that the documents sought on pre-action discovery would enable it as prospective plaintiff to identify relevant defences and the strength of them, something that did not occur in Baulderstone where there was no pre-action discovery. In reply it was submitted that the Contractors’ case is that there is impermissible interference with the expert unless the Principal can explain the communications and that in the absence of response by the Principal to requests for documents, the Contractor cannot know the content and context of such communications, and, as a result, whether there is an available defence or not.
As noted by Lindgren J in Alphapharm,[47] it would impose an artificial constraint to exclude pre-action discovery in cases where the basis of the application is to seek to identify a matter of defence. But the submissions to the effect that the Contractor needs pre-action discovery so as to identify defences and the extent of breach do not sit comfortably with the fact that, by its interlocutory injunction application, the Contractor has already decided to issue proceedings, without knowing of the existence or otherwise of either context defences as discussed in Baulderstone[48] or the detail of the extent and nature of the alleged breach.
[47][1996] FCA 1500.
[48][2003] FCA 174.
Furthermore, the submissions are not sustainable when the Contractor’s substantive case is a ‘no private communications’ case.
In such a case, the notion of obtaining documents so as to ascertain the existence and evaluate the strength of possible defences falls away. The ‘possible defences’ reason for requiring pre-action discovery falls away because the Contractor already knows there have been private communications to which it has not been copied.
As earlier discussed, the only basis upon which the Contractor was entitled to seek the injunctive relief is on the basis that any such injunction would continue until the trial.[49] That being the case, the Contractor, who did not issue a substantive proceeding at the time of issue of the summons and originating motion, would have been required by the Court to give an undertaking to do so if it were to be granted the injunction which, by the originating process, it seeks. It has already made a decision to issue a proceeding. It did so without access to the documents that it now seeks.
[49]ABC v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199, 241 [91]; The Siskina (1977) 3 All ER 803, 824.
Lack of Utility
Responding to the second submission on behalf of the Principal, the lack of utility argument, the Contractor drew attention to statements by Riordan J in Alex Fraser that on the hearing of a pre-action discovery application going into the merits of a dispute will usually not be appropriate.[50]
[50][2018] VSC 391, [53]–[54].
Those words of caution are apposite when it comes to the argument between the parties as to the lack of utility of a pre-action discovery order.
There is a contest of substance as to whether it is the case that the time for giving notice under clause 39.2 had already passed as at 4 June 2020, and, if so, whether as a consequence, by operation of clause 39.4 the Contractor is shut out from an entitlement to bring a proceeding. As earlier noted, the Contractor separately submits, and the submission appears to me to have substance, that irrespective of compliance or otherwise with clause 39 if the Contractor is correct concerning impermissible interference in the Certification Role, then the determinations previously made by the Principal’s Representative would be void in any event.
Given the competing arguments, and bearing in mind the words of caution against delving into the merits of the existence of possible causes of action to which Riordan J referred, the lack of utility argument does not provide a proper basis in this case to refuse the application.
All Reasonable steps
In B J Bearings Pty Ltd v Whitehead,[51] Hargrave J (as his Honour then was) said of the requirement in r 32.05(b) to make ‘all reasonable inquiries’ that ‘what constitutes “reasonable inquiries” is a question of fact, to be considered in all the circumstances of the particular case.’[52]
[51][2016] VSC 44.
[52]Hatfield v TCN Channel Nine Pty Ltd [2010] NSWCA 69; (2010) 77 NSWLR 506, 528 [86].
Here the facts concerning the incomplete Notice of Dispute process demonstrate clearly that the Contractor has not discharged its obligation to make all reasonable enquiries before seeking pre-action discovery.
The Principal submitted that without mediation of the subject matter of the Dispute Notice, an order for pre-action discovery was premature. It submitted that if the Contractor succeeds via the Dispute notice process in obtaining the documents to which it says it is contractually entitled, it will have the documents which it otherwise asks the Court to provide pursuant to r 32.05.
The dispute resolution process in clause 40 has two separate streams. One stream is expert determination, the other is mediation. The Notice of Dispute here is not amenable to expert determination. There was a contest on the application between the parties as to whether a mediation must be undertaken before a party is permitted to litigate concerning the subject matter of a Notice of Dispute. Clauses 40.5(a) and 40.5(c) do not make it clear that mediation is a necessary precondition to litigation. However, it is unnecessary to resolve that issue of construction. What is clear from clause 40.4(a) is that the parties may, by agreement, refer a dispute to mediation. What is also clear, is that there is no evidence that the Contractor has sought the agreement of the Principal to mediate. The Contractor has not taken all steps open to it under the contractual mechanism pursuant to which it is seeking the provision of the very same documents the subject matter of this application.
Because the Contractor has not done so, it is clear that as a matter of fact, all reasonable inquiries have not been made. For that separate and independent reason, the application must be dismissed.
The Discretion
Separately, the Principal submitted that the Court, in the exercise of its discretion, should refuse the application.
Even if I considered the criteria in r 32.05(b) to be satisfied in this case, which I do not, I would have nevertheless refused in the exercise of the residual discretion in r 32.05 to have ordered pre-action discovery. I would have done so because in my opinion it is reasonable in all the circumstances for the Contractor to take its decision without an order for pre-action discovery.
I would have refused to exercise the discretion for the following reasons:[53]
[53]Alex Fraser Pty Ltd v Minister for Planning [2018] VSC 391, [54(c)].
(a) First, because the Contractor already has sufficient information available to it to determine to bring an application for an interlocutory injunction, indicating that it is not reasonable for it to obtain an order for pre-action discovery in advance of issuing a proceeding for the same relief;
(b) Second, related to the first matter, the fact the Contractor has already issued a proceeding for an interlocutory injunction which it would need to have accompanied by a substantive proceeding in order to obtain the relief sought;
(c) Third, the fact that the Contractor has asserted in correspondence and notices, including as copied to third parties such as the Security Trustee, that it has a Claim for breach of contract for impermissible interference by the Principal with the Certification Role being performed by the Principal’s Representative;
(d) Fourth, the fact that the documentary basis relied upon by the Contractor for making such assertions and to make out a prima facie case in support of an interlocutory injunction comprises the same two categories of communications already known to the Contractor to exist and relied upon by the Contractor in support of the r 32.05 order; namely, the HSF documents and the letters from the Principals’ Representative;
(e) Fifth, because in any case there is another path open to and being pursued by the Contractor to obtain the documents. The Dispute resolution process by which the Contractor seeks the production by the same documents as sought in the application but based on an asserted contractual obligation to produce them is not complete. Upon completion, if the documents are not provided by agreement, the Contractor may assert a contractual right, enforceable by separate action to obtain the documents;
(f) Finally, because in light of the undertaking given by the Principal, the pre-action discovery application is contrary to the scheme for dispute resolution agreed by the parties and embodied in clauses 39 and 40 of the EPC Contract. Clause 40.6 provides that nothing in clause 40 Dispute resolution prejudices either party’s right to commence legal proceedings to seek urgent injunctive or urgent declaratory relief in respect of a Dispute. It was by virtue of the injunction application that the Contractor was able to bring the applications permissibly under the EPC Contract, and that part of the application has fallen away.
Timing
As to the time for production, the Contractor proposed that pre-action discovery be provided in two tranches, documents in the possession of HSF within seven days and otherwise documents in the possession of the Principal within 28 days. The Principal submitted that 60 days should be allowed for the making of discovery, should the Court be disposed to make an order.
As I do not consider the criteria in r 32.05 are made out, it is unnecessary to resolve the timing issue.
Disposition
For the reasons set out above the application for pre-action discovery is dismissed.
In summary it is dismissed because the criteria in r 32.05(b) are not made out:
(a) There is a clear tension between the application for injunctive relief and the application for pre-action discovery. Having determined that it has a proper basis upon which to seek an interlocutory injunction, the Contractor cannot establish that it does not have sufficient information to enable it to decide whether to commence a proceeding in the Court to obtain the same relief, based upon the same substantive cause of action that it would be obliged to bring in order to obtain the injunction that it seeks;
(b) As communicated to the Principal and to others in correspondence and Notices under the EPC Contract, the Contractor has already decided that it has a Claim against the Principal. It has given Notice pursuant to clause 39 that it intends to make and to pursue that Claim. That Claim, is the same claim in respect of which it seeks pre-action discovery. For the reasons given, having determined to make and pursue such a Claim the contractor does not require the documents that it now seeks in order to decide whether to issue a proceeding.
(c) Separately, the Contractor has not made all reasonable enquiries. It has not exhausted the Notice of Dispute process that it has initiated seeking the same documents.
As a separate matter, even if the criteria in r 32.05(b) had been made out, in the exercise of the discretion under r 32.05 I would have declined to make an order for the reasons set out above.
Subject to any submissions that the parties may wish to make as to costs I propose to order that the Contractor pay the Principal’s costs of the Originating motion and of the summons on a standard basis.
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