MP Water Pty Ltd v Veolia Water Australia Pty Ltd

1. [1]

   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”).

2. [2]

   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:

3. [3]

   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.

FACTS

1. [4]

   The plaintiff relied on evidence from chemical engineer Ben Bowen and solicitor Kon Nakousis. Veolia relied on evidence from commercial director Yvette Waterfall. The Customer relied on evidence from engineers Michael Clark and Mark Frewin. Some of the evidence was superceded by further evidence and offers of practical solutions to alleviate difficulties identified in earlier evidence. I have only set out the situation as it finally appeared.

The power station and mines

1. [5]

   EnergyAustralia operates the Mount Piper Power Station, which is located some 25 kms from Lithgow in the central west region of New South Wales. The power station comprises two coal-fired steam turbine generators which have the capacity to generate electricity for up to 15% of New South Wales’ power during peak operation.

2. [6]

   The main coal supply for Mount Piper Power Station is the Springvale Coal Mine, owned by Centennial Coal. Springvale Mine is actively mining coal at present.

3. [7]

   Also relevant is Angus Place Mine. This mine was previously operational but is currently in ‘care and maintenance’, that is, it is not currently being mined for coal but is being maintained to meet environmental and safety regulations with a view to potentially becoming re-operational again in the future.

Water from the mines

1. [8]

   As part of coal mining, water is intercepted from ground water by the mine workings and as groundwater flows in through strata within the mines. Springvale Mine is operated using longwall mining and there are aquifers which occur above and adjacent to the areas being mined. As the longwall is mined, the strata above the longwall is fractured, releasing local groundwater into the mine workings.

2. [9]

   In order to keep the mine operating and to ensure that it is safe and dry to allow people to enter and work within the mine area, the water must be pumped out to ensure that it does not accumulate in the mining and access areas. Water is removed from the mine by vertical bores up to the surface. The bores connect with an overland pipe operated by Veolia, which leads to the Facility.

3. [10]

   As part of mining operations, tunnels are cut to access the coal, which is very soft. The roofs and walls of the tunnels are supported by inserting a large series of bolts and mesh to hold together the ribs and walls of the mine so that they do not fall in on the tunnel. Each bolt is between six to 12 feet long and is chemically fixed to the wall or roof to be held in place. Each metre of a tunnel contains around eight bolts. If water accumulates in the mine, it can saturate the strata. It is difficult to predict the effect of saturation on the bolts and mesh used to support the tunnels. The reaction of the bolts and mesh to saturation and re-drying may result in significant work being needed to ensure the integrity of the strata for safe mining operations. When the Angus Place Mine experienced a flooding event, full re-support of the roof was required by reinstalling roof and wall bolts.

4. [11]

   A megalitre (ML) is one million litres. An Olympic swimming pool holds approximately 2.5 ML of water. As part of normal operations, around 25 ML of water is generated from groundwater flows and intercepted every day at Springvale Mine. This volume of water is generated each day irrespective of the specific activities being conducted at the mine and, therefore, the generation of water cannot be stopped or reduced.

5. [12]

   At Angus Place, around 7 to 8 ML of water is generated each day, with up to around 10 ML, even though mining is not currently taking place. This is the result of the natural inflows through the existing longwall strata within the mine. This water still needs to be removed to ensure that the strata is not saturated. Otherwise, saturation will significantly increase the costs of recommencing operations at the mine.

6. [13]

   Water from the Springvale and Angus Road mines is treated at the Facility. The combined water from Springvale Mine and Angas Place Mine is 35 ML per day. If the water cannot be treated at the Facility, there are no other avenues available for environmentally safe water management.

7. [14]

   The mines can stop the flow of mine water to the Facility, but then the water generated each day accumulates within the mines. (It takes approximately ten to eleven days to remove each day’s accumulation of water from the mines, as, after the Facility treats the water generated from the mines each day, it only has 3 ML of capacity to drawdown accumulated water.) The mines can also go into protective mode, when additional pumps are brought in to recirculate as much water as possible to disused mine workings, which can be used as reservoirs, following which the pumps are used to redirect water away from critical areas, equipment and infrastructure, thereby delaying the flooding of the mine for a limited time.

Using the water in the power station

1. [15]

   The treated water from the Facility is used in the Mount Piper Power Station’s cooling towers.

2. [16]

   Water is circulated through the cooling towers at the power station several times and, during each pass, some of the water evaporates as steam. The remaining water is known as “blowdown”, which is typically more saline than it was when first circulated through the cooling towers. Before the contracts in question, the Mount Piper Power Station had a series of ponds to hold such water, including Blowdown Pond A and Blowdown Pond B (Pond B).

The Contracts

1. [17]

   In November 2017, a suite of contracts was entered into between the parties, of which three are in evidence:

2. [18]

   It is the last of these contracts which is particularly relevant here. Under the Services Provider Agreement, Veolia is obliged to take and treat water from the mine, in effect, come what may. Clauses 8.2 and 8.3 require Veolia to provide the Services (including water treatment services) and to do so expeditiously and without delay. By clause 20.2(a), Veolia must accept and process all Mine Water made available at the Mine Water Receipt Points, subject to various matters not presently in issue. By clause 21.5, the quality or volume of Mine Water delivered by the Customer to a Mine Water Receipt Point does not relieve Veolia from or alter its liabilities or obligations under the Services Provider Agreement. By clause 1.1(b) in Annexure 3, the Facility must accept and treat Mine Water, including Out-of-Envelope Mine Water (a measure of water quality as received).

3. [19]

   Clause 44 of the Services Provider Agreement gives the plaintiff and the Customer “Step-in Rights”. The plaintiff has “step-in” rights inter alia where “a Services Provider Default occurs and the Services Provider has failed to diligently pursue the relevant Services Provider Default Notice”.

Fixing the ponds

1. [20]

   Under the Design and Construction Contract, Blowdown Pond A was required to be repurposed and recommissioned into the Mixed Brine Pond, while Pond B was to be repurposed and recommissioned into the Mine Water Buffer Pond. A facility diagram of July 2019 envisaged that Blowdown Pond A and Pond B formed part of the Facility.

2. [21]

   The purpose of a Mine Water Buffer Pond is to provide additional buffering capacity to store mine water in the event of restricted flow to the Facility or where water from the mine cannot be treated in the Facility immediately. If such a disruptive event occurs, the Mine Water Buffer Pond enables the Facility to continue to receive mine water and, in effect, to store it until the disruptive event is remedied. Water stored in the Mine Water Buffer Pond can then be sent back into the Facility for treatment.

3. [22]

   Schedule 20 to each of these contracts, “Pond Management”, required the plaintiff to procure a Pond Baseline Condition Report for Blowdown Pond A and Pond B. If the report indicated that it was necessary to remediate or remove settled solids from the ponds or to remediate or replace any liner, then Veolia was to provide a quotation for this work. The plaintiff could accept Veolia’s quotation or arrange for the work to be undertaken by others. If the work was undertaken by the Customer, then the plaintiff was obliged to ensure that such work was performed (Schedule 20, clause 6):

4. [23]

   In September 2019, the Customer completed the cleaning and re-lining of Blowdown Pond A, which was handed over to Veolia. Things did not go as smoothly with Pond B. When time came to begin working on Pond B, the Customer suggested that Veolia had caused delays to the project such that it was unable to remediate Pond B. Veolia said it was unable to use or repurpose Pond B into the Mine Water Buffer Pond as the Customer had not completed the remediation work and thus it should be removed from the requirements for Commercial Acceptance. The Customer and the Independent Completion Certifier would not agree to issue Commercial Acceptance without the Mine Water Buffer Pond.

5. [24]

   In May 2020, when the project was approximately one-year late, the plaintiff and the Customer entered into a Side Letter by which the Customer agreed to remediate Pond B at the plaintiff’s cost. Commercial Acceptance was certified by the Independent Completion Certifier the same day. Thus, construction of the Facility was complete, save for the remediation of Pond B under the Side Letter, and provision of services under the Services Provider Agreement began.

6. [25]

   In order to remediate Pond B, water was temporarily diverted from Pond B to another pond owned by the Customer, Pond D. In August and September 2020, the Customer cleaned and re-lined Pond B using the process as for Blowdown Pond A: cleaning, repairing and where necessary replacing areas of the existing liner and adding a second liner on top of the existing liner.

7. [26]

   On 26 October 2020, an independent certifier, SMEC, certified that Pond B was complete. Attached to the certifier’s report were several test reports including: a test report on the pond liner by Total Liner Systems; a sludge survey report by Dredging Solutions; a report by LendLease on liner assessment and installation; construction quality assurance reports by EcoLine in respect of the primary and secondary liner; and a variety of laboratory and test results. The certification and accompanying reports comprised some 200 pages of material. Presumably this was intended to address the requirements of Schedule 20, clause 6: see [22]. Veolia commissioned RedEarth Engineering to advise on the re-lining works performed on Pond B.

8. [27]

   Veolia asked for Pond B to be handed over empty prior to Veolia commencing the commissioning works required to incorporate Pond B into the Facility. This was done. Veolia diverted approximately 4 ML of mine water to Pond B, which Mr Bowen understood was the first stop in the commissioning process. The diversion to Pond D was also cancelled so that small amounts of excess mine water and water from the Facility drainage system was able to enter Pond B. Mr Bowen understood that Veolia was then prepared to commission Pond B and had begun the handover process.

9. [28]

   On 4 November 2020, RedEarth provided its report. On receipt of the RedEarth Report, Veolia asserted defects to Pond B and refused to accept handover of the pond. Mr Bowen has reviewed the report, which concluded that the relining works were performed well and that the liner used was chemically compatible with the water that was to enter Pond B. The report also stated that it was common for a double liner system, such as that of Pond B, to have a “leakage detection and recovery system” implemented.

10. [29]

    According to Mr Bowen, the RedEarth Report does not raise any issues with respect to the quality assurance documentation examined. The report identifies a number of key risks with mitigation measures identified as conventional control measures; does not identify any of these risks as being critical or indicative of anything which would give rise to a potential or imminent failure, nor recommended any immediate rectification. The report clearly links the regulatory requirements to the level of risk mitigation enhancements that are necessary, noting that the authors clearly state that they are not aware of the regulatory requirements for this specific case. As Mr Bowen reads the report, it does not give rise to any reason to suggest that the work done is defective.

11. [30]

    Ms Waterfall says the plaintiff needs to provide Veolia with information in respect of Pond B being: a document setting out the chemical compatibility of the liner; a final report regarding the condition of liner; an operation and maintenance manual; and an environmental management plan. Ms Waterfall says that Veolia presently has no knowledge of the integrity of the liner and its chemical compatibility and may not be able to safely carry out works in Pond B in accordance with its environmental planning licences and laws. I do not need to determine whether, in the circumstances described, Veolia accepted Pond B, nor whether Veolia is entitled to the documents it seeks under Schedule 20, clause 6 or otherwise.

12. [31]

    Veolia has continued to assert that Pond B is not available and cannot be used, although Ms Waterfall says that Pond B has been used to store processed drainage waters which are normal flows when a process is upset or flushing needs to occur at the Facility. Pond B has been gradually filling at a rate of less than 0.5 ML per day. Veolia appears to have diverted water to the pond from time to time. In about January 2021, Veolia diverted 11 ML to Blowdown Pond B. See also [35]-[38].

Capacity of Pond B

1. [32]

   Pond B has a capacity of 104 ML. Consistently with the purpose of the Mine Water Buffer Pond, of Pond B’s 104 ML capacity, 42 ML is to be kept for the Customer, known as the “Customer Free Board”: clause 5.6, Services Provider Agreement. The Customer Free Board allows 24 hours of mine water to flow into the buffer pond.

2. [33]

   Ms Waterfall explains that it is critical to ensure that wind-created waves do not cause untreated mine water in Pond B to splash over the edge. Therefore a maximum fill level allows 0.5 metres of ‘free board’. Further, to restart treatment of mine water direct from the mine after any shutdown of the Facility, Pond B ideally needs to have an extra 1 to 2 ML of capacity to account for additional pond water temporarily created through the process of start up.

Polymer dosing

1. [34]

   In about March 2020, the Customer advised that it was considering undertaking cationic polymer dosing to the mine water. A polymer is a chemical product often used in the treatment processes for the removal of sediments for water. The Facility itself uses a number of polymers. Veolia objected to the Customer undertaking cationic polymer dosing as it may be harmful to the Facility. According to Ms Waterfall, the use of polymers by the Customer can result in membrane fouling. As I understand it, the polymers used by the Customer and Veolia carry opposing electrical charges which react.

2. [35]

   The Customer insisted that such polymers were used in the ordinary course of mining operations and were necessary to prevent damage to pumps used in the mine. Veolia did not accept this and the plaintiff sought further information from the Customer to support the usage of polymers in its operations. After various meetings and correspondence from March to May 2020 in respect of this issue, the matter lay quietly until recently. On this application, the plaintiff referred to Veolia's obligations to accept and treat mine water under the Services Provider Agreement, notwithstanding water quality. Thus, even if the polymer dosing is problematic, it will only give rise to a claim against the plaintiff or the Customer for a breach of clause 20.1, which may sound in damages.

3. [36]

   At a meeting in February 2021, Ms Waterfall raised concerns with Mr Bowen and the Customer that variable mine water quality was causing overflow events which, by nature of the plant design, flowed to Pond B. However, that pond was not handed over and Veolia was waiting for the plaintiff to respond to Veolia’s concerns about the pond. Ms Waterfall said that either the plaintiff had to respond to Veolia’s concerns so that the pond could be used for its intended purpose or, otherwise, the mine water should be stopped, diverted to Pond D or treated by the Customer. The Customer said it had handed over Pond B to the plaintiff, while Mr Bowen said the plaintiff was considering Veolia’s concerns but was not willing to consider the other alternatives suggested by Veolia “within the meeting”.

4. [37]

   In March 2021, the Customer advising that it may resume cationic polymer dosing, to which Veolia objected. In about April 2021, a further 10 to 12 ML was added to Pond B.

5. [38]

   On 21 April 2021, Veolia issued an urgent “heads up” to the plaintiff and the Customer, noting that the plant had been affected by symptoms of polymer related filter fouling, causing overflow which drained to Pond B. The volume of Pond B now stood at 72 ML, being above the freeboard level of 62 ML. Veolia advised: (emphasis added)

6. [39]

   In response to this email, the Customer did not accept that there was anything wrong with the use of a cationic polymer. The plaintiff began to investigate commissioning temporary works by LendLease to divert water from Pond B. Mr Bowen says he was intending to transfer water from Pond B to the Customer to facilitate the commissioning of Pond B.

7. [40]

   On 5 May 2021, Veolia issued a notice under the Services Provider Agreement, advising that a services failure was likely to arise given the problems with Pond B. The plaintiff accelerated its efforts to establish a temporary diversion of water from Pond B.

Mines stop water

1. [41]

   On 6 May 2021, Veolia issued a notice under the Services Provider Agreement that, given the levels in Pond B had reached 85 ML, the flow of mine water must stop before the level reached 90 ML. The plaintiff was asked to stop the flow of mine water in order to prevent overflow. The plaintiff actioned this request with the Customer. The flow of mine water from the mines to the Facility was stopped at around 7.00 pm on 7 May 2021.

2. [42]

   The plaintiff also issued a notification to Veolia that it would be entering onto the Facility on 7 May 2021 to install pipework and equipment at Pond B to facilitate the completion of the commissioning of Pond B. Veolia responded that work could not be done on Pond B unless the information requested was provided, and suggested that the plaintiff was in breach of contract. Various dispute notices were issued by the parties and rejected.

3. [43]

   By 8 May 2021, the plaintiff had installed a temporary pump and was ready to commence transferring water from Pond B. The pump installed by LendLease is capable of transferring 4 ML per day. On 8 May 2021, in light of the second option referred to in Veolia’s email of 21 email 2021 (see [38]), the plaintiff sent a proposed direction to Veolia – directing Veolia to treat the water in Pond B – for comment. No comment was provided.

4. [44]

   By now, a “Major Service Failure” may have occurred under the Services Provider Agreement, as the Facility had failed or ceased to be able to accept mine water at a capacity which is at least at the Guaranteed Flow and Process Capacity for a continuous period of 48 hours: Clause 1.1. This would be a “Service Provider Default”: item 4 of the definition. On 11 May 2021, the plaintiff sent Veolia a default notice under clause 42.2 of the Services Provider Agreement in relation to the shutting down of the Facility. Veolia disputed the notice. Also on 11 May 2021, plaintiff issued a direction to Veolia to urgently begin reducing water in Pond B, recommence the Facility’s operation, and co-operate and assist the plaintiff and the Customer to manage the water in Pond B.

5. [45]

   On 12 May 2021, Veolia disputed the direction, saying that treating the water in Pond B was not suitable as, amongst other things, treating water in Pond B only would require the Facility to be set up differently and “would put the plant at risk when it returns to treating the Mine Water”. Two alternatives were put forward for consideration.

6. [46]

   The plaintiff suggested at the hearing that these proposals indicate that Veolia is willing to treat water from Pond B but only on terms which effectively reallocate agreed risk. The alternatives are also inconsistent with a belief that water from Pond B cannot safely be treated.

7. [47]

   Neither alternative was attractive to the plaintiff, who instead directed Veolia to commence treating mine water, including the water in Pond B, and to attend an on-line conference with the plaintiff. Failure to comply with these directions was said to leave the plaintiff with little choice but to exercise its rights, including step-in rights. In response, Veolia denied it was in default or that there was any Major Service Failure under the Services Provider Agreement.

Step-in Notice

1. [48]

   On 13 May 2021, the plaintiff requested a meeting with Veolia, but Veolia was not prepared to meet until it was provided with various information.

2. [49]

   On 13 May 2021, the plaintiff issued a Step-in Notice under clause 44.1(a) and (b) of the Services Provider Agreement and, pursuant to clause 44(c), notified of its intention to exercise Step-in Rights to remedy Veolia’s defaults. The extent of the Step-in Right being exercised was said to be limited as follows:

3. [50]

   The plaintiff advised that its representative, Mr Bowen, would attend the site for the purposes of the Step-in on 14 May 2021 at 9.00 am and required Veolia to make itself available for the purpose of implementing the Step-in Direction. In response, Veolia rejected the Step-in Notice as “entirely unlawful” and advised that it would only attend a meeting if it was to discuss the issues raised by Veolia in its earlier correspondence.

4. [51]

   The plaintiff says that the effect of the Step-in Notice was to address Veolia’s stated concerns about the risks involved in treating and de-watering Pond B by having the plaintiff take responsibility for the decision to do so, thus alleviating the immediate issue whilst meeting those concerns.

5. [52]

   On the morning of 14 May 2021, Mr Bowen attended at the Facility and met with Ms Waterfall.

6. [53]

   Later that morning, the plaintiff issued a Step-out Notice. The reason for the Step-out Notice was said to be to avoid uncertainty about who controls the Facility pending the interim mandatory injunction now sought.

7. [54]

   Ms Waterfall says it is not clear to her what the Step-in Notice directs Veolia to do in terms of assistance to the plaintiff. Further, Veolia has not been provided with any protocol or safe work method statement in relation to the plaintiff’s proposed operation of the Facility. Rather than complying with the Step-in Notice, Ms Waterfall suggests that LendLease pump water from Pond B to the Customer’s Pond D so there is sufficient available capacity in Pond B to restart the Facility, with Veolia to then commence treating mine water, excluding water from Pond B.

These proceedings

1. [55]

   Further correspondence ensued, including with the Customer, in respect of the impact of events on the mines and the urgent need for a solution. Later on 14 May 2021, the plaintiff commenced these proceedings ex parte, seeking orders for short service. Further communications ensued between the plaintiff, Veolia and the Customer as to resolving the apparent deadlock. By 20 May 2021, when the motion was returnable inter partes, no solution had been found.

APPLICATIONS FOR MANDATORY INTERLOCUTORY INJUNCTIONS

1. [56]

   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).

2. [57]

   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].

3. [58]

   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]:

4. [59]

   The rarity of interlocutory mandatory injunctions was noted by J D Heydon, Heydon on Contract (2019, Lawbook Co) at [28.530]:

5. [60]

   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)

6. [61]

   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:

SERIOUS ISSUE TO BE TRIED

1. [62]

   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.

2. [63]

   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].

3. [64]

   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.

4. [65]

   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).

5. [66]

   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.

6. [67]

   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:

7. [68]

   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:

8. [69]

   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.

9. [70]

   The Mine Water Buffer Pond is defined as:

10. [71]

    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.

11. [72]

    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.

12. [73]

    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.

13. [74]

    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.

14. [75]

    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.

BALANCE OF CONVENIENCE

1. [76]

   The level of water in Pond B can be reduced by pumping the water elsewhere or treating the water at the Facility. The Customer has offered to accept 5 ML into one of its ponds in order to reduce the level of Pond B sufficiently to allow the Facility to re-start and treat the water in Pond B but is not prepared, nor obliged, to take more water. Thus, the balance of convenience requires the Court to assess the risk that treating the mine water in Pond B in the Facility will cause harm to the Facility, and to also consider the risks of what may happen if the water is not so treated.

Damage to the Facility

1. [77]

   Ms Waterfall says that the directions in the Step-in Notice may cause damage to the Facility as the chemistry of the water in Pond B is unknown. Exotic and heavy metals and hydro carbonates may be present in the waters in such quantities as cannot be treated by the Facility. This would destroy reverse osmosis membranes and cartridge filters. The cost of replacing this equipment is some $1.25 million.

2. [78]

   Mr Bowen says the only water in Blowdown Pond B is rainwater and mine water which Veolia has put there. He does not believe that the treatment of this water will cause any damage to the Facility, as the Facility is designed to treat this water. Veolia has in fact used Pond B as a buffer pond. It is currently full of mine water, working as a buffer to other aspects of the Facility. Mr Bowen says the ability to urgently remove water from Pond B is not related to the liner condition of Pond B. Nor does any lack of information prevent the use of Pond B as a buffer pond and the treatment of the mine water which it contains.

3. [79]

   On the evidence, there is a risk that, if Veolia treats the water in Pond B in the Facility, damage may occur in the order of some $1.25 million. The risk of such damage, however, appears possible but not likely.

Impact on mines

1. [80]

   Approximately 32 to 33 ML is accumulating per day in Springvale and Angus Place. If water is not removed from the mines, water can damage the mechanical, electrical and other infrastructure and equipment in the mine, such as the ventilation system, trunk conveyor and the longwall equipment, which itself is worth approximately $140 million.

2. [81]

   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.

3. [82]

   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.

4. [83]

   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.

5. [84]

   At the Angus Place Mine, due to the inability to send water to the Facility, one of the old mine working areas (800 panel) is now full. Water in 800 panel has high levels of hardness and is usually blended with water from the other old mine working storage area (900 panel) before sending it to the Facility to ensure that the water meets the required specifications. As 800 panel is now full, water from 800 panel is flooding into 900 panel, effectively contaminating the water in 900 panel in an uncontrolled manner. This is occurring at a rate of approximately 0.5 ML per day through water ‘weeping’ through the walls. This will impact on the way that water can be blended from the Angus Place Mine to ensure that water flowing to the Facility remains within the required envelope.

6. [85]

   Varying estimates have been given as to when the mine workings at Angus Place are expected to flood, depending on the rate of water flow, ranging from 21 May 2021 to 22 June 2021. Continued flooding of the mining areas gives rise to the same loss of strata control issues already described, with significant costs associated with checking and restoring these strata controls, assuming they can be restored. Estimates were given that, by early August 2021, the mine void would be filled resulting in a loss of mining equipment and, by early November 2021, the roof areas of the mine would fall in on mine roadways, jeopardising future mining operations, in around early November 2021.

Water for use in cooling towers

1. [86]

   As the Facility is not presently operating, Mount Piper Power Station has had to obtain water from other sources to use in its cooling towers. This has caused EnergyAustralia to incur additional costs, which would not otherwise have been incurred if treated water was available from the Facility. Using water from other sources requires extra chemicals to be used in the cooling water system to manage water chemistry and this process results in extra blowdown being created, which must then be processed at additional cost. As I understand it, the plaintiff is exposed to these costs.

Coal supply

1. [87]

   The main impact of the non-operation of the Facility on Mount Piper Power Station is in relation to the supply of coal. There is currently enough coal stockpiled at the power station for about three months’ worth of operations. After that, the power station will need to arrange for the supply of coal from an alternate source, which would need to be transported by train at significant cost. As I understand it, the plaintiff will be exposed to these costs.

2. [88]

   In the events which have occurred, the Customer has issued a default notice to the plaintiff. The Customer has extended time for the plaintiff to remedy its breach (arising from Veolia’s breach) until 20 May 2021. The risk faced by the plaintiff is termination of the Water Treatment Services Contract, together with a claim for damages.

CONCLUSION

1. [89]

   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.

2. [90]

   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.

3. [91]

   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].

ORDERS

1. [92]

   For these reasons, I made the following orders on 20 May 2021:

   1. (1)

      NOTE that the plaintiff:

   2. (2)

      NOTE that the second, third and fourth defendants:

   3. (3)

      UPON the plaintiff’s undertaking as to damages in Note 3(a), the plaintiff pumping 5ML of water as agreed in Note 3(b), and the second, third and fourth defendants’ consent, acknowledgment and statements in Note 4:

   4. (4)

      Reserve all question of the costs of today.

   5. (5)

      Stand the Summons over for directions on Friday 28 May in the Technology and Construction List.

   6. (6)

      Grant liberty to the parties to apply on 24 hours’ notice to the Commercial List Judge.

   7. (7)

      These Orders to be entered forthwith.