[2021] NSWSC 454
Masters in Building Training Pty Ltd v State of New South Wales
Injunction granted
Catchwords
EQUITY – Equitable remedies – Injunction – Mandatory – Government contract to fund plaintiff’s training of apprentices purportedly terminated with only 3 months to run – Whether interlocutory mandatory inunction should be granted – No issue of principle
Cases cited
- BP Refinery (Westernport) Pty Ltd v Shire of Hastings(1977) 180 CLR 266
- Co-operative Insurance Society Ltd v Argyle Stores (Holdings) Ltd [1998] 1 AC 1
- Kolback Securities Ltd v Epoch Mining NL(1987) 8 NSWLR 533
- Shepherd v Felt & Textiles of Australia Ltd(1931) 45 CLR 359
Legislation cited
- National Vocational Education and Training Regulator Act 2011 (Cth)
Judgment
Summary
- [1]
The plaintiff, Masters in Building Training Pty Ltd (Masters) is a nationally registered training organisation. It provides what Mr Paul Lawrence, its Chief Executive Officer, describes as a blended training model, with online learning and workplace-based training coupled with onsite assessment for apprentices, trainees and experienced workers in the building industry throughout New South Wales, Queensland and the ACT.
- [2]
The defendant, the State of New South Wales, is sued in respect of its Department of Education through Training Services NSW (the Department).
- [3]
Masters and the Department were parties to a contract under the Smart and Skilled program which was due to expire in accordance with its terms on 30 June 2021 (the Contract). Under the Contract, the Department funds and monitors the vocational training provided by Masters to its eligible New South Wales students. Approximately 90% of Masters’ annual income was derived from funding provided under the Contract.
- [4]
On 25 March 2021 (when the Contract had only slightly more than three months to run) the Department purported to terminate the Contract with immediate effect.
- [5]
After an urgent, contested hearing in the Duty List, the Court made these orders on 12 April 2021:
- [6]
These are the reasons for those orders.
- [7]
The Court recognised that the relief sought by Masters was, in practical terms, tantamount to final relief. It was satisfied that there was a serious question to be tried as to whether the Department had breached implied obligations of good faith and to afford Masters a reasonable time to respond to matters alleged to be Events of Default under the Contract, such that the Department had not been entitled to terminate the Contract. The Court was satisfied that Masters had strong prospects of success in relation to the serious question to be tried. Furthermore, given the Department’s primary role under the Contract was to provide funding, in considering the balance of convenience the disruption to some 800 students of having their studies peremptorily terminated strongly favoured the relief being granted.
- [8]
Mr C O’Neill of Counsel appeared for Masters. Mr N Simpson of Counsel appeared for the Department.
Procedural history
- [9]
These proceedings first came before me in the Duty List on 31 March 2021. Although not having been formally served, the Department appeared.
- [10]
Masters’ summons, filed in Court that day, sought relief including:
- [11]
Masters’ application for interlocutory relief was plainly urgent, not least because there was evidence that the Department’s termination of the Contract had disrupted the studies of over 800 students. I stood the proceedings over to the next day, 1 April 2021, while I made inquiries as to what arrangements could be made to fix an urgent interlocutory hearing (including taking account of the intervening Easter break).
- [12]
At the hearing on 1 April 2021, the Court made directions for the Department to file any affidavits upon which it proposed to rely and for the parties to provide written submissions. In accordance with the directions I made on that day, Masters’ application for interlocutory relief was heard by me the following Friday, 9 April 2021.
- [13]
The hearing took the entire day. While it was not practicable to deliver ex tempore reasons at the conclusion of the hearing, I informed the parties that the Court would grant Masters the interlocutory relief which it sought. Primarily, this required the Department to continue to perform its obligations under the Contract by providing funding (referred to in the Contract as “Subsidies and Loadings”). I stood the proceedings over to the following Monday, 12 April 2021, with an invitation to the parties to attempt to agree the precise form of interlocutory orders to be made.
- [14]
The parties were able to reach an agreement as to the form of relief to be ordered on the basis of the Court’s indication of the outcome. On 12 April 2021, I made the orders set out at [10], indicating that I would publish my reasons at a later date and thereafter entertain argument as to costs on the papers.
- [15]
I record the Court’s gratitude for the parties’ helpful and thorough written submissions and the efficient way in which the hearing was conducted by counsel.
The Contract
- [16]
The Contract included:
- [17]
Masters had been under a contract to the same effect as the Contract since 2014 with annual renewals. It was common ground that the Contract had been created on or about 15 May 2020 to commence on 1 July 2020, by Masters accepting the terms and conditions in a “Review Notice” issued under clause 6 of the predecessor contract (in like terms to clause 6 of the Contract set out above). There was also no dispute that (but for the purported termination) the Department would not have issued a Review Notice pursuant to clause 6 of the Contract, so that the Contract would have come to an end on 30 June 2021.
The facts
- [18]
For the purposes of the interlocutory hearing, there was no real dispute about the objective events which led up to the purported termination of the Contract. As will be apparent from what follows, the relevant history began under the Contract’s predecessor contract. That predecessor contract was in relevantly identical terms to the Contract and, in what follows, contractual provisions are referred to without distinguishing whether they are under the Contract or its predecessor.
- [19]
In May 2019, Masters was notified by the Department that the Department wished to conduct a performance monitoring audit of Masters. The audit occurred during June and July 2019.
- [20]
On 13 December 2019, without any prior communication or notification, the Department issued Masters with a notice of suspension under the predecessor contract. The notice was signed by Mr Emil Tabone, Director, Training Market Operations. It contained an appendix setting out alleged Events of Default. The effect of the suspension was that Masters could not enrol new students. The letter sought a response within 28 days but also offered Masters an opportunity to meet with representatives from the Department to discuss the alleged Events of Default.
- [21]
A meeting took place between Masters management and the Department on 17 December 2019. On 6 January 2020 Masters delivered its response to the various allegations to the Department. According to the evidence of Mr Lawrence, on Masters’ case most of the alleged Events of Default had been remedied prior to the meeting on 17 December 2019 and, according to his affidavit, “The balance of the events of non-compliance identified in the Notice are still the subject of an ongoing remedial process instituted by [Masters] and monitored by the Department.”
- [22]
By letter dated 24 January 2020, the Department gave Masters what was described as a “notice of partial release from suspension”.
- [23]
By letter dated 4 February 2020, the Department issued to Masters what was described as a “notice of lifting of suspension” which included:
- [24]
On 29 April 2020, the Department emailed Masters what was described as a “Review of Remediation”. According to Mr Lawrence’s affidavit, it contained a review of the evidence that had been provided to the Department by Masters in January 2020. This required further action on the part of Masters, the detail of which it is not presently relevant.
- [25]
While the matters referred to in the preceding paragraph were being dealt with, on 15 May 2020 the Department issued Masters with a Review Notice under clause 6 of the predecessor Contract, which Masters accepted. This had the effect of bringing the Contract into existence which, in accordance with its terms, would come to an end on 30 June 2021 unless extended by the acceptance of a further Review Notice.
- [26]
On 22 June 2020, the Commonwealth regulator, the Australian Skills Quality Authority (ASQA), gave Masters notice of a decision to suspend part of Masters’ scope of registration under the National Vocational Education and Training Regulator Act 2011 (Cth) (the NVR Act). Masters’ application for a review of the decision was received by ASQA on 19 July 2020.
- [27]
By letter dated 13 July 2020, the Department, having become aware of ASQA’s decision to suspend four qualifications from Masters’ scope of registration, gave Masters a notice under clause 21.2(c)(i) of the Contract, suspending those same qualifications.
- [28]
By letter dated 11 September 2020, the Department gave Masters a further notice under clause 21.2(c)(i) of the Contract, suspending all qualifications. The reason for the suspension was recorded as:
- [29]
The letter invited Masters to give a response to the alleged Events of Default outlined in Appendix A to the letter.
- [30]
In early October 2020, Masters retained Mr Peter Cribb, solicitor, to represent it in its ongoing dealings with the Department. Mr Cribb wrote letters dated 6 and 7 October 2020 on behalf of Masters to the Department providing further information to the Department and dealing with other matters.
- [31]
By letter dated 16 October 2020, ASQA informed Masters that it had varied its decision (outlined at [26]) and would not be imposing the suspension. However, ASQA’s letter stated that Masters “remain non-compliant with the Standards for RTOs which is a breach of the condition of your organisation’s registration required by section 22 of the NVR Act” (the Non-Compliance Issue). The letter also said that ASQA had decided to issue a written direction requiring Masters to rectify specified breaches within 20 working days.
- [32]
Also on 16 October 2020, the Department responded to Mr Cribb with a letter which included:
- [33]
By letter dated 19 October 2020, Mr Cribb replied to the Department’s letter of 16 October 2020.
- [34]
By letter dated 26 October 2020, the Department responded to Mr Cribb providing further information and saying:
- [35]
By letter dated 28 October 2020, Mr Cribb wrote to the Department making various representations on behalf of Masters, ultimately requesting that the suspension that had been put in place on 13 July 2020 be lifted by no later than 4 November 2020.
- [36]
By letter dated 5 November 2020, the Department responded to Mr Cribb, including:
- [37]
On 6 November 2020, Mr Cribb wrote a lengthy response to the Department, which included a request that he be provided with a copy of the “reports from the two External Specialist Reviewers” in order that Masters “may have some understanding as to which “outstanding Events of Default” it has failed to satisfactorily remediate and full details and particulars of the nature and extent of such failures”.
- [38]
On 26 November 2020, Mr Cribb again wrote to the Department requesting, amongst other things, responses to parts of his letters of 6 October and 6 November 2020.
- [39]
By letter dated 10 December 2020, the Department responded to Mr Cribb, including:
- [40]
Masters had appointed its own expert reviewer in or about September 2020. That reviewer’s report was sent to the Department on 10 December 2020 together with additional evidence which, according to Mr Lawrence’s evidence, was intended to support Masters’ claim that it had successfully remediated all the outstanding issues forming the basis of the Department’s suspension.
- [41]
On 22 December 2020, the Department wrote to Mr Cribb, including:
- [42]
On 23 December 2020 and 22 January 2021, Mr Cribb wrote to the Department providing further information. He also requested that the Department respond to various inquiries he had made, including as to the outcome of the Department’s review of the further evidence referred to in the two preceding paragraphs.
- [43]
By letter dated 22 January 2021, the Department responded to Mr Cribb’s letters of 23 December 2020 and 22 January 2021, including a request for evidence of reassessment by Masters of five students. The Department’s letter included: “Once the Department has received the requested evidence it will be able to complete its full review of the matter.”
- [44]
On 4 February 2021, Mr Cribb responded to the Department’s letter of 22 January 2021 making a number of detailed points and requests over three pages.
- [45]
On 15 February 2021, Mr Cribb emailed Mr Tabone:
- [46]
That email resulted in Mr Tabone and Mr Cribb speaking on 16 February 2021. In a subsequent letter to Mr Tabone dated 10 March 2021, Mr Cribb said of that conversation:
- [47]
By letter from Mr Tabone to Masters dated 4 March 2021, the Department gave further notification of additional Events of Default, including:
- [48]
By letter dated 10 March 2021 to Mr Tabone, Mr Cribb, among other things, asked for the Department to provide “a copy of all documents the Department holds evidencing the “feedback” to which Your 4-3-21 Letter refers in order that [Masters] may have full particulars of the allegations made against it.” Mr Cribb’s letter also included:
- [49]
The meeting referred to in the Department’s letter set out at [47] took place on 12 March 2021. Detailed notes of the meeting were in evidence, although (with the exception of what is dealt with at [87]) for present purposes nothing turns on exactly what was said, other than to note that the Department requested information about certain matters and that there was no reference to the possibility of the Contract being terminated.
- [50]
On 12 March 2021 after that meeting, Mr Lawrence emailed Mr Stephen Buddeke of the Department, including:
- [51]
The following Tuesday, 16 March 2021, Mr Buddeke attended to observe one of Masters’ training sessions.
- [52]
The following Friday, 19 March 2021, Mr Lawrence emailed Mr Buddeke and others at the Department, including:
- [53]
Mr Buddeke responded to Mr Lawrence later that day by email:
- [54]
On 23 March 2021, Mr Lawrence emailed the Department including:
- [55]
Without further response by the Department to Masters, by a notice dated 25 March 2021 signed by Mr Tabone on behalf of the Department, the Department purported to terminate the Contract (the Termination Notice). The Termination Notice included:
- [56]
By letter dated 26 March 2021, Mr Cribb wrote to the Department, including:
- [57]
By letter of the same date, Mr Tabone responded to Mr Cribb:
- [58]
Also on 26 March 2021, the Department sent an email to a number of employers whose apprentices were training with Masters, stating:
- [59]
An email to similar effect to that set out in the preceding paragraph was also sent on 26 March 2021 to apprentices training with Masters.
- [60]
Mr Lawrence’s evidence was:
Masters’ submissions in chief
- [61]
Mr O’Neill submitted that there was a serious question to be tried in respect of four matters:
- (1)
That the Termination Notice did not contain a valid reason for termination under clause 21.2(c)(vi);
- (2)
Neither letter incorporated into the Termination Notice by reference provided a valid reason for termination. This was in circumstances where many of the matters of complaint had been resolved, or should have been accepted as resolved by the Department, or even if unresolved, were not of a sufficiently serious nature to justify termination of the Contract;
- (3)
Having embarked on the process of giving notice and requiring rectification under clause 21.2(d), looking at the events which had occurred since December 2020 and, in particular, after the meeting of 12 March 2021, the Department had breached an implied obligation (whether as a function of good faith or as an independent implied obligation) to give Masters a reasonable time to reply and respond. The Department had, in breach of those obligations, peremptorily acted to terminate the Contract.
- (4)
Even if there were grounds for termination, the Department was bound to exercise its power in good faith so as to ensure the provision of services to students was protected under the Contract. This was in circumstances where the alleged Events of Default did not affect the provision of education to students.
- (1)
- [62]
In relation to the first of the two letters relied upon in the Termination Notice (described at [20]), Mr O’Neill submitted that it predated the Termination Notice by one and a half years and predated the Department’s decision to lift the suspension (see [23]) and renew the Contract (see [17]). It had, in law, affirmed the Contract and waived its right to terminate in respect of those matters.
- [63]
In relation to the Department’s second letter (set out at [47]), Mr O’Neill submitted that the allegations it contained were imprecise. The Department had chosen to invoke the procedure under clause 21.2(d), and a process was underway in accordance with that clause.
- [64]
After the luncheon adjournment, Mr O’Neill produced this summary of the way in which Masters put its case:
- [65]
Mr O’Neill submitted that the balance of convenience strongly favoured requiring the Department to continue to perform the Contract because of the effect the termination had on over 800 students. Unless the students were able to fund their training with Masters themselves, they had without warning been put into a position where they would need to look elsewhere, if they could, to complete their training. In practical terms, all that requiring the Department to honour the Contract really required it to do was to continue to provide funding, as opposed to actively managing or providing services. Funding would not require the Court’s supervision. It was Masters who wanted to provide services to its students.
- [66]
Accepting that the Department was not going to renew the Contract in any event, the Department’s actions had deprived the students of what would have been an orderly opportunity to complete their studies with Masters or transfer in an orderly fashion to alternative training providers. Having regard to clause 6(a) of the Contract, both Masters and its students would have had at least two months’ notice that the Contract was going to come to an end on 30 June 2021. This is because the notice required to invite renewal of the Contract had to be given at least two months before the expiry of the Contract. The Department’s purported termination had deprived Masters, and more importantly, the students, of the benefit of what would have been at least eight weeks’ notice. Instead, the students’ courses had been precipitously terminated and, notwithstanding the Department’s promises of assistance, there was no guarantee that satisfactory solutions would be found to enable the students to continue their studies with the benefit of whatever level of achievement they had reached in the course of their studies with Masters.
- [67]
Finally, there was no real prejudice to the Department by ordering continued performance of the Contract. Assuming Masters’ students were able to make alternative arrangements, the Department would still be making payments in respect of those students undertaking their studies with alternative training providers rather than with Masters. In other words, the Department’s outflow of funds for Masters’ students would continue in any event, but paid to another provider.
The Department’s submissions
- [68]
Mr Simpson’s submissions for the Department, in particular his written outline, included an extensive summary of the applicable legal principles. I do not propose to reproduce that summary in these reasons because they are well known and they were not seriously in dispute between the parties. I will confine this summary to the substance of how Mr Simpson sought to apply those principles to the facts at hand.
- [69]
Mr Simpson submitted that the application for an interlocutory mandatory injunction was really to be understood as an application for a final order for specific performance. While accepting that there was no special test for a mandatory interlocutory injunction, he submitted that the Court should bear in mind what was said in J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (5th ed, LexisNexis, 2014) at [21-395]:
- [70]
Next, it was submitted that mandatory interlocutory injunctions are rare and that it is settled practice that the Court would not grant a mandatory injunction where it would require persons to carry on business, save for the most exceptional circumstances: Co-operative Insurance Society Ltd v Argyle Stores (Holdings) Ltd [1998] 1 AC 1 (Co-operative Insurance).
- [71]
Mr Simpson submitted that the relief sought by Masters was final relief disguised as interlocutory relief, and was not deployed in aid of any final relief. He submitted that was sufficient to refuse the relief sought. It is convenient to interpolate immediately that the Court did not accept that submission. The interlocutory relief sought was properly in aid of the declarations sought as final relief in the summons (set out at [10]).
- [72]
It was argued that on its proper construction, clause 21.2(c)-(e) meant that where there was an Event of Default the Department could either:
- (1)
immediately terminate the Contract; or
- (2)
issue a notice to Masters requiring Masters to demonstrate that there was no Event of Default or that the Event of Default had been remedied.
- (1)
- [73]
It was submitted that if the Department was not satisfied of either of the matters referred to in (2) of the preceding paragraph, the Department was entitled to terminate the Contract by written notice.
- [74]
Mr Simpson argued that the Termination Notice was validly issued both in accordance with the Contract and in accordance with those principles requiring the notice to convey unambiguously a decision to terminate, construed by reference to how a reasonable person would understand it in the circumstances of the particular case. There were clearly Events of Default continuing to exist up to and following the Termination Notice. As at 25 March 2021, those were:
- (1)
Masters’ failure to assess or rescind the qualifications of students that had been assessed by an unqualified trainer;
- (2)
Masters’ failure to maintain adequate records of specified types;
- (3)
The Non-Compliance Issue (Masters having been assessed as non-compliant with the standards administered by ASQA); and
- (4)
Masters failing to engage with students and conduct face to face training and quality training during practical sessions.
- (1)
- [75]
In the course of oral argument, Mr Simpson described as “indefensible” two of alleged Events of Default, being the Non-Compliance Issue and what was said to have been a failure by Masters (and admitted by Mr Lawrence at the 12 March 2021 meeting) to engage with students and conduct face to face training. Mr Simpson accepted that the Non-Compliance Issue was not referred to in the Termination Notice, but submitted this alleged Event of Default was still available to the Department to justify the Termination Notice in accordance with Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359.
- [76]
Insofar as Masters sought to rely on implied terms of good faith and reasonableness, Masters had failed to demonstrate how they could be implied having regard to the well-known tests in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (BP).
- [77]
Turning to whether or not Masters had been given a reasonable time to respond to the Department’s concerns, particularly over the period of 4 to 25 March 2021, this had to be determined in the context of what Mr Simpson described as the “litany of historical breaches”. When these were taken into account, any obligation to provide a reasonable time to respond (assuming there was such an obligation) had been satisfied.
- [78]
Mr Simpson next submitted that damages would be an adequate remedy. Furthermore, given the nature of the Contract, Masters’ damages would be de minimis. The present dispute was only about Masters’ financial entitlements under the Contract.
- [79]
In relation to the balance of convenience, Mr Simpson contended that the Court should be satisfied on the basis of an affidavit filed by Mr Tabone that the students would be looked after. Arrangements were in place to assist them to transition to other training providers. In addition, Masters had not identified any harm to itself (as opposed to the students) if interlocutory relief was not granted.
- [80]
As far as the Department’s position was concerned, the harm to it was not just monetary. It still had a supervisory role and there was a real risk that granting the orders would involve further supervision of the Court. For example, if any further notices of Events of Default had to be given or a further termination sought, this would require the Department to make an application to the Court.
- [81]
Finally, Mr Simpson advanced two discretionary arguments.
- [82]
The first was to raise an issue of unclean hands on the part of Masters. This was said to be constituted by Masters’ breaches of contract forming the basis for the termination, monies said to be outstanding to the Department, and an email from Mr Lawrence immediately following the purported termination which was said to be threatening to Mr Tabone.
- [83]
It is convenient to deal with the unclean hands argument immediately. I rejected the first matter referred to by Mr Simpson as circular. If, as the Court was satisfied, there is a serious question to be tried about whether there were breaches (see [92]), then the assertion of such breaches can hardly be called in aid as examples of unclean hands. In relation to the second matter, it was accepted that there was an instalment plan between Masters and the Department, and Mr Simpson was unable to obtain instructions that Masters was in breach of that plan. Finally, I do not regard Mr Lawrence’s perhaps understandably intemperate email to Mr Tabone after the purported termination (“You have picked a fight with the wrong guy. Now its (sic) personal. Enjoy your weekend.”) as being of sufficient seriousness to affect the discretionary equation.
- [84]
The second discretionary matter relied upon by Mr Simpson was that to order the Department to continue to observe its obligations under the Contract was an exercise in futility. This was because the Department had indicated that it would not seek to renew the Contract, which now had less than three months to run.
Masters’ submissions in reply
- [85]
It is only necessary that I record Mr O’Neill’s submissions in response to what Mr Simpson had described as the two “indefensible” defaults. By this I understood Mr Simpson to submit they were unanswerable.
- [86]
In relation to the Non-Compliance Issue, Mr O’Neill submitted that even if there was such an Event of Default, there was a serious question to be tried about whether it was of sufficient seriousness to justify termination of the Contract. For example, he drew attention to the fact that after being notified on 16 October 2020 that ASQA had varied its suspension decision (see [31]), the Australian Capital Territory had reinstated Masters in that jurisdiction. He also referred to various items of correspondence between the Department and Mr Cribb going to the question of whether, as a matter of fact, the Non-Compliance Issue had been resolved.
- [87]
In relation to the so-called admission, a note of what transpired at the meeting on 12 March 2021 recorded that Mr Buddeke said that Masters “had not been seen for 12 months by one of the employers” to which Mr Lawrence is recorded as replying that he “had also heard this”. Mr O’Neill submitted this was hardly an admission and, insofar as any complaint about face to face teaching over the last 12 months was concerned, this had to be viewed in the context of restrictions imposed during the COVID-19 pandemic.
- [88]
I accepted Mr O’Neill’s submissions as to why both of the alleged “indefensible” Events of Default did not properly bear that character. These matters also fall within the observations that I make at [89] to [92] below.
Consideration
- [89]
I begin by setting out to what I did not give dispositive weight: the debate between the parties about whether, and if so to what extent, any Events of Default remained extant and, if they did, their seriousness. Resolution of this issue is one aspect of determining whether the Termination Notice was valid and effective to terminate the Contract.
- [90]
Each side provided the Court with detailed tables setting out its version of what might be referred to, without disrespect, as the “state of play” in relation to the alleged Events of Default. As I indicated to the parties during the course of argument, the amount of correspondence and the level of detail that would need to be absorbed to understand the significance of the various alleged Events of Default and the extent to which they had been resolved was quite beyond what the Court could do in an urgent one day hearing.
- [91]
In this context, I observe that the history of events that I have set out at [18] to [60] is not a complete record of the correspondence. There were numerous communications and even those to which I have referred are far more lengthy and detailed than the short extracts which I have quoted. I have endeavoured to confine that history to specific matters to which the Court’s attention was drawn during the course of argument.
- [92]
The detail of the parties’ tables, even without reference to the underlying arguments set out in the correspondence, amply demonstrated that there was a serious question to be tried as to the status of the alleged Events of Default. However, given the detail of those matters and the time available to me, I was unable to come to a view about who might have the better argument at the end of the day. For that reason, I treated that conclusion as a neutral factor in the Court’s consideration of whether or not interlocutory relief should be granted.
- [93]
However, I was able to come to the clear conclusion that, in my respectful view, there was a serious question to be tried as to the matters conveniently set out in Mr O’Neill’s summary reproduced at [64], and that Masters had a strong case in that regard because the terms sought to be implied did satisfy the test set out in BP. There is a serious question to be tried as to whether, by reason of implication of terms, clause 21.2(d) means that once the Department has engaged the process set out in that clause by giving a notice, it must both exercise its rights under and pursuant to that clause in good faith and (whether as part of the obligation of good faith or as a freestanding implied obligation) afford a party in Masters’ position a reasonable time to deal with the matters set out in any notice. Furthermore, having invoked that course, there is a serious question to be tried about whether any implied good faith obligation informs the remedy (including but not limited to termination) which might be the end product of the process in clause 21.2(d).
- [94]
Concurrently with my satisfaction that there was a serious question to be tried as to good faith and reasonable time obligations implied into clause 21.2, I was also satisfied that, on the established facts, there was a serious question to be tried as to whether those obligations had been breached. The history to which the parties took me and which I have endeavoured to set out in [18] to [54] above, including the fact that the Department chose to renew the Contract and thereafter continued to engage with Masters, all provides a strongly arguable basis for concluding that the Department’s sudden termination of the Contract on 25 March 2021 (what Mr O’Neill described as “snapping its fingers”) was in breach of those obligations. This is particularly the case when one takes into account the course of events set out in [47] to [54] above.
- [95]
There was no dispute between the parties that, insofar as an interlocutory mandatory injunction was being sought, there was no special test to be applied over and above the usual tests for an interlocutory injunction. I also record that I did not see any material difference in how the Court should approach the matter whether it was characterised as being for an interlocutory mandatory injunction or an order for specific performance.
- [96]
Nevertheless, given the high likelihood that a final hearing would not be able to fixed before 30 June 2021 when the Contract will end in any event, I did consider that granting Masters relief would in a practical sense resolve the substance of the dispute between the parties. I therefore took into account what was said by McClelland J (as his Honour then was) in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535-536:
- [97]
Applying his Honour’s analysis, I regarded this as a case where it was desirable for me to evaluate the strength of Masters’ case for final relief, doing the best I could on the material before me. In my view, Masters had a strong case for final relief in respect of the matters which I have identified about which there was a serious question to be tried. That success would mean that the Department had not been entitled to issue the Notice of Termination.
- [98]
I also did not accept that the principle in Co-operative Insurance (see [70]) had any application to the present case. This is because the Department was not like a defendant who would be forced to carry on a business. The Court was satisfied the Department was primarily, although of course not exclusively, a funder. It is Masters that was anxious to be able to get on with its business.
- [99]
Turning to the balance of convenience, I accepted Mr O’Neill’s submissions set out at [65] to [67] above. In particular, the position of the students was a factor which weighed heavily in favour of granting the relief sought. There was evidence from one student of the disadvantage he would suffer if he was unable to continue with the courses that he was undertaking with Masters, which were due to be completed on 15 April 2022. His evidence was there was no suitable alternative provider in his region. I accept that this was the evidence only of one student. However, there was also evidence from Mr Lawrence of the general disruption that would be suffered by more than 800 students, many of whom were in areas where there were no alternative providers.
- [100]
I was not persuaded that Mr Tabone’s evidence for the Department about arrangements being put in place to assist Masters’ students (which I readily accept was being done) was a sufficient answer to neutralise in the balance of convenience what was an abrupt disruption to the students who were, in terms of the dispute between the Department and Masters, entirely innocent third parties.
- [101]
Nor did I accept Mr Simpson’s submissions set out at [80]. While I accept his submissions as correct in theory, there was no evidence to suggest that in reality any kind of supervision was likely to be required during the less than three months that the Contract had to run. Putting this another way, the risk of inconvenience to the students and Masters was certain, whereas it was far from certain for the Department. This was not a case where the mandatory nature of the relief being sought tipped the balance of convenience in favour of the Department (see [69]).
- [102]
These same considerations which informed my conclusion on the balance of convenience were also why I concluded, contrary to Mr Simpson’s submissions, that damages would not be an adequate remedy and that granting the relief would not be futile.
Conclusion
- [103]
For these reasons the Court made the orders set out at [5]. As I foreshadowed at the time of making those orders, the Court will make directions for any argument as to costs to be resolved on the papers.