MP Water Pty Ltd v Veolia Water Australia Pty Ltd

MP Water Pty Ltd v Veolia Water Australia Pty Ltd - [2021] NSWSC 582 - NSWSC 2021 case summary — Zoe

APPLICATIONS FOR MANDATORY INTERLOCUTORY INJUNCTIONS

Drawing on my judgments in In the matter of A Twins Spare Parts Pty Limited [2019] NSWSC 1347 and Clough v Breen [2020] NSWSC 653, on an application for an interlocutory injunction, the question is whether the plaintiff has made out a prima facie case and whether the balance of convenience favours the grant of the injunction. As to whether there is a prima facie case, a plaintiff does not need to show that it is more probable than not that at trial the plaintiff will succeed. It is sufficient to show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending trial. How strong the probability needs to be depends upon the nature of the rights the plaintiff asserts and the practical consequences likely to flow from the orders the plaintiff seeks: Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105 at [87] per Newnes JA (McLure P and Corboy J agreeing).
The second question 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 was granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1; Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46. Whether an applicant for an interlocutory injunction has made out a sufficient prima facie case and whether the balance of convenience favours the grant of such relief are related, not independent, questions: Warner-Lambert Co LCC v Apotex Pty Ltd [2014] FCAFC 59; (2014) 311 ALR 632 at [70] per Allsop CJ, Jagot and Nicholas JJ; Mineralogy v Sino Iron at [87].
As the plaintiff seeks orders that Veolia do something, it is appropriate to consider the principles which apply to granting mandatory interlocutory injunctions. The learned authors of J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis) note at [21-395]: … mandatory injunctions are comparatively rare. … The interlocutory mandatory injunction is particularly unusual. This is partly because a mandatory injunction is usually more onerous for a defendant to comply with than a prohibitory one. It is partly because the usual purpose of an interlocutory injunction is to preserve the status quo, a consideration inapplicable to mandatory injunctions. But there is nothing to prevent a court from issuing an interlocutory mandatory injunction. … In truth, a court hearing an application for an interlocutory mandatory injunction must apply exactly the same tests as it would in the case of an application for an interlocutory prohibitory injunction, not some different or more exacting test.
The rarity of interlocutory mandatory injunctions was noted by J D Heydon, Heydon on Contract (2019, Lawbook Co) at [28.530]: In part this is because interlocutory mandatory injunctions, by compelling the defendant to take positive steps, are more likely to inconvenience the defendant and cause the defendant harm less capable of being remedied by the plaintiff's undertaking as to damages if the plaintiff fails at the final hearing. For this reason, the author (at [28.540]) referred to authority to the effect that in an interlocutory application for an enforcing mandatory injunction, the Court must feel "a high degree of assurance that at the trial it will appear that the injunction was rightly granted": Shepherd Homes Ltd v Sandham [1971] Ch 340 at 351 per Megarry J.
This approach was considered by Hoffmann J (as his Lordship then was) in Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670 at 680-1: (emphasis added) The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the court may make the "wrong" decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been "wrong" in the sense I have described. The guidelines for the grant of both kinds of interlocutory injunctions are derived from this principle. … If it appears to the court that, exceptionally, the case is one in which withholding a mandatory interlocutory injunction would in fact carry a greater risk of injustice than granting it even though the court does not feel a "high degree of assurance" about the plaintiff's chances of establishing his right, there cannot be any rational basis for withholding the injunction.
In Australia, the test for a mandatory injunction is no different to an 'ordinary' prohibitive injunction. Nor has the requirement for "a higher degree of assurance" found wide acceptance. The authorities are canvassed and helpfully summarised by Newnes JA, with whom McLure P and Corboy J agreed, in Mineralogy v Sino Iron at [76]-[85]. His Honour concluded that no different standard applies. In short, Gummow J rejected the "high degree of assurance" test in Businessworld Computers Pty Ltd v Australian Telecommunications Commission [1988] FCA 127; (1988) 82 ALR 499, noting at 503: … it has long been the case that interlocutory mandatory injunctions would be more likely to issue where the defendant was compelled, not to embark upon a fresh course of conduct, but, as here, to revert to a course of conduct pursued before the occurrence of the acts or omissions that provoked the litigation. See likewise Kiefel J in Racecourse Totalizators Pty Ltd v Totalisator Administration Board of Queensland (1995) 58 FCR 119 at 123; [1995] FCA 1405; Bingham v 7-Eleven Stores Pty Ltd [2003] QCA 402 at [108]; Tymbook Pty Ltd v State of Victoria (2006) 15 VR 65; [2006] VSCA 89 at [33]-[35] per Maxwell P and Charles JA; National Commercial Bank Jamaica Ltd v Olint Corporation Ltd [2009] UKPC 16 at [19]-[21] per Lord Hoffmann for the Privy Council.

[3]

SERIOUS ISSUE TO BE TRIED

Veolia submits that the "Step-In Notice" demands that Veolia perform acts that it is not required to perform pursuant to clauses 44(a)(7)-(9) of the Services Provider Agreement. The Step-In Notice requires Veolia to operate the Facility. That is not Veolia providing "assistance" to the plaintiff for the plaintiff to take possession of the Facility and for the plaintiff to "provide the Services" in accordance with clause 44(a)(7). This is the plaintiff demanding that Veolia itself provide the Services. The Step-In rights are limited to the plaintiff taking possession of the Facility and the plaintiff or the Customer providing the Services, as was said to be made plain by clauses 44(b) and (d) of the Services Provider Agreement. Thus, the Step-in Notice was invalid.
Further, the requirement on Veolia at paragraph (a) of the Step-in Notice to "assist" was "so widely and ambiguously worded as to be deprived of effect": Optus Networks Pty Ltd v City of Boroondara [1997] 2 VR 318 per Ormiston, Charles and Callaway JJA at 337. The requirement on Veolia at paragraph (b) of the Step-in Notice was said to fall foul of the principle that one does not grant an injunction to compel the defendant to do what is "necessary" without further definition: Greetings Oxford Koala v Oxford Square Investments Pty Ltd (1989) 18 NSWLR 33 per Young J at 42. Paragraph (b) failed to define what was "necessary" or "desirable". It is not for the Court to formulate the type of order that can be made: Greetings at 42. Further, it was submitted that the Court could not be satisfied that making the injunction would carry a "lower risk of injustice": Albarran v Envirostar Energy Ltd [2002] NSWSC 108 per Barrett J at [29].
The plaintiff submitted that the power in clause 44(a)(7) is to "take or assume total or partial possession, management and control". The words "total or partial" condition the "possession, management and control". That there can be a partial assumption of management or control was said to be demonstrated by clause 44(d), which is a partial suspension of the defendant's obligations "to the extent necessary". Further, Veolia must "assist" the plaintiff take that partial management or control. The assistance Veolia is obliged to provide is described as assistance "wherever and however possible to ensure". That is not merely an obligation not to hinder the plaintiff if it takes partial management and possession by attending to give a direction that water treatment services recommence.
By attending the site and giving a direction, the plaintiff submitted that Mr Bowen would be taking temporary, and partial, "possession, management and control of the Facility" within the meaning of clause 44(a)(7). But even were that not the case, the identified Step-in Rights include the plaintiff taking "such other steps as are necessary or desirable to continue the provision of the Services" (clause 44(a)(7)) and doing "anything which the Services Provider is entitled to do under an O&M Project Contract or with respect to the Project" (clause 44(a)(9)). The giving of the direction by Mr Bowen was a step necessary for the continued provision of the Services (for the purposes of clause 44(a)(8)) and defendant would undoubtedly be able to give a direction of the type given by Mr Bowen (for the purposes of clause 44(a)(9)). The Step-in Notice was therefore within power, in the sense that it was an exercise of an identified Step-in Right within the meaning of clause 44(a)(8) and (9), as well as clause 44(a)(7).
The plaintiff submitted that there is no minimum requirement for a notice which conditions the exercise of the power. The power may be exercised without giving a notice at all: clause 44(d). The purpose and, therefore, required content of any notice is identified in clause 44(d), being to provide notice to the defendant that the plaintiff is exercising its Step-in Rights. The notice given performed its contractual function. No more was required. Further, the plaintiff submitted that the notice given identified that which must be done. Veolia must assist the plaintiff to commence treatment of mine water at the Facility and do those further things directed as necessary or desirable to continue provision of the Services. That is within the power of requiring that Veolia assist the plaintiff. Veolia will be required to show the plaintiff how to recommence operation and, if the plaintiff cannot do that itself, to assist the plaintiff in restarting operation of the Facility.
There is no doubt that, in appropriate cases, a court may determine the proper construction of a contract in determining an interlocutory application. As to when a court may embark upon such a determination, the authorities suggest that the following matters will bear upon that choice: 1. The complexity involved in construing the contract: Cohen v Peko-Wallsend Ltd [1986] HCA 70; (1986) 68 ALR 394 at 397 per Gibbs CJ, Mason and Wilson JJ. 2. The urgency of the matter and the time available to hear and determine the application: Cohen v Peko-Wallsend Ltd at 397; ETT v IPSTAR Australia [2008] NSWSC 644 at [29] per White J ("if time permits and it is otherwise possible to do so"). 3. Whether construing the contract is likely to require considering evidence of the objective matrix of facts in which the contract was made or otherwise require making findings of fact on further evidence adduced at trial: ETT at [29]; The Trust Company (Australia) Ltd v NextDC Ltd [2018] NSWSC 736 at [30]-[31] per Parker J. 4. The strength of the applicant's substantive case, especially where the grant or refusal of the interlocutory injunction would, in effect, finally determine the matter at hand in favour of the party successful in the application: Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238; [2011] FCAFC 156 at [72]-[73] per Dowsett, Foster and Yates JJ, citing NWL Ltd v Woods [1979] 1 WLR 1294 at 1305-1307 per Diplock LJ. 5. The prejudice that would be suffered by each of the respective parties, including the extent to which an undertaking as to damages would ameliorate the prejudice: Garnock v Black [2005] NSWSC 1052 at [23] and [31]-[32] per Campbell J (see also Garnock v Black [2005] NSWCA 475 at [15]-[19] and [28] per Basten JA). 6. Whether the commercial purpose of the contract would be defeated if an interlocutory injunction were granted contrary to its proper construction: Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd [2015] VSCA 98 at [34]-[38] per Osborn and Ferguson JJA and [122]-[123] per Kaye JA. 7. Whether determination in an interlocutory judgment will fail to achieve finality as the matter will be re-argued at a final hearing or on appeal: The Trust Company (Australia) Ltd v NextDC Ltd at [29] per Parker J ("I think it is inevitable, given the intensity of the forensic contest, that the losing party will challenge my decision and accordingly no time will be saved.")
As I understand it, Veolia does not dispute on this application that, in the circumstances when the "Step-in" Notice was issued, the plaintiff was entitled to exercise Step-in rights. The issue is the scope of those rights and whether the notice was valid and clear. The most relevant portions of clause 44 provide: (a) If at any time during the Operations Phase: (1) a Services Provider Default Termination Event occurs; (2) a Services Provider Default occurs and the Services Provider has failed to diligently pursue the relevant Services Provider Default Notice; or … Project Co (in the case of paragraphs (1) to (3)) or the Customer (in the case of paragraphs (4) to (6) and in accordance with clause 44 of the WTSC) may elect, and if it so elects the Services Provider will assist Project Co or the Customer wherever and however possible to ensure that Project Co or the Customer is able, to: (7) temporarily take or assume total or partial possession, management and control of the Facility (or any part of the Facility) and the provision of the Services (or any of them); (8) take such other steps as are necessary or desirable to continue the provision of the Services as required by this Contract or to minimise the risk to the Environment, to other members of the general public or of material damage to the Facility, as applicable; and (9) do anything which the Services Provider is entitled to do under an O&M Project Contract or with respect to the Project, (each a Step-in Right). (b) When exercising Step-in Rights, Project Co will use (or procure that the Customer uses) reasonable endeavours to operate the Facility in a manner which is consistent with the provision of the Services as required by this Contract. (c) Each of Project Co and the Customer may exercise its Step-in Rights without prior notice to the Services Provider but Project Co will, if reasonably practical to do so, give prior notice to the Services Provider and in any event will, as soon as practical, provide notice to the Services Provider that it or the Customer is exercising its Step-in Rights. (d) Upon either Project Co or the Customer exercising its Step-in Rights, the Services Provider's rights and obligations under this Contract are suspended to the extent necessary to permit Project Co or the Customer to exercise those Step-in Rights.
The Facility is defined as the whole of the Facility to be designed, engineered, procured, supplied, constructed, tested, commissioned, operated, maintained and owned by the plaintiff on the Site including the Mine Water Buffer Pond, as further described in the Scope of Works and Services.
The Mine Water Buffer Pond is defined as: Mine Water Buffer Pond [T]he existing Blowdown Pond B owned by Energy Australia at MPPS after it has been repurposed by the Construction Contractor to function as the Mine Water Buffer Pond and which will be part of the Facility, with all modifications and additions necessary to be compliant with Schedule 20 of the Construction Contract; where: 1 all modifications and additions are to be designed, engineered, procured, supplied, constructed, tested, and commissioned by the Construction Contractor, as further described in Attachment 1; and 2. which will be operated and maintained by the Services Provider in accordance with Schedule 20 of this Contract and the Mine Water Buffer Pond Operating Protocol.
Veolia says it is the Construction Contractor and, unless it repurposes Blowdown Pond B, then the pond can never become a Mine Water Buffer Pond. The plaintiff submits that the present dispute is to be resolved by reference to the obligations of Veolia under the Services Provider Agreement to take and treat water from the mine, come what may. That obligation is not derogated from by Veoila's definitional argument as to whether Pond B exists as defined in the Services Provider Agreement. In a physical sense, Pond B does exist and is presently being used to hold untreated mine water. Veoila having refused to operate the Facility, the plaintiff has a contractual right to "Step-in". The plaintiff wishes to exercise its contractual right to cause the Facility to operate including Pond B.
Services are defined as the services in respect of the Facility to be provided by Veolia, including all services described in the Scope of Services, Variations and any incidental services or functions required for the proper performance and provision of those services. The Scope of Services is itself a voluminous document.
Clause 44 occupies three pages of a 495 page contract, which itself is part of a suite of transactional documents, of which only three are in evidence. The clause is imbedded with numerous defined terms. Many of the definitions themselves include further defined terms. The definition of Mine Water Buffer Pond is curious as it does not appear to envisage - as Schedule 20 does - that whilst Veolia is entitled to provide a quotation to remediate Blowdown Pond B, the plaintiff or the Customer may undertake that work instead. I cannot exclude the prospect that extrinsic evidence will be adduced in respect of the construction of this definition.
Construing clause 44 is necessarily a task requiring detailed analysis and a considerable amount of time which a Duty Judge does not ordinarily possess. I am loathe to definitively construe clause 44 in the midst of an urgent application such as this, particularly where the Services Provider Agreement governs the arrangements between the plaintiff and Veolia for 15 years. Nor is it clear what prejudice Veolia will suffer if the clause is not construed today, for which the usual undertaking as to damages will not give adequate protection.
It is not expedient to decide on a final basis the difficult questions of law that are involved in this application today. However, I am satisfied that there is a serious question to be tried as to whether the plaintiff is entitled to require Veolia to treat the water in Pond B, and whether the Step-in Notice was sufficiently clear to enable Veolia to understand that request.

[7]

Springvale Mine

Springvale Mine has gone into "protective mode". The mine is on high alert and starting to plan next steps which, by 20 May or 21 May 2021, are likely to include the relocation of pumps. From 21 May 2021, impacts to the mine's ventilation circuit are expected to commence. Due to rising water levels and the subsequent reduction in the area for air to flow, the amount of air which can be distributed throughout the mine is reduced and parts of the mine have to cease operations.
Once the water fills the disused mine workings, it will start flooding the 'tail pulley' area at the bottom of the mine where the conveyor which transports coal out of the mine is located. If pumping to the Facility is not restored, this area of the mine is expected to flood by 2 June 2021, with the conveyor needing to cease operations within a week of that date, as a result of which mining activities will need to cease. To avoid this, water will need to commence flowing to the Facility by 31 May at the latest. If the mine shuts down, a workforce of some 400 people will be stood down.
If pumping to the Facility is not restored, the longwall area will begin flooding on 7 June 2021. If flooded, the longwall will be irrecoverable and, as the longwall is designed specifically for each mine, will take some two years to replace. Moving the longwall equipment usually takes five to six weeks. Attempting to move the longwall equipment as part of an unplanned move would require all coal in that panel to be sacrificed as it would not be possible to get back into that area to recommence mining at a later point. The longwall is not in a location where it can easily be moved. It would be a high-risk operation from the perspective of successfully recovering the longwall and from an employee safety perspective. The bolts and mesh used to support the tunnels would begin to deteriorate from June 2021 and, by mid-September 2021, significant strata deterioration would have occurred, leading to roof areas falling in on mine roadways.

[11]

CONCLUSION

Having regard to [62]-[75], I am satisfied that there is a serious issue to be tried. Having regard to [76]-[88], I am satisfied that the balance of convenience favours the granting of interim relief.
As to the form of orders sought, the plaintiff submitted that the mandatory injunction sought involved no more than restarting the Facility and otherwise reverting to a course of conduct that was sustained before the present dispute. Veolia submitted that the lack of clarity in the terms of the mandatory injunction, which adopted the terms of the Step-in Notice, was such that the Court could not be satisfied that any mandatory order it made could be complied with. The lack of description in the Step-in Notice, of the "assistance" that Veolia is to provide, meant that an order to comply with the Step-in Notice Veolia would not be certain nor enable Veolia to know exactly what can and cannot be done: Greetings at 41, Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 per Meagher, Handley and Cripps JJA at 348. The form of orders was said to be are "ambiguous, uncertain and indefinite", with the result that Veolia cannot be sure whether any steps it takes will be sufficient to "loyally comply with them": Greetings at 41; Curro at 349.
I consider that an interim mandatory injunction is appropriate here, in circumstances where the orders sought require Veolia to treat mine water as it is obliged to do under the Services Provider Agreement, albeit accepting that the water in Pond B has the 'history' outlined in this judgment. To address Veolia's suggestion that the form of the orders sought is not sufficiently clear, I have amended the orders to enable Veolia to know exactly what can or cannot be done, including having regard to evidence and offers which have transpired since these proceedings were commenced. I have endeavoured to "steer the course which appears to 'carry the lower risk of injustice'": Albarran v Envirostar Energy Ltd per Barrett J at [29].

Parties

Applicant/Plaintiff:

MP Water Pty Ltd

Respondent/Defendant:

Veolia Water Australia Pty Ltd

Cases Cited (30)

Judgment

HER HONOUR: This is a Duty Judge application. I made orders on 20 May 2021. These are my reasons. The plaintiff, MP Water Pty Ltd, seeks an interim mandatory injunction requiring the first defendant, Veolia Water Australia Pty Ltd, to treat water emanating from a mine operated by the second to fourth defendants, Boulder Mining Pty Ltd, Centennial Springvale Pty Ltd and EnergyAustralia NSW Pty Ltd (referred to in the contracts as "the Customer").
Coal from the mine is used to power the Mount Piper Power Station, which provides 15% of New South Wales' electricity. Water from the mine is treated by Veolia at the Springvale Water Treatment Facility (the Facility), under a contract with the plaintiff. As a result of two long-running disagreements concerning: 1. Veolia's objection to the Customer dosing the mine water with polymers; and 2. Veolia's refusal to accept handover of a pond (Pond B) repaired and remediated by the Customer, Veolia has stored the disputed water in the disputed Pond B such that it has no more capacity at the Facility to take and treat water from the mine. The Customer has had to stop the flow of water to the Facility. The mine is flooding. The risks of an environmental incident are increasing, as is the risk of damage to substantial and highly valuable infrastructure.
The plaintiff has issued directions, default notices and, finally, a "Step-in" Notice to Veolia, in an effort to require Veolia to treat the water in Pond B. Veolia disputes the plaintiff's contractual right to require it to treat water in Pond B and further suggests the Step-in Notice is insufficiently clear to permit it to know what it is being asked to do. Veolia asked the Court to construe the relevant contractual provisions on a final basis: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69. That is sometime appropriate (see principles at [67]) but, for the reasons which follow, I do not consider it appropriate to adopt that course here. Rather, it is sufficient to conclude that there are serious issues to be tried as to the contractual rights of the parties and the balance of convenience strongly favours making the orders sought by the plaintiff.

[2003] QCA 402

[1986] HCA 70

[2016] WASCA 105

[1995] FCA 1405

[2015] VSCA 98

[2006] VSCA 89

(2006) 227 CLR 57

(1968) 118 CLR 618

(1988) 82 ALR 499

(1986) 68 ALR 394

(1993) 30 NSWLR 337

(1964) 112 CLR 125