Birdon Pty Ltd v Houben Marine Pty Ltd

Houben Marine sends fresh invoices for subsequent charter hire seven months later 12 On 20 February 2011, Houben Marine sent five further invoices, ADs 10-14, to Birdon. These asserted that Ain Dschalut had been on hire from 18 July 2011 to 26 December 2011. Subsequently, on 8 March 2011, Houben Marine sent three more invoices, ADs 15-17, claiming further hire until 20 March 2011. The total claimed in those eight invoices amounts to about $2,060,000. 13 The eight invoices bore dates well before the dates of their despatch. The first, ADs 10, was dated 31 August 2011. It claimed $95,040 for hire between 18 July 2010 and 15 September 2010. That was apparently based on the last part of cl 33.2 of the additional terms, claiming hire at the rate of 15% of the charterparty rate for 60 days. Invoice ADs 11 was dated 9 September 2010 and claimed $190,080 hire at the full rate of $67,200 for two weeks and four days from 16 September to 3 October 2010. Invoice ADs 12 was dated 27 September 2010 and claimed $295,680 for four weeks' hire to 31 October 2010. Invoices ADs 13 and 14 were dated 25 October and 22 November 2010. Each claimed a further four weeks' hire to 28 November and 26 December 2010 respectively. The second batch of invoices, ADs 15, 16 and 17, sent to Birdon on 8 March 2011, were dated 20 December 2010, 17 January 2011 and 14 February 2011 respectively. Each claimed four weeks' hire for periods ending 23 January, 20 February and 20 March 2011 respectively. Each of the eight invoices commenced with the anomalous assertion, given their content, dating and times of despatch: "2 weeks hire payable in advance as per Charter agreement." 14 Subsequently, on 21 April 2011, Houben Marine made a payment claim for $2,132,907.86 against Birdon under the Security of Payment Act asserting that the eight invoices, together with one other which is not presently relevant, were unpaid. The payment claim asserted reference dates for payment of the last day of each month between March 2010 and March 2011. It claimed that the date for payment was 10 May 2011. 15 The interlocutory injunctions I granted in May and June this year restrained Houben Marine from proceeding with the adjudication process, from seeking any adjudication certificate or making any further application relating to those invoices under the Security of Payment Act. The interlocutory injunctions also restrained the adjudicator and his appointer from proceeding with the adjudication or referring to adjudication any further payment claims made by Houben Marine based on the impugned invoices. At that time, Birdon put forward that its financial position was as recorded in its accounts as at 31 October 2010. The balance sheet in those accounts showed that the company had share capital and reserves of about $2.26 million, including trade debtors of over $5 million, a loan to its holding company, Birdon Holdings Pty Limited, of about $1.2 million, and total assets of nearly $8 million. The accounts showed total liabilities of about $5.6 million. 16 When the matter was returned before me following the delivery of judgment by the Full Court, Houben Marine put into evidence Birdon's draft accounts for the year ending 30 June 2011. These showed a significant change in Birdon's balance sheet. The total capital and reserves were now about $1.34 million. The intercompany loan account due by the holding company had increased to about $2 million. Birdon's total current assets were about $2.45 million and total current liabilities were about $3.1 million, leaving it with net assets of about $1.34 million.

The issues between the parties 17 The cases of each of the parties on what the oral contract provided and whether or not it was at an end following the dredge's return to Homebush Bay are clearly divergent, on the facts, and on what might be the proper construction, and reconciliation, of the apparently conflicting terms of the 1 April 2010 version of the charterparty, if that is found ultimately to record the agreement made by the parties. A major issue for the trial will be the contractual period of the hire. That will involve determining whether or not the charterparty required mutual agreement to extend the hire period beyond three months, whether additional cl 33.2 effected such an extension or whether, as Houben Marine appears to contend as an alternative in its defence, the parties made some further agreement on 30 March 2010 for an extension of time. Birdon argued that the contract orally agreed between the parties on 30 March 2010 provided for the hire of the dredge for a period of three months for use in Western Australia, and if that were completed before the three month period had ended, for return to Sydney for use at Garden Island. In addition, Birdon alleged that each of the invoices was "backdated". 18 Birdon relied on the return of the dredge to Houben Marine's Homebush Bay premises after more than three months of hire as a redelivery and, therefore, the completion of the charterparty. There is no evidence that Houben Marine ever informed Birdon that the dredge was ready for use after it had been returned to Homebush Bay in mid July 2010. Houben Marine argued that there was no evidence of a notice of redelivery in accordance with the written terms of the charterparty and, so, it was entitled to treat the charter as continuing. Houben Marine made a submission in the adjudication proceedings explaining the seven month delay between the return of the barge to its Homebush Bay premises and service of the first five invoices in respect of hire claimed after that return. That explanation was follows: "There was no need to communicate that hire was on going when this was clearly evident from the contract. … The reason for the delay in the issuing of invoices was because the relevant director of Houben Marine was distracted as he was going through a divorce at the time." 19 Birdon also alleged that Houben Marine made representations, in trade or commerce, that in substance were: the hire period was effectively for three months or as extended by mutual agreement on two weeks' notice, and upon redelivery at Homebush Bay the charter would terminate (the first representations); Houben Marine's intention was only to seek to hire out the dredge for three months and there would be no hire or further obligation due by Birdon once she was redelivered to Homebush Bay (the second representations); the eight invoices served on Birdon in February and March 2011 were genuine, correctly represented the dates of their issue and were not backdated (the third representations). 20 Birdon alleged that the first representations were made before the oral contract was made. It pleaded that each representation was relied upon by it and amounted to a contravention of s 18 of the Australian Consumer Law. It alleged that by reason of the first representations it was misled into entering into, or performing, the charterparty without reviewing or revising the terms of the unsigned Barecon 2001 form proffered in the email of 1 April 2010. Secondly, Birdon asserted that at no time prior to late February 2011, when it received the first set of invoices, had Houben Marine suggested that the charterparty was still on foot following redelivery of the dredge in July 2010. Accordingly, Birdon claimed that the second representations had caused it to be misled into believing that the charter was at an end from the time of the dredge's redelivery. Thirdly, Birdon alleged that the third representations were calculated to bring about a situation in which Birdon was exposed to an adjudication process based on the eight invoices and their use in supporting the payment claims. It asserted that in making the payment claims, Houben Marine represented that they were based on genuine reference dates, the invoices had not been backdated, and had become due and payable and remained unpaid from their dates of issue. 21 In effect, Birdon claimed that it is not liable for any further amounts of hire at all and that the true contract between the parties effectively came to an end when the dredge was returned to Homebush Bay in July 2010. Alternatively, Birdon sought relief on the basis that it was misled by Houben Marine's conduct in contravention of s 18 to believe that the contract either provided, as the first representations suggested, for the three month period of hire, or alternatively, that the contract had, in fact, been accepted to be at an end as asserted in the second representations.

(a) Should an interim injunction be granted under s 234 of the Law? 22 It is convenient to deal first with the claim for an interim injunction under s 234 of the Australian Consumer Law. That section provides that if an application for an injunction is made under s 232, the Court may, if it considers desirable, grant an interim injunction pending the determination of that application. There is no dispute that Birdon is entitled to bring its application for relief under s 234. The test applicable for the grant of an interlocutory injunction has been subject to some debate between the parties. As noted above, the test is set out in the organising principles identified in the reasons of Gummow and Hayne JJ in O'Neill 227 CLR at 81-82 [65], namely: 'The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd ((1968) 118 CLR 618). This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued ((1968) 118 CLR 618 at 622-623): "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 ((1968) 118 CLR 618 at 620). With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal ((1968) 118 CLR 618 at 622): "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."' 23 The real debate between the parties centred on whether the second of the two criteria for the grant of the injunction has been established in this case. The substance of the parties' arguments centred on the questions of the degree to which the inconvenience or injury to each has to be established in this application and how that may be affected by the strength of any prima facie case, which it appears that Houben Marine concedes currently exists. 24 I am satisfied that Birdon has shown a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial, subject to the question of the balance of convenience. The strength of the probability of Birdon's success is signalled by the fact that for over seven months Houben Marine made no claim at all for what ultimately amounted to over $2 million in the aggregate. That sum was comprised of very large sums accruing, if its case were correct, every two weeks at the rate of $134,400. It is notable, in weighing the likelihood of success of a claim for charter hire due two weeks in advance for eight months, that nothing was claimed by the owner (Houben Marine) against a charterer, particularly in circumstances where Houben Marine did not give any notice of the dredge's reassembly and availability for use at any time. And, Houben Marine was aware of Birdon's ongoing work at Garden Island because it had two of its hopper barges working on that project, earning it charter revenue. A further factor that adds to the apparent strength of Birdon's prima facie case is the present absence of any evidence of a mutual agreement for an extension of the hire period, after the return of the dredge to Homebush Bay, apart from what happened prior to the making of the oral contract on 30 March 2010. 25 In addition, the reference dates relied on by Houben Marine in its payment schedule are somewhat incongruous. There is no apparent reason why they were claimed to be at the end of each month of the asserted period of the hire, rather than for every second week in advance, as Box 22 of the Barecon 2001 form provided. Of course, this issue may be resolved by an adjudicator in the course of an adjudication. 26 If the current interlocutory injunctions substantively remain in place until final determination of the proceedings, the adjudication process will continue to be forestalled. Of course, those injunctions must be justified on a different basis following the decision of the Full Court that the current injunctions should be dissolved after Birdon failed on its Constitutional challenge. 27 These facts suggest that there is a strong prima facie case that if the evidence remains unchanged, Birdon would be likely to succeed at trial. However, it is likely that at the trial, there will be, first, considerably more evidence adduced and, secondly, detailed argument on the construction of any contract, whether it is fully recorded in the 1 April 2010 Barecon 2001 form or elsewhere. A trial of those issues will be necessary before a confident conclusion could be reached as to what the real underlying rights of the parties are. It is not appropriate to express any views on that question on this application. I merely make the observation that at the moment, on the limited evidence, and bearing in mind that Houben Marine has not yet exercised its opportunity to put on evidence as to the circumstances, it is impossible to know the basis on which the ultimate trial will be decided. 28 The grant or continuation of interlocutory injunctions will not substantively dispose of the rights of either of the principal parties in the proceedings. However, Birdon's position must be balanced against the interruption in the statutory right of Houben Marine to seek remedies under the Security of Payment Act. That Act was designed to ensure, as its analogues throughout Australia were, that the process of adjudication would provide a speedy and effective means of ensuring cash flow to builders from parties with whom they contract, where those parties operated in a commercial, as opposed to a domestic, context. That intention reflects the legislature's appreciation that an assured cash flow is essential to the commercial survival of builders and if a payment the subject of an adjudication is withheld pending the final resolution of the builder's actual entitlement to payment, the builder may be ruined, as Keane JA observed in RJ Neller Building Pty Limited v Ainsworth [2009] 1 Qd R 390 at 400-401 [39]. Fraser JA and Fryberg J agreed with his Honour. 29 Houben Marine argued that this speedy adjudication procedure ought not be interfered with by the grant of an interlocutory injunction and that the balance of convenience weighed heavily in its favour. It also argued that no present damage had been sustained or proved by Birdon and that in effect, its application for injunctive relief was premature. Houben Marine said that this was because until the result of the adjudication process was known, there would be uncertainty as to the best means of balancing the respective prejudices that each party will, or might, suffer by the grant or withholding of interlocutory relief. Houben Marine argued that if the adjudication were allowed to proceed, the parties would be able to address arguments from a new position, influenced by whether the adjudicator had accepted Birdon's argument that Houben Marine's claims were not maintainable under the contact, or alternatively, the adjudicator having provided for a reduced payment or set of payments. 30 Houben Marine also pointed to the fact that Birdon had not paid any money into Court, as would ordinarily be expected, so it claimed, and indeed, as would be required under s 25 of the Security of Payment Act if an attempt were made to set aside a judgment based on an adjudication certificate. During the course of argument, Birdon offered to provide, on or before 1 November 2011, $200,000 in cash to be paid into Court or provided by way of a bank guarantee as securing its undertaking as to damages, if an interlocutory injunction were granted or continued. 31 Houben Marine also argued that Mason A-CJ in Castlemaine Tooheys Limited v South Australia (1986) 161 CLR 148 at 153 had appositely observed that a party applying for an interlocutory injunction had to demonstrate that he or she would suffer irreparable injury for which damages would not be an adequate compensation. 32 The concept of irreparable injury to which his Honour referred must, of course, be read having regard to the organising principles accepted as stating the law by the majority of the High Court in O'Neill 227 CLR 57. I am of opinion that Mason A-CJ was referring to the well known principle affecting the discretion to grant an interlocutory injunction, namely, that damages would not be adequate compensation for the injury that the plaintiff would suffer if an injunction were not granted. This is relevant in considering the degree of injury that the plaintiff would suffer by permitting the threatened conduct to continue unabated. I am not satisfied that there is any substantive difference between what Mason A-CJ had in mind and the organising principle of considering whether the inconvenience or injury which the plaintiff is likely to suffer if an interlocutory injunction were refused, outweighs or is outweighed by the injury the defendant would suffer if an injunction were granted. Both what Mason A-CJ said and the organising principles involve consideration of the same concepts and matters in exercising the discretion to grant an interlocutory injunction. 33 The injury to which Birdon will be exposed is a process in which a debt due by it will be created under the Security of Payment Act if an adjudication is made against it by force of s 23(2) of that Act. Whether or not an injunction is later granted, the creation of such a debt is likely to create significant disadvantage for Birdon. That is because, on its current balance sheet, any significant sum found to be due by it in the adjudication would cause it substantive detriment and may render it insolvent. In addition, if an adjudication were made against Birdon, Houben Marine would be entitled to add statutory interest of 8.5% or perhaps more at the charterparty rate, thereby leading to a not insubstantial increase in the amount of Birdon's liability. 34 Next, Houben Marine argued that Birdon had not identified any causative effect between the alleged misleading conduct and any apprehended loss that Birdon asserted. Houben Marine argued that this ellipsis was demonstrated by the reasons of Hodgson and Basten JJA in Bitannia Pty Limited v Parkline Constructions Pty Limited (2006) 67 NSWLR 9 at 39 [106] per Basten JA (also at 27 [58]-[60]) and at 15 [8] per Hodgson JA. 35 In one sense, there is an opposition here between two sets of statutory rights that are in play, namely, Houben Marine's right to pursue the adjudication process under the Security of Payment Act and Birdon's right to seek relief from Houben Marine's alleged departure from the norm of conduct in s 18 of the Law. Birdon claimed that it will suffer loss by the use of the adjudication procedure in the circumstances where an adjudication award may be made against it despite, first, the contract being at an end or, secondly, the misleading or deceptive conduct that gave rise to its entry into the contract, or, thirdly, the rendering of the invoices that may be acted on by the adjudicator, in treating the contract or the payment claims as valid. 36 In my opinion, the proper principle to be applied in a case like this was identified by Hodgson JA in Bitannia 67 NSWLR at 15 [8], namely, that the Australian Consumer Law: "… discloses a legislative intention that persons should have a remedy to protect them from damage from the misleading conduct of a corporation, or to recover from the corporation compensation for such damage, and it would not be in accordance with that intention that a corporation should be permitted to obtain a judgment against a defendant on a cause of action one essential element of which has been created by that corporation's misleading conduct against that defendant. Subject to discretionary questions, it would in my opinion be appropriate for a court to give effect to that legislative intention by granting an injunction under [the powers now reflected in ss 232 and 234 of the Law]." (emphasis added) 37 The provision by Birdon of $200,000 in cash or by way of a bank guarantee in support of the undertaking as to damages will also be of assistance in providing Houben Marine with some redress if it succeeds at trial. 38 In weighing the injury likely to be suffered by the parties, I am mindful of the fact that, without any real explanation, Houben Marine delayed for over seven months in making claims that a valuable dredge was actually on hire after it had been returned to the contractually nominated place of redelivery, Homebush Bay. Its assertion that its delay was due to one of its directors having difficulties arising out of his own personal circumstances suggests that the injury from a further delay of a few months until the matter comes on for a trial that will commence on 12 March 2012 will not be of great significance to it. This is hardly a situation in which Houben Marine has timeously or expeditiously sought to pursue its rights. It sat on its hands for over seven months before it created a series of invoices for that preceding period without ever raising with the other party to the contract a serious contention that the dredge was still on hire. On the material now before me, Houben Marine has failed to give any real explanation for its delay or of any injury that it may be caused if the status quo is maintained until Birdon's case is determined on its merits. 39 Birdon's claim is further strengthened by the circumstance that Houben Marine, without any explanation, relied on invoices that bore issue dates well before the dates in February and March 2011 when they were served, with the exception of the last. There has been no explanation as to how that discrepancy in dating and service happened, even accepting that one of the directors was experiencing matrimonial problems. 40 I am satisfied that damages would not be an adequate remedy if I allowed an adjudication process to proceed that could potentially result in a substantial determination being made against Birdon. The size of the payment claims is significant. At the moment, it would appear that these claims were put forward by Houben Marine in order to obtain an adjudication under the Security of Payment Act for a sum in the order of $2 million plus interest. I am satisfied that Birdon is not, and will not be, in a position where it could meet an adjudication debt of that order or of a significant size. On the other hand, there is no evidence before me of a substantive injury to Houben Marine if it is kept out of its entitlement to pursue an adjudication procedure. 41 The scheme reflected in s 32 of the Security of Payment Act is that at a final hearing of the parties' underlying dispute, the accelerated payment of an adjudication debt can be taken into account in adjusting the parties' rights if they are not as the adjudicator found. It is not appropriate to wait until the adjudication process takes place to assess the consequences of what the adjudicator might determine. Whatever the adjudicator determines will then become a debt created, and given effect, by statute. Whether or not an injunction were granted restraining Houben Marine from presently enforcing it, the existence of that debt and interest is likely to impact adversely on the appearance of Birdon's solvency to its creditors.

(b) The relevance of the application for special leave to appeal 42 The second, and until now primary, basis upon which Birdon sought the continuation of injunctive relief was that it has applied to the High Court of Australia for special leave to appeal from the decision of the Full Court. The special case stated for the consideration of the Full Court included the question whether the existing interlocutory injunctions should continue. The majority held they should not. Nonetheless, the subject matter of the application for special leave includes, in part, the consideration of that very question. 43 It is less than desirable that, as the dissenting judge in the Full Court, I should be asked effectively to make an evaluation of the strength of Birdon's attack on the decision of the majority: see Paringa Mining & Exploration Co plc v North Flinders Mines Limited (1988) 165 CLR 452 at 459-460 per Mason CJ, Brennan and Gaudron JJ. Whether or not an injunction ought be granted pending the hearing of an application for special leave to appeal involves the exercise of an extraordinary jurisdiction. In that situation, the Court must consider the four issues raised by Brennan J in Jennings Construction Limited v Burgundy Royale Investments Pty Ltd [No. 1] (1986) 161 CLR 681 at 685, namely: (1) whether there is a substantial prospect that special leave to appeal will be granted; (2) whether the applicant has failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending; (3) whether the grant of a stay will cause loss to the respondent; and (4) where the balance of convenience lies. The second issue is not relevant here, since I am considering that very question. Brennan J addressed an argument by the respondent that special leave there was unlikely to be granted saying (at 685): "It is undesirable to canvass the arguments in advance. I do not, however, think that the prospect of a grant of special leave is insubstantial." His Honour imposed, as conditions on the grant of a stay in that case, that the applicant seek special leave and prosecute any appeal with all reasonable expedition and give an undertaking as to damages. 44 In this matter, the argument based on Constitutional invalidity is not insubstantial. Birdon is prepared to give undertakings, by its senior counsel, in the terms that it gave earlier as well as a further one, to provide a measure of security for the undertaking as to damages, albeit that it falls far short of Houben Marine's total claim. If the High Court were to grant special leave to appeal there may be a question as to the maintenance of the trial date that I have fixed. When I offered the trial date neither party had put on or prepared its evidence for a final hearing. Birdon has sought about three weeks in which to provide any further evidence that it will seek to lead. After that, Houben Marine has said that it will not be able to complete its evidence preparation until late January 2012.

Conclusion 45 There being no evidence of any substantial injury to Houben Marine other than the one that can be inferred by it being kept out of a claim for a very large sum of money, to which it may only be temporarily entitled in any event, I am not persuaded that the injury it will suffer from the relatively short delay until a trial in this matter is held and a final judgment delivered will outweigh the potential prejudice and detriment to Birdon. I am satisfied that Birdon is entitled to interim protection under s 234 of the Law based on its claims under s 18: Bitannia 67 NSWLR at 15 [8]. 46 For these reasons, I am of opinion that I should make an order giving effect to the answers the Full Court gave but then remake the interlocutory injunctions in the same terms until the final hearing has concluded or until further order, on conditions that Birdon undertakes: (1) to pursue its application for special leave to appeal, and any appeal, and all steps in these proceedings up to and including the completion of the trial with all due expedition; and (2) on or before 1 November 2011 to pay the sum of $200,000 into Court or into any bank account which may be agreed between it and Houben Marine or alternatively provide a bank guarantee in that sum in a form acceptable to Houben Marine or failing agreement, in a form settled by the Registrar in that sum. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.