In Vestas v Lal Lal, the Supreme Court of Victoria provided guidance concerning communications between a Principal and the Principal’s Representative when acting as certifier regarding an application for preliminary discovery and interlocutory injunction.
This case re-enforces the importance of the Principal’s Representative/Superintendent acting independently and avoiding private communications with the Principal when acting as a certifier.
The Court: Supreme Court of Victoria
The Case: Vestas – Australian Wind Technology Pty Ltd v Lal Lal Wind Farm Nom Co Pty Ltd  VSC 554
Lal Lal (Principal) contracted with Vestas (Contractor) to engineer, procure and construct the Lal Lal Wind Farm (EPC Contract). The Superintendent under the EPC Contract was the Principal’s Representative.
The EPC contract involved two sets of works – the ‘Yendon’ works and the ‘Elaine’ works, which were scheduled for completion by 24 July 2019 and 19 September 2019 respectively.
During the works, the Contractor made approximately 27 extension of time (EOT) claims, none of which were granted by the Superintendent.
In March 2020, the Contractor raised concerns about the Principal’s involvement with the Superintendent’s certification role. This concern was seeded by the appearance of comments from the Principal’s solicitors in documents issued by the Superintendent in its role as Certifier, and correspondence from the Superintendent which described the certification role as being carried out by the Principal.
In May 2020, the Contractor’s solicitors sent a letter to the Principal and the Superintendent alleging interference with the Superintendent’s certification role, and breach of the EPC Contract.
Between June and July 2020, the Contractor made a formal claim under the EPC contract and issued a Notice of Dispute under the EPC Contract.
The parties held a senior representatives meeting to resolve the dispute but were unsuccessful. Thereafter the dispute was not referred to mediation, even though that option was available under the EPC Contract.
In August 2020, the Contractor sought injunctive relief and commenced proceedings against the Principal seeking:
- preliminary discovery of all correspondence between the Principal and the Superintendent in relation to its certification role; and
- Injunctive relief to restrain the Principal from communicating privately with the Superintendent in connection to its certification role.
The injunction was dismissed on the basis that the Principal offered to give undertakings to the Court sought by the Contractor for the Principal to not communicate privately with the Superintendent in connection to its certification role.
Rule 32.05 of the Supreme Court (General Civil Procedure) Rules 2015 outlines the three components the Contractor must satisfy when seeking an order for preliminary discovery, ie:
- There is a reasonable cause to believe that the Contractor has or may have the right to obtain relief;
- After making all reasonable enquiries, the Contractor does not have sufficient information to determine whether to commence proceeding to obtain that relief ; and
- There is a reasonable cause to believe that the Principal or its representative is likely to have any document in their possession that is relating to whether the Contractor has the right to obtain the relief and inspection of the document would assist the Contractor in making that decision.
The dispute before the Court concerned the second criteria, ie whether the Contractor lacked the information required to determine whether to commence proceedings after making all reasonable enquiries. The parties’ arguments are summarised in the table below:
|Issue||Principal’s Argument||Contractor’s Argument|
|Sufficiency of the
|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 Superintendent regarding the latter’s certification role. The fact that the Contractor seeks an injunction means it has concluded it has sufficient information to determine whether to commence proceedings.||The contractor relied on the decision of the Victorian Supreme Court in Pandolfo1 which held that an applicant “sufficient information to plead a prima facie case” may prudently wish to obtain preliminary discovery about defences are available to the respondent and the strength of those defences, or to determine the extent of the respondent’s breach and the likely quantum damages.|
|No Utility||There is no utility in the proposed proceeding because the Contractor is out of time to challenge previous determinations under the EPC Contract and is precluded from doing so.||The Contractor does not agree that failure to give notice within time has the effect of shutting out the Contractor from future claims, and that even it that were so, if the Superintendent has breached the EPC Contract when performing its certifier role so the determinations made by the Superintendent cannot stand.|
|All Reasonable Enquiries||The Contractor has not made all reasonable enquiries because, even though it initiated a dispute under the EPC Contract seeking the documents, it did not mediate as it was permitted to and therefore has not made all reasonable enquiries.||The Contractor contends that the language of the contract is ‘convoluted’, and it cannot be said that mediation is a pre-condition to the right to commence proceedings.|
The Principal also contended that even if r 32.05 is satisfied, the Court should exercise its discretion to refuse the application because the Contractor has not completed the contractual dispute resolution process, because the scope of what is sought is too broad and beyond the purpose of the rule, and the preliminary discovery would serve no purpose as no proceeding could be initiated due to being out of time pursuant to the contract.
Delany J found that the requirements of r 32.05(b) had not been satisfied and made orders dismissing the Contractor’s application. At para  the Court stated:
“In summary it is dismissed because the criteria in r 32.05(b) are not made out:
- 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;
- 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.
- 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.”
In relation to each of the issues raised by the parties, His Honour:
- accepted the Principal’s “sufficiency of information” argument on the basis that the fact the Contractor sought an interlocutory injunction necessarily conveyed that it had sufficient information available to it already to determine whether to issue a proceeding;
- rejected the Principal’s “lack of utility” argument as forming a proper basis to reduce the application on the basis that the hearing of a pre-action discovery application should avoid delving into the merits of the existence of possible causes of action; and
- accepted the Principal’s “all reasonable steps” argument. His Honour found that it was clear as a matter of fact that the failure to refer the dispute to mediation meant that all reasonable inquiries had not been made. His Honour held that this basis formed a separate and independent reason for dismissing the application.
His Honour also stated, even if he had been satisfied that the criteria in r 32.05(b) had been satisfied he would have exercised his direction to refuse the application because, in all the circumstances, it was reasonable for the Contractor to make its decision without an order for pre-action discovery.
Superintendents must act with high caution and careful consideration when exercising a dual role as both the Principal’s Agent and as Certifier.
Consideration must be given as to the level of transparency required in relation to communications related to the exercise of a Superintendent’s certification functions, and if this must be open and copied to the contractor.
There is a risk that private communication between the Superintendent and the Principal will be sufficient to undermine the Superintendent’s independence when acting in its certification role and may constitute a breach of contract or other cause of action.
If you are a contractor or are concerned with the actions of a Superintendent under your contract, contact Morrissey Law + Advisory.
 Pandolfo v Finadri  VSC 211.
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