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[2012] NSWSC 1370
plaintiff. The Court concluded that Leighton was entitled to interlocutory relief in the general terms of prayers 1 to 5 of the summons. Relief was conditional on Leighton giving the usual undertaking as to...
Leighton said it had ended its subcontract with Arogen and required Arogen to leave a work site. Arogen disputed the termination and reoccupied the site. The Court recognised that forcing a party to do something before trial is unusual, and that Arogen had arguable points about whether the termination was valid. It nevertheless ordered relief in principle because the interim order would not decide the termination dispute, delay to an important public infrastructure project was costly, and damages appeared capable of addressing Arogen's loss if it later succeeded. Leighton had to give an undertaking as to damages, and Arogen was to have a reasonable period to remove its people and equipment. The precise orders were to be settled by the parties.
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2,286 words · generated 01/10/2026
Leighton Contractors Pty Ltd was carrying out works for Ausgrid to upgrade the electricity supply system in Sydney’s southern suburbs. The project was described as very substantial, involving hundreds of millions of dollars and many kilometres of cables, and as likely to benefit a large part of southern Sydney when completed [1].
No linked legislation citations have been extracted yet.
Leighton subcontracted horizontal directional drilling services to Arogen Pty Ltd. The works contract was made on 8 March 2011 and later varied by an agreement dated 6 January 2012 [2]. The judgment notes that the parties had already litigated an earlier dispute concerning an adjudicator’s determination. McDougall J referred to the earlier decision, Leighton Contractors v Arogen [2012] NSWSC 1323, in which the adjudicator’s determination had been quashed [3]. The present reasons do not revisit that decision’s reasoning.
The original contract contained a convenience termination provision, cl 43.1(a), separate from other termination rights concerning breach, events under the head contract, or work being taken out of Leighton’s hands [4]. On 15 October 2012, Leighton gave notice purporting to terminate for convenience [5]. Clause 43.4 required Arogen, on termination, to cease work and demobilise its people, plant, vehicles, equipment and other things from the site [6]. The notice required demobilisation to begin immediately and effectively be completed within 14 days [7].
Leighton took possession of the Cooks River site and engaged guards. Arogen said it did not accept that the termination was valid [8]-[9]. Following further correspondence, Leighton issued another direction about demobilisation on 26 October. Later that day Arogen personnel reoccupied the site and locked themselves in, with their own security guards, according to the judge’s understanding of the events [10]-[11].
Leighton then sought an interlocutory order requiring Arogen to vacate as quickly as possible [12]. Arogen offered undertakings that would have limited its presence, allowed up to two employees to protect equipment, prohibited interference with Leighton’s work, and relinquished possession except for an area needed to protect its resources and equipment [13]. Leighton said those undertakings were not enough to allow it to continue working, although the judge observed that the evidentiary basis for this submission was unclear [14].
The immediate question was not whether Leighton had validly terminated the contract at a final hearing. It was whether Arogen should be required to leave while that dispute remained unresolved.
McDougall J accepted Arogen’s starting point that mandatory interlocutory relief is highly unusual, particularly where it might practically determine the substantial dispute [16]. The judge did not treat that as a bar. Instead, the decision turned on whether the order would in fact determine the termination issue and on the competing practical consequences of granting or refusing relief.
Arogen advanced three principal challenges to the termination. First, it argued that the variation agreement had removed Leighton’s convenience termination right. The executed variation contained no such restriction, so Arogen would need rectification to add a term said to have been agreed in the offer to vary. The judge also considered it arguable that the offer’s reference to removing works was confined to Sites C and F, neither of which was the disputed site [17]-[19].
Second, Arogen argued that Leighton had to pay amounts specified in cl 43.1(d) to (g) before termination could take effect. The judge regarded that construction as problematic, because some amounts might be disputed and some, such as demobilisation costs, could only be assessed after demobilisation [20]. Third, Arogen said the exercise of the termination right might be subject to good faith and that Leighton may not have acted in good faith. The judge considered it difficult to see how an express convenience termination right, accompanied by compensation, would be constrained by good faith, but accepted that a freestanding contractual obligation of good faith might still be arguable [21]-[23]. These were not final determinations of those issues.
A key point was that the interim order would not resolve whether termination was valid [25]. The judge considered specific performance of the works contract extremely unlikely, though not universally unavailable for construction or infrastructure contracts. One reason for caution was the risk that the Court would have to supervise performance and decide whether contractual standards had been met [24]. If the termination proved invalid, the judge considered that Arogen’s real remedy would be damages, potentially including loss of bargain damages if proved [26]-[27]. Leighton’s ability to meet a damages award was not challenged [26].
The balance of convenience included competing considerations. In Arogen’s favour was the principle that contracts should be performed according to their terms, rather than allowing a party to buy its way out by paying damages. The judge recognised that enforcing cl 43.4 in the interim could produce that practical effect if Arogen later succeeded on termination validity [28].
On Leighton’s side were the public interest in completing the infrastructure works and the substantial costs of delay. Leighton’s evidence put daily delay costs above $56,500, and the judge also considered the delayed benefit to those awaiting completion [15]. The judge further considered damages an adequate remedy for Arogen if it ultimately established that it had lost the contract’s benefit through a breach by Leighton [29]-[30].
Finally, the judge considered the parties’ conduct. Although Leighton had precipitated the dispute by purporting to terminate, Arogen had aggravated the situation by reoccupying the site without notice after being locked out, without articulating a basis for its right to do so [31]. Weighing all those factors, the Court concluded that interlocutory relief should be granted in this case [31].
The relief was not unconditional. Leighton had to give the usual undertaking as to damages, and Arogen had to be allowed a reasonable, but not leisurely, period to remove its personnel and equipment. The parties were considered better placed to propose the practical timetable, so the matter was stood over for short minutes of order [32]-[33].
The judgment expressly describes the application as involving “no question of principle” in its catchwords. It is therefore best understood as a fact-sensitive application of interlocutory relief considerations, not as announcing a new general rule.
The judgment’s stated position before the decision was that mandatory interlocutory relief is unusual, particularly where it may determine the substantial issue in practical terms [16]. The Court nevertheless said that the unusual character of the relief did not prevent it from being granted after considering the full circumstances [31]. Its reasoning did not displace the importance of performing contracts according to their terms. Rather, it weighed that consideration against the public and financial consequences of delay, the availability of damages, and the fact that the final termination question would remain unresolved.
The judgment also states that specific performance of construction and infrastructure contracts is not universally unavailable, but that the circumstances for granting it are extremely limited [24]. It does not set out a comprehensive test for specific performance or identify an exhaustive list of relevant circumstances. Its discussion provides a reason relevant to this case: the Court may be drawn into supervising performance and assessing compliance with contractual standards.
The decision’s practical effect was to require Arogen to vacate before final determination of its termination arguments, while preserving those arguments and its possible damages claim. The condition requiring an undertaking as to damages reflects that the interim order could cause loss if the final outcome differed from the interlocutory assessment. The judgment does not say that damages will always be adequate in similar disputes. It records the Court’s assessment on the evidence and submissions in this case, including the absence of any suggestion that Leighton could not meet damages [26], [29].
At [16], the Court accepted that it is “unusual in the extreme” to grant mandatory interlocutory relief, especially where the practical effect may be to determine the dispute. Plain English: an order compelling a party to act before the final hearing needs careful justification, particularly if it risks making the final hearing pointless.
At [25], the Court said the interim order would not decide whether the contract had been validly terminated. Plain English: requiring Arogen to leave the site would settle the immediate possession issue, but not the underlying contractual question.
At [26], the Court reasoned that if termination was valid, Leighton would be entitled to the relief it sought, and if termination was invalid, Arogen’s rights would be in damages. Plain English: the judge viewed damages, rather than an order requiring the project contract to continue, as the likely remedy if Arogen ultimately proved its case.
At [28], the Court recognised the “powerful consideration” that contracts should be performed according to their terms, rather than allowing a party to pay damages instead of performing. Plain English: a damages remedy is not automatically a complete answer to a claim that a party should honour its contract. The judge treated this as a factor for Arogen, but not as decisive by itself.
At [31], the Court concluded that “the balancing of all those factors requires that the relief be granted in this present case.” Plain English: the result depended on the combination of the public interest, the costs of delay, the likely damages remedy, the limited practical effect on the final contractual dispute, and Arogen’s reoccupation of the site.
At [32], the Court made relief conditional on Leighton’s undertaking as to damages and a reasonable time for Arogen to remove its people and equipment. Plain English: the order was not intended to require instantaneous removal, and Leighton had to accept a potential obligation to compensate for loss caused by the interim order if appropriate.
The judgment is most relevant as an illustration where a party seeks a mandatory interim order requiring a contractor or subcontractor to leave a project site after a disputed termination. The features the Court specifically considered included:
Those features are not stated as a checklist or a universal test. The decision itself says it raises no question of principle. A materially different case, for example one where an interim order would effectively determine the final dispute or where damages were not considered adequate, cannot be resolved by simply applying the outcome here.
The supplied judgment does not cite any later decisions, and the materials provided do not establish how later courts have treated Leighton v Arogen [2012] NSWSC 1370. No claim about subsequent adoption, limitation, distinction or rejection can therefore be grounded in this source alone.
The one other decision mentioned is Leighton Contractors v Arogen [2012] NSWSC 1323, an earlier proceeding between the same parties concerning an adjudicator’s determination [3]. McDougall J described its result as quashing the adjudicator’s decision and stated that Arogen was not entitled to the fruits of its success in that adjudication. The present judgment refers to that earlier case as procedural background, rather than analysing or applying its reasoning to the interlocutory injunction question.
The judgment’s own caution is important when considering its potential use: the catchwords say “no question of principle”, and the reasons repeatedly assess the particular facts. Without later authorities, the source supports describing the case as an example of balancing considerations in an unusual interlocutory application, not as proof that a general rule has been adopted by later courts.
Several questions remained unresolved because the application concerned interim relief. Most centrally, the Court did not finally decide whether Leighton validly exercised its convenience termination right. The questions about the effect of the variation agreement, any asserted payment conditions, and the role of good faith were left for later consideration, with the judge noting that evidence would be needed to develop Arogen’s arguments [17]-[23].
The judgment also did not determine the final amount, if any, payable to Arogen under the contract or in damages. It noted that Arogen might claim more than the amounts specified in cl 43.1, including loss of bargain damages, if it could prove them [27]. Nor did the judgment make a final finding about the merits of such a claim.
The precise terms of the interlocutory orders were not included in the reasons. The Court concluded that relief should be granted in the general terms of prayers 1 to 5, but left the parties to propose short minutes, including a reasonable removal period [32]-[33]. The reasons therefore establish the conditions the judge considered necessary, but not the final wording or timetable.
Finally, the judgment’s discussion of good faith and specific performance is deliberately limited. It recognises that a freestanding good-faith obligation may be arguable [22], and that specific performance is not universally excluded for construction or infrastructure work [24]. It does not resolve the scope of either proposition. Nor does the supplied material answer how courts subsequently treated this decision.
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Judgment (EX TEMPORE - REVISED 6 NOVEMBER 2012) 1HIS HONOUR: The plaintiff (Leighton) contracted with Ausgrid to carry out works for the upgrade of the electricity supply system to the southern suburbs of Sydney. That project is an extremely substantial one, involving hundreds of millions of dollars in cost and many kilometres of electricity supply cables. It will be, upon completion, a project likely to be of benefit to much of the southern part of Sydney. 2Leighton entered into a subcontract with the defendant (Arogen) under which Arogen agreed to perform horizontal directional drilling services. That "works contract", which was made on 8 March 2011, was varied by a variation agreement made on 6 January 2012. 3There have been previous disputes between Leighton and Arogen as to Arogen's entitlement to be paid for work done under the works contract as varied. Unfortunately, those disputes have led to previous litigation in this Court, relating to the determination of an adjudicator: see Leighton Contractors v Arogen [2012] NSWSC 1323. As a result of the Court's decision, the decision of the adjudicator was quashed and Arogen was held not to be entitled to the fruits of its success. I do not propose to repeat what I said as to the unfortunate fact that the parties were deprived of the benefit of their statutory forum for the determination of this dispute by reason of jurisdictional errors on the part of the adjudicator. 4The works contract (at least before it was varied) contained a provision, cl 43.1(a), which entitled Leighton to terminate it for convenience. It is clear that this was separate to the other rights of termination, which included termination for breach (cl 42), termination by reason of something arising under the head contract (cl 43.1(b)), and termination because work was taken out of the hands of Leighton under the head contract (cl 43.1(c)). 5On 15 October 2012, Leighton gave written notice to Arogen whereby Leighton terminated, or purported to terminate, the works contract for convenience (cl 43.1(a).) 6By cl 43.4 of the works contract, Arogen was required to do a number of things upon termination. It was required to cease work under the works contract (para (a)). Further, and of particular significance for present purposes, it was required to "demobilise from the Site all persons, plant, temporary works, vehicles, equipment and other things owned by or under [its] control..." (para (c)). 7The termination notice directed Arogen to commence demobilisation forthwith, and to complete that process in effect within 14 days. 8After that notice was served, Leighton took possession of the works site to which it related (namely, a site known as the Cooks River site) and engaged guards to secure it. 9Arogen replied, stating that it was considering its position but that it did not accept that the termination was valid. 10There was further correspondence, which dealt among other things with what Leighton said was the continued failure of Arogen to demobilise. Thus, a further direction was given in that regard, on 26 October 2012. 11Later on that day, it appears, Arogen personnel reoccupied the site and locked themselves in. They seem to have brought with them their own security guards. As I understand it, that unsatisfactory position continues until the present time. 12I am concerned today with an interlocutory application made by Leighton for an order requiring Arogen to vacate the site as quickly as possible. That application was brought on short notice. Arogen's response to the application is to offer certain undertakings to the Court and to submit to directions that it prepare its case quickly for either an interlocutory or a final hearing. 13The undertakings offered are that: (1) subject to what follows, Arogen will not enter on the subject land; (2) Arogen will however authorise no more than two of its employees to enter and remain on the land to protect its plant and equipment; (3) Arogen will not impede Leighton from performing work on the land or interfering with Leighton's programme for the works; and (4) Arogen will relinquish possession of the subject land "other than that area required to protect its resources, plant and equipment". 14Leighton submits, although on what evidentiary basis is unclear, that those undertakings are insufficient to permit it to continue with its work. 15There is no doubt that this is a dispute that has a very significant public interest element. The evidence of Mr Iain Lamb, for Leighton, is that Leighton is being held up in completing the subject severable portion of the works, and that the completion date for those works is being adversely affected accordingly. Not only will that expose Leighton to significant expenses (Mr Lamb estimates that the daily cost of delay exceeds $56,500), it will also expose those for whose ultimate benefit the works are being carried out, to delayed completion of the works, and thus delayed enjoyment of the benefits. 16The submissions for Arogen commence with the proposition that it is unusual in the extreme for the Court to grant mandatory interlocutory relief on an interlocutory basis. That may be accepted; and accepted a fortiori where the effect of granting relief on that basis is, in practical if not in legal terms, to determine the substantial issue in the proceedings. In this case, it may be doubted that the grant of relief would determine the substantial issue in the proceedings, in a practical sense. 17Arogen submits that there are difficulties with the notice of termination. First, it submits there is an argument available to it that, as a result of the variation agreement, the ability of Leighton to terminate for convenience was removed. That submission depends on the proposition that there was incorporated into the variation agreement a term of its offer to vary the effect that the offer did not permit removal of any part of the works from Arogen. 18The variation agreement, as executed, contains no restriction on, let alone removal of, Leighton's right to terminate for convenience. Thus, Arogen could only succeed on this aspect of its case if it were to have the variation agreement rectified to include the term said to be agreed as a result of acceptance of the offer to vary. 19There is another problem with this aspect of the argument, which is that it is at least arguable, on the fair construction of the variation offer, that the "removal of any works" was limited to two areas known as Site C and Site F, neither of which is involved in the present dispute. 20Next, Arogen submits that it is a condition of an effective termination under cl 43.1 that Leighton pay Arogen certain costs, which are specified in paras (d) to (g). It would be unusual if the valid exercise of a right to terminate depended on payment of amounts, the quantification of which might well be in dispute (and in good faith dispute): for example, the value of work executed prior to termination (para (d)) or the reasonable cost of materials and goods reasonably ordered (para (e)). It is even more remarkable that this would be so where one aspect of the amounts payable is, by definition, something only assessable once demobilisation has occurred: namely, the costs thereof (para (f)). 21Next, Arogen submits, it may well be that the exercise of the cl 43.1 right of termination is something which must be undertaken in good faith; and that in this case there may well be circumstances where the termination was undertaken other than in good faith. 22It is very hard to see how an entitlement to terminate "for convenience", accompanied by the obligation to pay what the parties must be taken to have agreed would be fair compensation for the consequences of such termination, could be conditioned by any obligation of good faith. On the contrary, I would have thought, such a right was one to be exercised according to idiosyncratic or personal notions of convenience, and not necessarily one constrained by any concept of good faith. In saying this, I accept that it may still be arguable that good faith is a freestanding obligation of the particular contract, and not merely an implied incident of performance of contractual obligations. Of course, if the latter view were correct, it might have little to do with the exercise of a contractual right. 23Be all that as it may, it must be accepted that there are arguments available to Arogen. It must be accepted, also, that those arguments would require evidence to flesh them out, or to raise the factual framework within which they could be articulated and considered. 24I said earlier in these reasons that the effect of granting mandatory interlocutory relief would not amount in substance to the final determination, in a practical sense, of the substantive questions in issue. This is a case where it is unlikely in the extreme that the Court would grant specific performance of the works contract as varied. Whilst I accept that there is no universal rule that the Court will never grant specific performance of a contract for construction or infrastructure work, or more generally a building contract, nonetheless the circumstances in which the Court will do so are extremely limited. One reason why the Court is reluctant to grant specific performance of such contracts is that it may be called upon to supervise that performance, if only because one party or the other will require the Court to consider whether the relevant performance obligations and standards have been met, in accordance with the Court's decree. 25Nonetheless, the substantial question - whether the contract has been validly terminated - is not one that will be determined, in either a practical or legal sense, by the grant of the mandatory interlocutory relief that Leighton seeks. 26In the circumstances that appear from the evidence and submissions, it seems to me that the real issue in the case is whether the contract has been validly terminated. If it has, then, by hypothesis, Leighton is entitled to the relief that it seeks. If it has not, then again by hypothesis, Leighton is not entitled to the relief that it seeks. But in circumstances where, as I have indicated, it is unlikely in the extreme that specific performance would be granted, the necessary consequence is that Arogen would be left to its rights in damages. There is no suggestion that Leighton is not good for such damages as may be proved. 27Further, if Arogen's contentions are correct, then the damages to which it is entitled may go well beyond its cl 43.1 entitlements, and could include such loss of bargain damages as it might be able to prove. 28In this case, there are very significant and important balance of convenience factors. On the one side, there is the presumption that contracts should be performed according to their terms, and that parties should not be able to buy their way out of contractual obligations by paying damages for breach. That is a powerful consideration in Arogen's favour. The effect of enforcing cl 43.4, on an interlocutory basis, would be to permit Leighton to do that very thing if, ultimately, the termination issue were determined in Arogen's favour. 29On the other hand, there is, as I have said, a strong public interest in completion of the works. There is also the circumstance that the costs of delay are accruing at a very substantial daily rate. Finally, there is the circumstance that whatever the outcome of the termination question may be, the real rights that Arogen has are rights in damages; and this is a case where damages would appear to be an adequate remedy for loss of the benefit of the contract if indeed it is proved that Arogen has lost that by reason of some breach on Leighton's part. 30Of course, and harking back to what I said about specific performance, the adequacy of damages as a remedy is another factor that would tell against the grant of a decree for specific performance. 31In those circumstances, and taking into account, as I have already acknowledged, that it is only in a most unusual case that the Court will grant, by way of interlocutory relief, an order of a mandatory nature, nonetheless I think that the balancing of all those factors requires that the relief be granted in this present case. In reaching that conclusion I take into account also that although Leighton precipitated the situation by terminating (or purporting to terminate) the works contract, nonetheless Arogen aggravated it by reoccupying the site, without notice even though it had been locked out, and without articulating either any reason in support of its right to do so or any other justification for its action. 32For those reasons, I conclude that Leighton is entitled to relief on an interlocutory basis in the general terms of prayers 1 to 5 of the summons. Clearly enough, that relief should only be granted on the basis that: (1) Leighton gives the usual undertaking as to damages; and (2) Arogen is allowed what is in all the circumstances a reasonable (but not leisurely) time to remove its personnel and its equipment. 33It is my view that the parties are in a better position than the Court to deal with this latter aspect of the matter and accordingly I propose to stand the proceedings over until tomorrow morning at 9.30am to enable the parties to bring in short minutes of order.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 November 2012
Leighton
Arogen
The Court concluded that Leighton was entitled to interlocutory relief in the general terms of prayers 1 to 5 of the summons. Relief was conditional on Leighton giving the usual undertaking as to damages and Arogen receiving a reasonable, but not leisurely, time to remove personnel and equipment. The proceedings were stood over until 9.30 am the following morning for the parties to bring in short minutes of order: [32]-[33].