FEDERAL COURT OF AUSTRALIA

Ecap Finance Pty Ltd v Ottoway Engineering Pty Ltd (No 2) [2017] FCA 237

ORDERS

THE COURT ORDERS THAT:

1.    Leave be granted to the applicants to make the application for leave to appeal filed in this proceeding on 13 February 2017.

2.    The application for leave to appeal is dismissed.

3.    The applicants are to pay the respondents’ costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

CHARLESWORTH J:

INTRODUCTION

1    This is an application for leave to appeal from an interlocutory judgment delivered in proceedings between Ottoway Engineering Pty Ltd (Ottoway) and Westpac Banking Corporation (Westpac). The parties to the proceedings dispute the construction and enforceability of a bank guarantee executed by Ottoway’s banker in favour of Westpac (the Guarantee).

2    At the commencement of the proceedings, Ottoway obtained an ex parte interim injunction to the effect that Westpac be restrained from taking any further steps to demand or obtain payment in respect of the Guarantee. On 2 June 2016, Besanko J made an order that the injunction be extended until trial or until further order: Ottoway Engineering Pty Ltd v Westpac Banking Corporation [2016] FCA 635 (Ottoway No 1). The trial between Ottoway and Westpac has been set down for four days commencing on 14 March 2017.

3    On this application there are three applicants: Ecap Finance Pty Ltd (ECAP), Troy James Millen and his partner Kelly Jean O’Brien. They are not parties to the proceedings before Besanko J. I will refer to them collectively as the Leave Applicants.

4    By an Interlocutory Application filed in the proceedings on 20 December 2016 the Leave Applicants applied for an order to the effect that they be joined as respondents in the proceedings and an order that the injunction be dissolved. Besanko J dismissed the application: Ottoway Engineering Pty Ltd v Westpac Banking Corporation (No 2) [2017] FCA 39 (Ottoway No 2). Leave is sought to appeal from that interlocutory judgment.

THE REQUIREMENT FOR LEAVE

5    Leave to appeal is required: s 24(1A) of the Federal Court of Australia Act 1976 (Cth) (FCA Act). In Samsung Electronics Co Limited v Apple Inc [2013] FCAFC 138 (Samsung) at [19], the Full Court emphasised the need for flexibility in the exercise of the discretion conferred under s 24(1A) of the FCA Act:

The very width of the discretion and the prudence in not seeking to confine the manner in which it is to be exercised is a necessary corollary of the myriad of interlocutory decisions which may be made — ranging from interlocutory decisions affecting the substantive rights of parties (and effectively being final orders) to matters of practice and procedure (including decisions to extend time, the granting or refusal of adjournments and the filing of evidence). The different character of interlocutory decisions which may be made and the different factual and forensic circumstances in play when such decisions are made nevertheless have occasioned a different emphasis from one judgment to another upon one particular factor or factors rather than others.

6    In Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 (Décor Corporation) the Full Court (Sheppard, Burchett and Heerey JJ) identified “an appropriate litmus test for the general run of cases in which leave to appeal from an interlocutory decision is sought” (at 399). The test involves an inquiry firstly into whether the judgment of the primary judge is attended by sufficient doubt to warrant it being reconsidered by the Full Court and secondly into whether substantial injustice would result if leave were refused, supposing the decision to be wrong. The two aspects of the test are not to be applied in a tick-a-box fashion. They bear upon each other such that the degree of doubt sufficient to justify the grant of leave in one case may differ from that required in another, having regard to the nature and degree of substantial injustice that might result should leave be refused. It is in this respect that the discretion to grant leave may involve a fine balance of competing considerations: see Sharp v Deputy Commissioner of Taxation (Cth) [1988] FCA 76; (1988) 88 ATC 4,184 at 4,186 (Burchett J) (approved by the Full Court in Décor Corporation at 398 - 399).

7    As White J observed in Ferdinands v The State of South Australia [2017] FCA 32, s 24(1A) of the FCA Act is a legislative endorsement of the recognised principle that appellate courts should exercise restraint before interfering with matters concerning practice and procedure. The consequences of a lack of appellate restraint were identified by Jordan CJ in In re the Will of F.B. Gilbert (dec.) (1946) 46 SR (NSW) 318 at 323:

… I am of the opinion that, … there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal.

That passage was cited with approval by the High Court in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177.

8    Section 24(1AA)(b)(i) of the FCA Act is important. It provides that an appeal must not be brought from a judgment of a single Judge of this Court if the judgment is:

(b)    a decision to do, or not to do, any of the following:

(i)    join or remove a party; …

9    The Leave Applicants submit that their application for leave to appeal is confined to that part of Besanko J’s judgment dismissing their application for an order dissolving the injunction and does not therefore offend the proscription in s 24(1AA)(b)(i) of the FCA Act.

10    Westpac adopted a neutral position on the application for leave. It filed no written submissions and at the commencement of the hearing its solicitors were excused from further attendance.

11    Ottoway opposes the grant of leave. Among other things, it claims that the proposed appeal is in some respects an impermissible attempt to challenge Besanko J’s decision not to join the Leave Applicants as parties in the underlying proceedings, from which there lies no appeal. They further contend that the Leave Applicants require “leave upon leave” in that, as non-parties to the underlying proceedings, they cannot make the present application except with the leave of the Court.

THE INJUNCTION

Principles

12    As Gummow and Hayne JJ said in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 (at [65]), an applicant for an interlocutory injunction must show a “sufficient likelihood” of success to justify, in the circumstances, the preservation of the status quo pending trial. The balance of convenience must favour the grant of the injunction.

13    Besanko J used the phrase “prima facie case” to summarise the requirement that there be a sufficient likelihood of success. I will use the same terminology.

14    The task of establishing a prima facie case is not an onerous one. As Weinberg J said in Mobileworld Operating Pty Ltd v Telstra Corporation Limited [2005] FCA 1365 at [23]:

Sometimes, on an application for interlocutory relief, a court is sufficiently able, on the evidence before it, to reach a conclusion as to particular facts or matters in dispute. However, it must be remembered that any such conclusion will be provisional, and by no means necessarily the same as that which is subsequently reached at the final hearing. The degree to which a court is prepared to investigate disputes of fact depends on their difficulty and on the other circumstances in question, and particularly on the extent of urgency or prospective hardship involved: ICF Spry, The Principles of Equitable Remedies (6th ed, 2001) ('Spry') at 466.

15    The requisite strength of the prima facie case depends upon the nature of the rights the applicant asserts and the practical consequences likely to flow from the order: see Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622 (Kitto, Taylor, Menzies and Owen JJ); Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238 at [59] (Dowsett, Foster and Yates JJ).

16    These principles were summarised by Besanko J in Ottoway No 1 at [2]. The Leave Applicants do not dispute the correctness of his Honour’s summary.

The dispute between Ottoway and Westpac

17    The factual background to the Guarantee dispute is described in some detail in Ottoway No 1. The salient facts for present purposes are:

(1)    On 14 August 2014, Ottoway entered into a building subcontract (original subcontract) with Bluenergy CMC Pty Ltd (BCMC) pursuant to which Ottoway would perform building work for BCMC. At that time, BCMC was the head contractor on a large building project located at Cape Preston in the Pilbara region in Western Australia. The works under the head contract were commissioned by Sino Iron Pty Ltd. The price under the original subcontract between BCMC and Ottoway was $17,350,000.

(2)    BCMC agreed to make an advance payment of 10% of the original subcontract price to Ottoway for certain costs associated with the building works, including project mobilisation costs. Ottoway agreed that it would repay that advance by deductions from progress payments to which it would otherwise be entitled under the original subcontract. BCMC borrowed money from Westpac under a finance facility (Facility) in order to make the advance payment to Ottoway.

(3)    On 14 September 2014, a representative of Ottoway’s banker (NAB) issued a bank guarantee in favour of Westpac in the amount of the advance payment, referred to by Besanko J as the “earlier guarantee”. Save for the amount, the earlier guarantee is in the same terms as the Guarantee.

(4)    In October 2014, BCMC and Ottoway negotiated another agreement to replace the original subcontract. The new agreement, referred to as an “Alliance Agreement”, was executed on 12 February 2015.

(5)    The Guarantee was executed by a representative of NAB on 12 June 2015. The amount of the Guarantee is $1 million. The Guarantee names Westpac as the beneficiary and Ottoway as the customer. It recites that Westpac accepted the Guarantee “in connection with the Agreement”. The Agreement is defined in the Guarantee (as it was in the earlier guarantee) in the following terms:

PROJECT MOBILIZATION COST PLANT, EQUIPMENT’S AND RECOURSE [sic RESOURCES] FOR CONTRACT BETWEEN OTTOWAY ENGINEERING PTY LTD ABN 70 125 531 428 AND BLUENERGY CMC PTY LTD ABN 33 160 063 187 EXECUTED ON THE 21ST OF AUGUST 2014 FOR THE PROVISION OF MECHANICAL & PIPING INSTALLATION & COMMISSIONING WORKS RELATING TO DEWATERING BUILDINGS 313 AND 314 CONVEYOR REPAIRS. THIS BANK GUARANTEE ISSUED TO SECURE THE LENDING OBLIGATIONS OF BLUENERGY CMC PTY LTD TO WESTPAC BANKING CORPORATION.

Besanko J observed that the agreement there referred to appears (at least on a prima facie basis) to be the original subcontract, which was later replaced by the Alliance Agreement.

(6)    Ottoway claims that it has repaid the money advanced to it by BCMC and that it has otherwise performed all of its obligations under the Alliance Agreement and the subsequent agreement. Indeed, it does not appear to be disputed that BCMC remains significantly indebted to Ottoway.

(7)    BCMC did not repay all of the money borrowed under the Facility from which it had drawn the advance. The events that followed are summarised by Besanko J in (Ottoway No 1 at [29]):

On 22 December 2015, Ottoway issued a Statutory Demand against Bluenergy for the sum of $1,455,794.03. Bluenergy did not pay Ottoway that amount and Ottoway applied to wind up the company. Bluenergy was placed into administration on 22 March 2016. On 13 April 2016, the company was wound up in insolvency. On 14 April 2016, Westpac appointed a receiver and manager. It appears that Bluenergy has substantial liabilities.

18    The proceedings before Besanko J were commenced by Ottoway after Westpac made or purported to make a demand on NAB under the Guarantee for the payment of $858,158.96 plus interest calculated daily thereafter. The amount demanded by Westpac is said to be owed by BCMC under the Facility.

19    On its application for injunctive relief, Ottoway contended that, on its proper construction, the Guarantee is a performance bond of the type considered by the High Court in Wood Hall Ltd v The Pipeline Authority (1979) 141 CLR 443 (Wood Hall), in that it gave security for the performance of Ottoway’s obligations to BCMC and not for the performance of BCMC’s obligations to Westpac. It further contends that, if the Guarantee is what it calls an “ordinary commercial guarantee”, it does not secure all of BCMC’s borrowing obligations, but only those arising under the Facility. It is then alleged that the Guarantee was procured or the Facility extended in contravention of the Australian Consumer Law (ACL) by reason of misleading and deceptive conduct or unconscionable conduct for which Westpac is responsible and that the enforcement of the Guarantee by Westpac would involve a furtherance of fraud by BCMC.

20    Declaratory and other relief is sought in the proceedings to give effect to Ottoway’s alternate claims, including a permanent injunction restraining Westpac from having recourse to the Guarantee.

The grant of the injunction

21    Besanko J determined that Ottoway had a prima facie case, both in relation to the construction of the Guarantee and in relation to the allegations of contravention of the ACL, and that the balance of convenience otherwise favoured Ottoway. His Honour’s reasons proceed as follows:

(1)    The Guarantee refers to two sets of obligations: the obligations under the subcontract between Ottoway and BCMC, and the obligations owed by BCMC to Westpac.

(2)    Insofar as it was necessary to demonstrate ambiguity in the meaning of the Guarantee in order to permit reference to surrounding circumstances, ambiguity was present.

(3)    The surrounding circumstances included the existence and terms of the Alliance Agreement, of which Besanko J said (Ottoway No 1 at [24]):

Clause 14.7 suggests that [BCMC] and Ottoway considered that the earlier guarantee related to Ottoway’s obligation to [BCMC] to repay the advance payment, not [BCMC’s] obligation to repay the monies it borrowed from Westpac. This is the case because the amount of the earlier guarantee is to be reduced by the payments made by Ottoway to [BCMC], not [BCMC’s] payments to Westpac.

(4)    His Honour concluded (at [39]):

I think that, at a prima facie level at least, there is force in the submission that the form of the Guarantee and the circumstances in which it was executed is more consistent with it being a performance guarantee or bond securing Ottoway’s obligations to [BCMC] than an ordinary commercial guarantee securing another party’s obligations to a third party.

(5)    As to the claim founded in contravention of the ACL, Ottoway had established a prima facie case that (at least) Westpac may have left the negotiations with Ottoway about the Guarantee to BCMC and was arguably responsible for its conduct.

(6)    Whilst Ottoway could establish that it would suffer some prejudice if an injunction was not granted, Westpac did not identify any prejudice to it other than the fact that it could not presently take steps to enforce the Guarantee against Ottoway as it sought to do. Accordingly, the balance of convenience “although not overwhelming,” favoured Ottoway.

22    The interim order made on 30 March 2016 is in the following terms:

1.    Upon Ottoway Engineering Pty Ltd ACN 125 531 428 providing the usual undertaking as to damages, Westpac Banking Corporation ABN 33 007 457 141 be restrained, and an interim injunction be granted pending determination of these proceedings at trial or until further order, restraining Westpac Banking Corporation ABN 33 007 457 141 (either by itself, its servants or its agents) from calling upon, and taking any further steps to demand or obtain payment in respect of the Bank Guarantee dated 12 June 2015, Guarantee No: 247057359, issued by National Australia Bank Limited (NAB) guaranteeing NAB’s customer Ottoway Engineering Pty Ltd ACN 125 531 428.

23    That order was extended until trial or further order on 2 June 2016.

THE INTERLOCUTORY APPLICATION

The Leave Applicants

24    ECAP was formerly known as Bluenergy Capital Pty Ltd. Mr Millen is the sole director of that company and owns all of the shares in it. He is also the sole director of, and owns all of the shares in, another company named Evolve Industries Pty Ltd (Evolve). It was formerly known as Blue Energy Industries Pty Ltd. Mr Millen’s partner, Ms O’Brien, was the sole director of BCMC. Its shares are held by Evolve. As I have mentioned, BCMC was put into liquidation on Ottoway’s petition on 13 April 2016 and receivers and managers were appointed to the company on 14 April 2016. ECAP was responsible for the appointment of the receivers and managers.

Interests asserted before Besanko J

25    As I have said, by their Interlocutory Application the Leave Applicants relevantly sought orders to the effect that they each be joined as respondents to the proceedings and that the injunction granted on 30 March 2016 and extended on 2 June 2016, be dissolved. The application was supported by an affidavit of Mr Millen sworn on 16 December 2016 in which he described the nature of the interests of the Leave Applicants in the substantive proceedings as a whole, or at least in having the interlocutory injunction dissolved. The facts established by Mr Millen’s affidavit are summarised by Besanko J in Ottoway No 2 at [9] in a manner that is not subject to challenge on the proposed appeal:

(1)    Until it went into liquidation, Mr Millen was the client liaison and relationship manager of Bluenergy CMC and Ms O’Brien was a director of the company.

(2)    At the request of Bluenergy CMC, Westpac issued two unconditional bank guarantees in favour of Sino Iron, each for the amount of $1,134,900 ($2,269,800 in total) (‘Performance Guarantees’). Bluenergy CMC obtained a bank facility from Westpac for the purpose of acquiring the Performance Guarantees in favour of Sino Iron (‘Bank Facility’). The Bank Facility was secured by two term deposits with Westpac made by Bluenergy CMC each in the amount of $1,134,900 ($2,269,800 in total) and a general security agreement between Westpac and Bluenergy CMC over all of Bluenergy CMC’s existing and future assets and undertakings.

(3)    Bluenergy CMC also had a facility with ECAP which was to be used to provide working capital and which was secured by a charge over Bluenergy CMC’s assets (‘Charge’). Mr Millen was not able to produce the Charge.

(4)    At the request of Westpac, and as further security for Bluenergy CMC’s existing obligations under the Bank Facility, on or about 25 September 2014, Ms O’Brien and Mr Millen executed a joint and several personal guarantee and indemnity in favour of Westpac securing all monies owing by Bluenergy CMC up to $4,025,000. Mr Millen was not able to produce a copy of the Personal Guarantee.

(5)    On or about 31 July 2015, Sino Iron returned the first Performance Guarantee in the amount of $1,134,900 to Bluenergy CMC.

(6)    ECAP was responsible for the appointment of the receivers and managers to Bluenergy CMC on 14 April 2016.

(7)    On or about 18 August 2016, Westpac demanded repayment from Mr Millen and Ms O’Brien under the terms of the personal guarantee for the amount owing to Westpac under the Bank Facility, being an amount of $940,012.29.

(8)    Mr Millen believes there are two possible further sources of cash flow to Bluenergy CMC and he identifies them as follows (at paragraph 54 of his affidavit):

54.1    the return of the remaining Performance Guarantee held by Sino Iron, in the amount of $1,134,900, which would result in the money held by Westpac on term deposit that presently secures the outstanding Performance Guarantee being available to be applied by Westpac to reduce other secured indebtedness of Bluenergy; and

54.2    payment of retention monies of approximately $529,000.00 on other non Sino Iron related projects.

(9)    The Performance Guarantee in favour of Sino Iron as security for the Defects Liability Period in the amount of $1,134,900 (i.e., the second performance guarantee) is due to be returned to Bluenergy CMC on or about late January 2017.

(10)    The interest in the proceeding which is claimed by the applicants for joinder is identified by them in the concluding paragraphs of Mr Millen’s affidavit as follows:

66.    But for the Injunction, upon return of the remaining Performance Guarantee by Sino Iron referred to in paragraph 54.1, which I understand is due and will occur in or about late January 2017, the $567,000.00 presently held by Westpac on term deposit as security for the Performance Guarantee would not be applied by Westpac against Bluenergy indebtedness, and would therefore become available to Ecap under the Charge and be paid to the receivers/managers of Bluenergy for the benefit of Ecap.

67.    By reason of the foregoing:-

67.1    Ecap and Ms O’Brien and I have been, and continue to be, adversely and directly financially affected by the grant and ongoing effect of the Injunction;

67.2    Ecap and Kelly and I claim, by reason of that direct and adverse financial affect, that we should have been respondents to the Proceedings before the Injunction was granted, and claim to be entitled to now be joined as respondents and to have the Injunction immediately dissolved.

26    The personal guarantees executed by Mr Millen and Ms O’Brien were not annexed to Mr Millen’s affidavit, nor were they otherwise admitted in evidence on the hearing of their Interlocutory Application, nor are they in evidence on this application.

REASONS OF THE PRIMARY JUDGE

27    There is some overlap between the issues arising on the joinder application and the issues arising on the dissolution application. Although no right of appeal lies against the decision refusing the joinder of the Leave Applicants, it is necessary in the circumstances to summarise both aspects of the judgment.

28    Besanko J proceeded on the basis that the application for joinder was to be decided in the exercise of the Court’s general power to make any order that the Court considers appropriate in the interest of justice: r 1.32 of the Federal Court Rules 2011 (Cth) (Rules). He stated that the principles applicable on an application by a non-party to be joined as a party to a proceeding are the same as those applicable on a joinder application made by a party to the proceeding under r 9.05. That is consistent with earlier authority of this Court: McAlister v New South Wales (2014) 223 FCR 1 at [23] (Edmonds J); Kadam v MiiResorts Group 1 Pty Ltd [2016] FCA 1205 at [13] – [19] (Edelman J). Rule 9.05 relevantly provides for the joinder of a person “whose joinder is necessary to ensure that each issue in dispute in the proceedings is able to be heard and finally determined”.

29    The primary judge referred to the decision of the Full Court in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 (News) and the decision of the High Court in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 (John Alexander). He discerned from those authorities a requirement that the Leave Applicants show that their rights against or liabilities to a party in respect of the subject matter of the proceedings would be directly affected by an order that might be made in the action. It would not be sufficient to show that they might be better off financially if the case was decided one way or another. Applying that test, his Honour held that:

(1)    ECAP had no rights against, or liabilities to, either Westpac or Ottoway and “the most that it can say is that monies may come to it if the Guarantee is enforced” (Ottoway No 2 at [14] and [17]);

(2)    the liability of Mr Millen and Ms O’Brien to Westpac as guarantors was not likely to be directly affected by any order the Court may make in the proceedings (Ottoway No 2 at [14] and [17]);

(3)    the Leave Applicants were “unable to show anything more than that they are likely to be better off financially if the case is decided in favour of Westpac” and that was not a “sufficient interest for joinder purposes” (Ottoway No 2 at [12] and [17]).

30    In oral submissions before Besanko J, the Leave Applicants argued that quite apart from the joinder principles stated in John Alexander, they were entitled to apply to have the injunction dissolved under an equitable principle recognised by the English Court of Appeal in Cretanor Maritime Co Ltd v Irish Marine Management Ltd [1978] 1 WLR 966 (Cretanor) without first being joined as parties and that, on such an application, it was unnecessary to establish an interest equivalent to that required on a joinder application. It was sufficient, they submitted, to show that their interests were “adversely affected by the terms of the injunction”. The lesser test is said to have been advanced by Kerr J in RD Harbottle (Mercantile) Ltd v National Westminster Bank Ltd [1978] 1 QB 146 (Harbottle) at 157 a year before Cretanor was decided. Besanko J summarised and disposed of that contention as follows (Ottoway No 2 at [16]):

Counsel for the applicants for joinder also referred to Cretanor Maritime Co Ltd v Irish Marine Management Ltd [1978] 1 WLR 966 where Buckley LJ (with whom Goff LJ and Sir David Cairns agreed) said (at 978):

… Where an injunction has been granted in an action which affects someone who is not a party to the action, he can apply in the action for the discharge of that injunction without himself being made a party to the action (Bourbaud v. Bourbaud (1864) 12 W.R. 1024; Daniell’s Chancery Practice, 8th ed. (1914), vol. II, p. 1343, footnote (i); Kerr on Injunctions, 6th ed. (1927), p. 662). Where the interest of the applicant is clear, he may make such application by motion in the action (Jones v. Roberts (1841) 12 Sim. 189) and in my opinion can equally well do so by summons. If it were necessary, it seems that probably there would be power under R.S.C., Ord. 15, r. 6(2)(b)(ii), to add the debenture holder as a party, but in the circumstances I do not consider that this is necessary. The question whether, as between the owners and the debenture holder, the injunction should be discharged can be adequately brought before the court by amendment of the summons so as to make the debenture holder an additional applicant. …

I do not think that Buckley LJ is identifying a wider principle than that identified in News Limited and John Alexander, but if his Lordship is, I must follow the two Australian decisions.

31    Later in his reasons, Besanko J noted that Counsel for Westpac had drawn his attention at the conclusion of submissions to an allegation pleaded by Ottoway to the effect that BCMC had acted fraudulently. The primary judge did not deal with the matter because, he concluded, the Leave Applicants had not advanced a submission that the pleaded allegation would give BCMC “or some other person the right to be joined in the proceeding or to intervene in some way” (Ottoway No 2 at [24]).

32    The primary judge then turned to consider the question of whether there appeared to be a basis for the dissolution of the injunction. His Honour premised that part of his judgment with the following remark (Ottoway No 2 at [18]):

In case I am wrong and the applicants for joinder have a right to be joined as parties, or at least to seek the dissolution of the injunction, I will consider whether the injunction should be dissolved.

33    The Leave Applicants made a submission that Ottoway did not have a prima facie case because (as Besanko J understood the submission) “the authorities make it clear that the enforcement of the Guarantee did not depend on proof of a breach of the underlying agreement” (Ottoway No 2 at [20]). After citing the relevant authorities relied on by the Leave Applicants, Besanko J said (Ottoway No 2 at [21]):

I was referred to a number of those authorities, or at least the principle which they identify, by counsel for Westpac on the hearing of the application for an interlocutory injunction. It seemed to me (and it still does), the issue in this case is a different one, or arguably a different one, and that is the nature of the obligations referred to in the Guarantee when there are two quite different agreements which might have given rise to the Guarantee. I referred to the two sets of obligations in my earlier reasons (at [37]). In this case, as I understand it, there is no dispute but that Westpac is seeking to enforce the Guarantee in relation to the obligations of Bluenergy CMC to it, whereas Ottoway claims that the Guarantee was given in relation to its obligations to Bluenergy CMC. Arguably, this is a different and prior issue from that which is the subject of the authorities I have identified in the previous paragraph.

34    There was, his Honour held, no reason to disturb the injunction made at the outset of the proceedings and extended on 2 June 2016.

THE LEAVE APPLICANTS’ STANDING TO MAKE THIS APPLICATION

35    Ottoway submits that the Leave Applicants “require leave to seek leave to appeal” because they are non-parties to the proceedings before Besanko J. It submits that the test on any application for leave to make the present application as non-parties is that stated by Knox CJ and Starke J in Cuthbertson v Hobart Corporation (1921) 30 CLR 16 (Cuthbertson) at 25: “could or could not the applicant by possibility be made a party to the action by service”. From there Ottoway contends that the question of whether the Leave Applicants could be made a party in the underlying proceedings has been finally determined by Besanko J in that part of Ottoway No 1 from which no appeal lies.

36    A non-party to a proceeding may invoke the appellate jurisdiction conferred under s 24 of the FCA Act with the leave of the Court: Commonwealth v Construction, Forestry, Mining and Energy Union (2000) 98 FCR 31 at [18] (CFMEU). I accept Ottoway’s submission that the Leave Applicants are non-parties for those purposes. However, I do not accept that the test for the grant of leave to a non-party to make an application of the present kind is as inflexible as Ottoway suggests. In Witness v Marsden [2000] NSWCA 52; (2000) 49 NSWLR 429, Heydon JA said that Knox CJ and Starke J in Cuthbertson (at [81]):

… do not appear to have been propounding an exhaustive test for leave to appeal. … ‘sufficiently interested’.

37    That passage has been cited with approval by the Full Court of this Court: CFMEU at [18]. See also Fortress Credit Corporation (Australia) II Pty Ltd (ACN 114 624 958) v Fletcher [2011] FCAFC 89; (2011) 281 ALR 38 (Fletcher) at [32] and [35].

38    Although they are not parties to the proceedings between Ottoway and Westpac, the Leave Applicants were the moving parties on an Interlocutory Application by which they sought an order that the injunction be dissolved. For reasons explained below, the success of their application for an order that the injunction be dissolved was not dependent upon their joinder as respondents in the action. They each have an interest in having the correctness of the decision made on that discrete application reviewed in the appellate jurisdiction of the Court. I consider their interests sufficient to justify a grant of leave to bring the present application.

THE PROPOSED GROUNDS OF APPEAL

39    The draft notice of appeal states that the Leave Applicants appeal from “the judgment” given by Besanko J on 30 January 2017. As I have said, no appeal lies at all from that part of the judgment refusing their joinder as parties.

40    Counsel for the Leave Applicants nonetheless explained the proposed grounds so as to confine their application to that part of Besanko J’s judgment dismissing their application for an order that the injunction be dissolved. So understood, the proposed grounds allege that the primary judge erred by (in my words):

(1)    failing to find that the “autonomy principle” applied to the Guarantee whether or not it was construed as a performance bond and that Ottoway therefore had no arguable case to restrain the enforcement of Westpac’s rights (draft notice of appeal [1]);

(2)    failing to find that the Leave Applicants were entitled to have the interlocutory injunction dissolved as of right in accordance with the principles stated in John Alexander, irrespective of whether they were in fact joined as parties (draft notice of appeal [2]);

(3)    failing to find that they were entitled to have their application for the dissolution of the injunction determined in accordance with the principle stated in Cretanor (without being joined as parties) which, it is said, involves a wider and more flexible test than that applying on a joinder application (draft notice of appeal [4]); and

(4)    misapprehending both the import and importance of their submissions concerning the effect of Ottoway’s allegations of fraud against BCMC which, they submitted, could not on any view of the facts or law prevent Westpac from making a demand against NAB under the Guarantee (draft notice of appeal [5]).

Proposed ground 1: the autonomy issue

41    This issue is identified in the draft notice of appeal as follows:

1.    His Honour erred at [20] and [21] in his reasons for the decision (‘the Reasons’) —

1.1.    by treating the autonomy principle applicable to the construction of bank guarantees at [20] in the Reasons as limited to a principle that enforcement of a bank guarantee does not depend on proof of a breach of the underlying agreement;

1.2.    by distinguishing the long line of authorities establishing and applying the autonomy principle on the basis that identifying the applicable underlying obligations for which the bank guarantee was security is a different and prior issue from that which is the subject of those authorities; and

1.3. by not holding that:-

1.3.1.    the autonomy principle is that a bank guarantee is independent from any underlying contract or other contract, subject only to exceptions concerning fraudulent or other conduct of the beneficiary (which have no application in this matter);

1.3.2.    both of the respective conditions for the declarations sought in the final relief set out at [4] in the Reasons, namely the bank guarantee in issue (‘the Bank Guarantee’) is a performance bond by way of a bank guarantee or an ordinary commercial guarantee are misconceived because the autonomy principle is based on a bank guarantee being an unconditional obligation to pay which is equivalent to cash;

1.3.3.    the interlocutory injunction restraining Westpac Banking Corporation (‘Westpac’) from recovering the amount of the Bank Guarantee from the National Australia Bank on the basis of the issue referred to in [21] of the Reasons (‘the Interlocutory Injunction’) was inconsistent with the autonomy principle, and in particular with the allocation of risk manifested by the grant of the Bank Guarantee, and that the Interlocutory Injunction should therefore be set aside; and

1.3.4.    identification of the applicable underlying obligations referred to in ground 1.2 above could not result in final relief restraining Westpac from enforcing the Bank Guarantee because the autonomy principle applies to whichever of the possible underlying obligations secured by the Bank Guarantee may be found to be actually secured by the Bank Guarantee.

42    In summary, the Leave Applicants contend that the principles in Wood Hall operated on the Guarantee such that it was immediately enforceable regardless of whether or not Ottoway was in breach of its obligations to BCMC and regardless of whether BCMC was in breach of its obligations to Westpac. It mattered not which of the two obligations was determined at trial to be secured by the Guarantee. Thus, it was submitted, the primary judge erred in finding that the identification of the obligation secured by the Guarantee (being a construction issue) was “arguably a different and prior issue” to that which had been raised by the Leave Applicants.

43    Ottoway argued that the principles in Wood Hall did not operate in relation to an instrument in the nature of an “ordinary commercial guarantee”.

44    I was invited to construe the Guarantee as being one species of instrument and not another. The Leave Applicants, in particular, contended that it was not open to Besanko J to conclude that the Guarantee was other than immediately enforceable, whatever the obligation secured by it. It is not appropriate on an application of this kind that I express any concluded view about the proper construction of the Guarantee. The merits of the proposed ground of appeal may be assessed by an alternate route.

45    In Wood Hall the appellant (a building contractor) sought to restrain its bank from making payments upon demands made pursuant to four bank guarantees given in favour of the respondent. Two of the guarantees were described as “performance guarantees”. They were executed pursuant to a building contract which required that performance guarantees (or alternative securities) be provided as security for the appellant’s “due and faithful performance” of work under the underlying building contract. The relevant terms of the performance guarantees were (at 447):

1.    The Bank unconditionally undertakes and covenants to pay on demand any sum or sums which may from time to time be demanded in writing by Owner up to a maximum aggregate sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000.00) to be held by Owner as security for and until the performance and completion by Contractor of all of the conditions of the said Contract in all respects.

2.    The Bank’s liability under this Deed shall be a continuing liability and shall continue until notification has been received from Owner that Contractor’s liability is released, until payment is made under this Deed of the said maximum aggregate sum or until the date of the Certificate of Acceptance given by Owner to Contractor in accordance with the provisions of the said Contract whichever event occurs soonest.

46    The emphasis is mine. Importantly in that case the respondent’s demand for payment was made at a time when the works were not complete and no certificate of acceptance had been issued under the building contract.

47    Gibbs J (with whom Barwick CJ and Mason J agreed) held (at 451) that on their proper construction, the performance guarantees entitled the respondent to demand payment from the bank in respect of the whole of the secured amount irrespective of whether the appellant was otherwise entitled to make a demand for payment under the underlying building contract (whether for breach or otherwise). The bank’s “unconditional undertaking” would otherwise have no commercial utility. See also Stephen J at 458 and Murphy J at 461.

48    It followed that the appellant was not entitled to an injunction it had obtained at first instance restraining the bank from paying the respondent the secured amount at any time before a certificate of acceptance had been issued.

49    In Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 91 ALJR 108 at [85], Gageler, Nettle and Gordon JJ (citing Wood Hall) said this of the principle of autonomy:

… subject to fraud perpetrated by a beneficiary, an instrument of this nature (unconditional promise to pay on demand) is independent of any underlying transaction and any other contract. That principle – the principle of autonomy – reflects that those instruments, by their nature, stand alone. Not only are they equivalent to cash, but, by their terms, they also require that the obligations of the issuer are not determined by reference to the underlying contract. The principle of autonomy dictates that the surrounding circumstances and commercial purpose of the Construction Contract are different from those of the [guarantee].

(footnotes omitted)

50    Their Honours continued (at [88]):

. . . The issuer’s sole concern is to provide security in accordance with its contract with its customer … and, when the security is issued, to see whether there has occurred the event stipulated in the instrument on which the issuer’s obligation to pay arises. In effect, such securities ‘create a type of currency’ and are treated as being ‘as good as cash’. Instruments of this nature are essential to international commerce and, in the absence of fraud, should be allowed to be honoured free from interference by the courts.

(footnotes omitted)

See also French CJ at [5], [6] and [8].

51    The Leave Applicants do not contend there is any underlying and ongoing dispute between Ottoway and BCMC concerning Ottoway’s completion of its obligations under the Alliance Agreement or, for that matter, the original subcontract. Besanko J determined that it was at least arguable that the Guarantee secured those obligations (which were, at least arguably completely discharged) and not BCMC’s unfulfilled obligations to repay Westpac. If the Guarantee did indeed secure Ottoway’s obligations to BCMC, a prima facie case arose as to whether Westpac could now be prevented from demanding payment in security for the performance of that obligation.

52    I accept the Leave Applicants’ contention that, generally speaking, where the parties to an underlying contract are in dispute as to their rights and liabilities under it, the existence of the dispute cannot be relied upon as a basis to restrain the beneficiary of a performance bond given by way of bank guarantee from demanding payment as security for due performance of the contract. That proposition can only be stated as a general rule because, in all cases, the respective rights and obligations of the parties to a performance guarantee must be governed by the terms of the instrument itself and, in some instances, the right to call on an undertaking contained in a performance guarantee may be expressly or impliedly qualified by the terms of an underlying contract: Wood Hall at 459 (Stephen J).

53    However, the injunction restraining Westpac from having recourse to the Guarantee is not, as asserted in [1.3.3] of the draft notice of appeal, “inconsistent with … the allocation of risk manifested by the grant of the … Guarantee”. Rather, the injunction recognises that the very identification of the obligation (or risk) to which the Guarantee relates is an antecedent question of construction that is genuinely in dispute and that may arguably preclude Westpac’s entitlement to have recourse to it. The grant of the injunction is not inconsistent with the decided cases.

54    I do not consider this aspect of his Honour’s reasons to be attended with sufficient doubt to warrant reconsideration by a Full Court.

The direct interest issue

55    In John Alexander, French CJ, Gummow, Hayne, Heydon and Kiefel JJ stated (at [137]) that where a court makes an order affecting a person who should have been joined as a necessary party, that person is entitled to have the order set aside whether or not the person becomes a party. Their Honours held (at [138]) that the New South Wales Court of Appeal had erred in treating the question of a non-party’s entitlement to have an order set aside as a matter of joinder involving the exercise of discretion.

56    The principle stated in John Alexander applies to a person who should have been joined as a necessary party in accordance with the test stated in Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52. In that case, Diplock LJ (at 56) rejected a test for whether a person was a necessary party by reference to any distinction between “legal” and “commercial” interests. He said:

A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?

57    The requirement that there be a direct effect on rights or liabilities has been said to differentiate cases in which a person ought to be joined from those where the effect of a proposed order on a person is indirect or consequential: News at 525.

58    The Leave Applicants submit that Besanko J erred in determining that their rights and liabilities to any party were not directly affected by the injunction and that the error infected his Honour’s reasoning not merely on their application for joinder (the dismissal of which, they acknowledge, cannot be appealed) but also his Honour’s reasoning on the separate question of whether the injunction should be dissolved. I accept that the contention is one that can be raised on the proposed appeal notwithstanding s 24(1AA)(b)(i) of the FCA Act. However, I do not consider the contention has sufficient prospects of success to warrant the grant of leave to appeal.

59    Mr Millen and Ms O’Brien argued on this application that their equitable rights of subrogation against Westpac in respect of the debt owing under the Facility were directly impinged by the injunction. They submitted that the injunction against Westpac necessarily included a restraint on any person seeking to enforce the Guarantee in Westpac’s name in the exercise of subrogated rights.

60    The question of whether an interlocutory judgment is attended with sufficient doubt to warrant reconsideration by a Full Court is ordinarily to be determined by reference to the evidence admitted and submissions made in the primary proceedings.

61    The subrogation argument raised before me was not raised in argument before Besanko J, although his Honour did raise in arguendo the issue of co-sureties. In response, Counsel for the Leave Applicants positively stated that they did not rely on any rights as co-sureties vis á vis themselves and Ottoway or NAB for the purposes of their dissolution application. Counsel submitted that it was unclear whether Mr Millen and Ms O’Brien on the one hand and Ottoway or NAB on other hand were properly to be regarded as co-sureties. He could not and did not state whether the respective instruments guaranteed the same obligation and otherwise advanced no argument founded in the law of co-sureties.

62    Mr Millen and Ms O’Brien may have sound commercial reasons not to commit to a substantive position on their status as co-sureties vis á vis Ottoway or NAB. However, it seems to me that the particular subrogation rights now relied on in argument by Mr Millen and Ms O’Brien cannot be considered in isolation from the co-sureties question. If Mr Millen or Ms O’Brien were to discharge BCMC’s obligations under the Facility in full, any rights they may have to enforce the Guarantee against Ottoway in Westpac’s name may depend on whether the respective guarantees secure performance of the same obligation. Accordingly, their subrogation arguments cannot be comfortably reconciled with the equivocal position they adopted in relation to their status as co-sureties before Besanko J. Nothing I have said should be understood as expressing any concluded view about the respective rights and obligations between Ottoway, Mr Millen, Ms O’Brien, Westpac, NAB and BCMC. It is simply to say that Mr Millen and Ms O’Brien cannot shy away from a suggestion that they are co-sureties with Ottoway or NAB, and yet at the same time positively assert the existence of a right or potential right to enforce the Guarantee in Westpac’s name, the exercise of which is said to be prevented by the injunction.

63    Two further observations should be made. Although rights of subrogation arise at general law and to some extent under statute, the rights may be excluded or curtailed by the contract of guarantee: O’Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200. Mr Millen and Ms O’Brien did not adduce in evidence before Besanko J (or foreshadow any attempt to apply for leave to adduce on the appeal) copies of their personal guarantees so as to permit any assessment to be made about whether the terms of those instruments affected their subrogation rights in any way. Moreover, their respective entitlements to enforce their rights of subrogation (if any) do not arise unless and until their own sureties are paid. It is unclear whether they intend to pay upon Westpac’s demand at any time prior to the delivery of judgment in the proceedings between Ottoway and Westpac.

64    Although the discretion to grant leave to appeal is flexible enough to permit consideration of the merits of arguments not raised before a primary judge (and in respect of which a Full Court may grant leave to agitate upon appeal) in all of the circumstances I have described, the subrogation argument is afforded little weight in my determination of this application.

65    In relation to ECAP, it was submitted that Besanko J erred in failing to find that its rights were affected in the manner referred to by the Full Court in News at 524 — 525:

Where the orders sought establish or recognise a proprietary or security interest in land, chattels or a monetary fund, all persons who have or claim an interest in the subject matter are necessary parties. This is because an order in favour of the claimant will, to a corresponding extent, be detrimental to all others who have or claim an interest.’

(emphasis added)

66    To similar effect, the Full Court in Fletcher held that a prospective appellant holding a charge over the assets of a party to be funded in the underlying proceedings should be granted leave to appeal against a decision approving a funding agreement. Leave to appeal was granted and the appeal allowed on the basis that the value of the chargee’s security would potentially be diminished according to the terms of the agreement.

67    The current restraint on Westpac may well affect ECAP’s prospects of recovery on its own security and thereby affect its “value” in that financial sense. But that same financial consequence would follow if BCMC’s obligations under the Facility were to be discharged by Mr Millen or Ms O’Brien under their personal guarantees. They have no defence to Westpac’s demands under their guarantees and there is no suggestion they have no capacity to pay. The possibility that Westpac may apply monies paid to BCMC by Sino Iron to discharge the debt owing on the Facility is an ordinary commercial consequence of Westpac having first ranking charge superior to ECAP’s security that is not legally affected by the injunction. Moreover, if the Guarantee was to be construed in favour of Westpac in the proceedings and Ottoway’s other claims were unsuccessful, then Ottoway (by its banker NAB) would be liable to discharge BCMC’s obligations under the Facility in full. The Leave Applicants made no submissions and adduced no evidence about the potential for Ottoway to enforce general law rights of indemnity against BCMC and, for that purpose, to exercise subrogated rights in Westpac’s own first ranking charge to claim any surplus that might be available in the receivership in priority over ECAP’s second ranking charge. The potential for that result will of course depend on the terms of instruments that are not before the Court. However, given the complexity of multi-party arrangements, it seems to me that the nature of ECAP’s claimed interest in the dissolution of the temporary injunction is somewhat oversimplified and required a more precise degree of proof before Besanko J if it were to be regarded as anything other than an indirect and financial interest.

68    I do not consider Besanko J’s findings concerning the effect of the injunction on ECAP’s rights as a secured creditor of BCMC to be attended with sufficient doubt to warrant reconsideration on appeal.

The Cretanor issue

69    This proposed ground of appeal is expressed as follows:

His Honour erred at [16] of the Reasons in holding that the principle enunciated in Cretanor Maritime Co Ltd v Irish Marine Management Ltd [1978] 1 WLR 966 (‘Cretanor’), is not wider than that in the 2 Australian cases referred to in [11] – [15] of the Reasons because:-

4.1    as referred to in the passage quoted from News Limited v Australian Rugby Football League Limited and Ors (1996) 64 FCR 410 (‘News’) in [13] of the Reasons, an injunction may affect a third party without necessarily directly affecting the third party’s rights against or liabilities to any party to the action in respect of the subject matter of the action; and

4.2    although such a third party affected by an injunction is therefore not a necessary party to the action, the Cretanor principle entitles them to apply for the discharge of the injunction without being joined as a party to the action, and the Cretanor principle is therefore complementary to and not inconsistent with the principles concerning necessary parties to an action.

70    It is necessary to read the proposed ground narrowly so as to avoid entertaining an impermissible challenge to Besanko J’s decision to refuse to join the Leave Applicants as parties. As explained in submissions, the contention is that the learned judge failed to appreciate that this Court may dissolve an injunction in accordance with an equitable principle stated in Cretanor which, it is said, differs both in its source and content to the principles stated in cases such as John Alexander. The “complementary” jurisdiction to dissolve the injunction in accordance with “the Cretanor principle” is said to be conferred under s 5(2) of the FCA Act which provides that this Court is a court of law and equity. It is then submitted that the learned judge erred in failing to recognise that the Cretanor principle had been approved by Australian courts as a distinct and complementary discretionary basis for the dissolution of an injunction on the application of a non-party who can show an interest in the outcome of the proceedings being something less than that required on an application for joinder. By failing to recognise the existence and content of the equitable principle, his Honour’s discretion to dissolve the injunction is said to have miscarried in a manner that may be interfered with on appeal in accordance with the principles stated in House v The King (1936) 55 CLR 499.

71    The authorities relied upon in support of this proposed ground are sparse.

72    Cretanor itself concerned a dispute between the owner and the charterer of a vessel. In arbitration proceedings, the owner obtained an injunction restraining the charterer from removing its assets from the jurisdiction (Ireland). The only asset situated in the jurisdiction was a deposited fund standing to the credit of the charterer in an Irish bank. The owner and the charterer then entered into a settlement agreement which referred to the injunction and which prevented the charterer from applying to discharge it.

73    Prior to the commencement of the proceedings, the charterer had granted to an Irish bank a debenture creating a fixed and floating charge over all of its present and future assets, including the deposited fund. The bank assigned the debenture to another person (assignee). After the injunction was made, the new debenture holder appointed a receiver. The receiver obtained an order discharging the injunction. The owner appealed.

74    In the Court of Appeal, Buckley LJ (with whom Goff LJ and Sir David Cairns agreed) held that under the terms of the debenture, the receiver acted as the agent for the charterer, not as agent for the new debenture holder. The settlement agreement precluded the receiver in that capacity from obtaining a discharge of the injunction. However, the injunction affected the proprietary interests of the new debenture holder who, upon the crystallisation of the charge, became entitled to a fixed charge over the charterer’s assets “but subject to the necessity of getting the injunction discharged so as to enable the receiver to remove [the asset in question] from the jurisdiction”. The circumstance that the debenture holder had not applied in the proceedings below to discharge the injunction gave rise to what Buckley LJ described as “one of procedure only” (at 975). It is in that context that the passage from Buckley LJ’s judgment to which Besanko J referred (extracted in these reasons at [30] above) is to be understood.

75    Buckley LJ’s words “[w]here the interest of the applicant is clear” are seized upon by the Leave Applicants. They submit that, consistent with that phrase and the decision of Harbottle to which I have earlier referred, the Court has the discretion to dissolve an injunction on the application of a non-party even if the non-party cannot show that their rights or liabilities to a party will be directly affected by the outcome of the proceedings.

76    I doubt the correctness of that submission. The non-party in Cretanor had an obvious and direct interest in having the injunction dissolved: his charge was a proprietary interest in the very assets the charterer (and therefore the receiver as its agent) was restrained by the injunction from dealing with. The operation of the injunction in personam against the receiver was a practical obstacle to the enforcement of the new debenture holder’s first ranking proprietary rights. The Court in the passage extracted at [30] above should be understood as dealing not with the question of the sufficiency of the debenture holder’s interests in bringing an application, but with the procedural question arising from the fact that the debenture holder was not the party that had applied for the dissolution of the injunction in the proceedings below. The Court was concerned to resolve that procedural issue and not to posit a new and more flexible test for the sufficiency of the non-party’s interest in having an injunction dissolved.

77    I also doubt that Australian courts have expressly approved “the Cretanor principle” as formulated by the Leave Applicants. The three cases they rely upon do not go so far.

78    In Michael Wilson and Partners Ltd v Nicholls (2011) 244 CLR 427 Gummow A-CJ, Hayne, Crennan and Bell JJ said at [40]:

If orders are made without notice to a party it is ordinarily sound practice to require the moving party to give to the opposite party notice of the making of the orders and the material on which the orders were made as soon as reasonably practicable after the making of the orders. The party affected by the orders can then move to have the orders amended or discharged.

79    Although Cretanor is one of four authorities cited in a footnote to that passage, the passage itself is not to the same effect as the principle advanced before Besanko J and sought to be advanced on appeal by the Leave Applicants. Had the High Court intended by that statement to approve in Australia a more flexible substantive test for the dissolution of an injunction by a non-party, the proposition would have been stated with more precision and prominence than by way of a citation in a footnote.

80    In BP Chemicals ANZ Pty Ltd v Manildra Starches Pty Ltd [1997] FCA 1189 (BP Chemicals), Finkelstein J considered the authorities concerning the power of the Court to revoke or vary an injunction. In that case, a party to the proceedings applied for the variation of an injunction previously made in the proceedings. His Honour was not concerned with the test for sufficiency of interest that might apply where such an application is made by a non-party. No occasion arose in that case for Finkelstein J to expressly recognise or approve “the Cretanor principle” in its application to non-parties.

81    Although the general statements of principle in BP Chemicals were referred to by a single judge of the Supreme Court of South Australia in West Beach Trust v Profile Events Pty Ltd [2008] SASC 221 at [25] – [27], that case neither establishes nor recognises a “complementary” test for the dissolution of an injunction by a non-party different from that established in the cases referred to by Besanko J.

82    Counsel for the Leave Applicants could point to no Australian decision in which a non-party had invoked (successfully or otherwise) the alternative basis for the dissolution of an injunction said to be recognised in Cretanor and approved in this country.

83    In light of what I have said, there is insufficient doubt attending Besanko J’s approach in applying the test in John Alexander and News and in preference to a wider principle (if it existed) allowing for the dissolution of an injunction. Moreover, his Honour proceeded to determine the Leave Applicants’ arguments concerning the dissolution of the injunction on the assumption that he was wrong in determining they lacked standing to apply for that relief. If, as the Leave Applicants submit, Cretanor provides a separate and discretionary substantive basis for that relief, it cannot be fairly argued that his Honour would have exercised that discretion in the Leave Applicants’ favour, especially given the nature of the antecedent construction dispute he had identified. While I recognise that it is at least arguable that the test for the dissolution of an injunction on the application of a non-party may be more flexible than that applied by Besanko J, the strength of the argument is not sufficient to warrant interference by a Full Court.

The fraud issue

84    At [24] of Ottoway No 2 Besanko J said:

I should refer to one matter which was raised by counsel for Westpac at the conclusion of the submissions. He referred to the fact that Ottoway’s Amended Statement of Claim contains a plea that [BCMC] has engaged in a fraud on Ottoway (paragraph 37.3). Whether that circumstance would give [BCMC] or some other person the right to be joined to the proceeding or to intervene in some way is not before me. That would be a different basis from that advanced on the present application.

85    The Leave Applicants contend that the existence of allegations of fraud against BCMC was indeed a circumstance advanced to justify their own joinder in the action. Even if they are correct about that, nothing would turn on it for present purposes because they cannot appeal from the decision refusing their joinder.

86    The proposed ground of appeal in [5] of the draft notice of appeal raises a different issue. It is said that Besanko J’s concluding remarks disclose that his Honour failed to appreciate that the question of fraud had also been raised by the Leave Applicants as relevant to their application for the dissolution of the injunction quite apart from their joinder as parties. The transcript of the proceedings before Besanko J suggests Counsel for the Leave Applicants had indeed raised an argument to the effect that Ottoway could not establish fraud, even on a prima facie basis, as an “exception to the autonomy principle” on the alleged facts. That was because the fraud was said to be that of BCMC and not that of the beneficiary of the Guarantee, Westpac. Only fraud by or on behalf of Westpac could be used as a basis to enjoin it from enforcing its rights under the Guarantee. The Leave Applicants relied on Clough Engineering Ltd (ACN 009 093 869) v Oil and Natural Gas Corporation Ltd [2008] FCAFC 136; (2008) 249 ALR 458. I accept that those submissions were made and that, if accepted, they were relevant to the assessment of whether Ottoway could show a prima facie case.

87    The passage at [24] of Ottoway No 2 is to be understood in its context. His Honour was there dealing with a matter raised by Counsel for Westpac concerning Ottoway’s pleaded fraud allegations against BCMC being a possible basis for their own joinder. It does not necessarily follow that his Honour failed to appreciate or deal with the Leave Applicants’ alternative submissions concerning the principles in Wood Hall and other authorities and the availability of fraud as an exception to those principles. The Leave Applicants’ submissions concerning the application of Wood Hall and like authorities were dealt with by his Honour at a level of generality that encompasses the Leave Applicants’ arguments on those principles, including their arguments concerning the availability (or otherwise) of the fraud exception. As I have already identified, Besanko J held that the application of the principles in authorities such as Wood Hall to the Guarantee arguably depend on the resolution of the parties’ antecedent dispute concerning which of two very different obligations were secured by the Guarantee. It seems to me to have been unnecessary for Besanko J to go further so as to consider the availability of possible exceptions to the Wood Hall principles should they apply.

88    The Leave Applicants further contend that his Honour in any event erred in finding no basis to depart from his finding in Ottoway No 1 that Ottoway had demonstrated a prima facie case on its claim founded in misleading and deceptive conduct and unconscionable conduct. That is a slightly different contention that is not raised clearly on the draft notice of appeal independently of the point I have just dealt with.

89    I do not consider there to be sufficient doubt about that part of his Honour’s judgment to warrant reconsideration by a Full Court in all of the circumstances. I take into account the circumstance that the Leave Applicants did not put before me all of the evidence upon which Besanko J relied in determining the prima facie case to arise in Ottoway No 1 and the circumstance that Ottoway’s pleaded case is that the enforcement of the Guarantee would be unconscionable in all of the circumstances and constitute the furtherance “by Westpac” of BCMC’s fraud.

90    I have not overlooked that the exercise of his Honour’s discretion to grant (and refuse to dissolve) the injunction involved a balancing of related factors, such that if there be error concerning the existence or strength of one aspect of Ottoway’s claims, the error might conceivably have affected his Honour’s assessment of where the balance of convenience ultimately lay having regard to the authorities I have cited at [15] above. However, even assuming there is doubt as to his Honour’s assessment of the strength or availability of Ottoway’s fraud and like claims, the doubt must be shown to be sufficient to justify reconsideration of the judgment on appeal. I do not consider that any error in the assessment of the prima facie merits of the ACL and fraud claims would have materially affected his Honour’s identification of the central construction dispute between Ottoway and Westpac. The existence of that real dispute was a clear and independent basis for maintaining the status quo pending judgment so that any error concerning the other aspects of Ottoway’s case would not cast sufficient doubt as to the correctness of the outcome to warrant reconsideration by a Full Court.

It may be preferable not to describe this as an exception but rather as an over-riding rule because it emphasises that the ‘primary focus’ will always be the proper construction of the contract: Bateman Project Engineering Pty Ltd v Resolute Ltd (2000) 23 WAR 493; [2000] WASC 284 per Owen J at [30]. Stephen J recognised this in Wood Hall at CLR 459; ALR 398–9 by observing that the provisions of the contract may qualify the right to call on the undertaking contained in a performance guarantee.

SUBSTANTIAL INJUSTICE AND DISCRETIONary CONSIDERATIONS

91    Section 24(1A) of the FCA Act is a civil practice and procedure provision for the purposes of s 37M of the FCA Act. It provides:

37M The overarching purpose of civil practice and procedure provisions

(1)    The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:

(a)    according to law; and

(b)    as quickly, inexpensively and efficiently as possible.

(2)    Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:

(a)    the just determination of all proceedings before the Court;

(b)    the efficient use of the judicial and administrative resources available for the purposes of the Court;

(c)    the efficient disposal of the Court’s overall caseload;

(d)    the disposal of all proceedings in a timely manner;

(e)    the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

(3)    The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.

(4)    The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings:

(a)    the Rules of Court made under this Act;

(b)    any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court.

92    As I observed in Irwin v Irwin [2016] FCA 1565 at [37]:

Section 37M(2) enumerates, without exhaustion, some of the objectives to be achieved by the civil practice and procedure provisions in accordance with their overarching purpose. Subsections 37M(2)(a) to (d) each refer to considerations affecting not only the parties to a particular dispute, but to the effective administration of justice across the whole of the Court more generally. Construed as a whole, the reference in s 37M(1) to the ‘just resolution of disputes’ is to be given a wide meaning, so as to encompass considerations affecting not only the interests of the parties in a particular proceeding, but the effective resolution of all disputes pending in the Court. The just resolution of ‘disputes’ in the Court may well be served by the application of a civil practice and procedure provision in a manner that advances the wider objectives specified in s 37M(2) even though the interests of individual litigants may be adversely affected in the particular case, and perhaps seriously so. The terms of s 37M recognise that the judicial and administrative resources available for the purposes of the Court are not unlimited.

93    The orders sought on this application included an interlocutory order that the trial dates in the action between Ottoway and Westpac be vacated “and not relisted until after judgment in this appeal”. The application for that order was heard and dismissed by White J: Ecap Finance Pty Ltd v Ottoway Engineering Pty Ltd [2017] FCA 200.

94    As I have said, the trial between Ottoway and Westpac is due to commence on the next business day after the delivery of judgment on this application. The Leave Applicants filed the Interlocutory Application in the proceedings on 20 December 2016, more than eight months after the grant of urgent interim relief, more than six months after the extension of the injunction and the delivery of reasons in Ottoway No 1 and more than a month after Besanko J had ordered that the action between Ottoway and Westpac be set down for trial.

95    The primary judge proceeded on the basis that Mr Millen became aware of the injunction on 8 June 2016. Mr Millen’s explanation for the delay in making the Interlocutory Application was “by no means a full and satisfactory explanation”: Ottoway No 2 at [19]. That finding is not the subject of challenge on the proposed appeal.

96    Whether the Leave Applicants intend to satisfy Westpac’s demand for payment at any time prior to the delivery of judgment in the primary proceedings is unclear on the evidence before me. No evidence was adduced before Besanko J or before me as to their financial position generally or as to their present capacity to pay.

97    Counsel for the Leave Applicants acknowledged that they might have a claim for compensation to be awarded upon Ottoway’s undertaking as to damages given upon the grant of the injunction. I take that potential claim for compensation into account although I give it little weight because I am in no position to assess whether such a claim might necessarily succeed on the facts and law.

98    Assuming the interlocutory judgment to be wrong, the prejudice the Leave Applicants will suffer if the injunction persists until final judgment in the proceedings does not equate to the prejudice they might suffer if an injunction in the same terms were to be granted on a permanent basis. The purpose of the interlocutory injunction is to preserve the status quo vis á vis Ottoway and Westpac pending judgment in the action between them. The temporary nature of the injunction weighs heavily in the exercise of my discretion. Accepting that the Leave Applicants are indeed prejudiced by Westpac’s demand per se, the consequence that they must wait for judgment in the action to be delivered before applying for leave to appeal against any final orders is, to some extent, a consequence of their own delay.

99    As Ottoway acknowledged, the Leave Applicants will be in a position to seek leave, as non-parties, to appeal any final orders made in the proceedings and in that event would not otherwise be required to apply for leave to appeal as they do in respect of an interlocutory judgment.

100    If leave to appeal against the interlocutory injunction were to be granted, the Full Court would (whether expeditiously or not), in the exercise of the appellate jurisdiction, determine whether Ottoway had established a prima facie case at the outset of the proceedings (proposed ground 1), whilst at the same time Besanko J would, in the exercise of the original jurisdiction, hear and determine the substantive merits of Ottoway’s claims. The efficient disposal of the Court’s overall caseload would not be achieved by that state of affairs. Nor would that objective be achieved by the revocation of White J’s orders and the vacation of the imminent trial dates.

101    Weighing all that I have said, and bearing in mind the principles in Samsung and Décor Corporation, the overarching purpose expressed in s 37M of the FCA Act would best be served by the refusal of leave to appeal.

Associate:

Dated:    10 March 2017