Betapave v Shell Co & Anor [2004] NTSC 55

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Betapave v Shell Co & Anor [2004] NTSC 55

PARTIES: BETAPAVE PTY LTD

v

THE SHELL COMPANY OF AUSTRALIA LTD and MCMAHON SERVICES AUSTRALIA PTY LTD

TITLE OF COURT: SUPREME COURT OF THE NORTHERN TERRITORY

JURISDICTION: SUPREME COURT OF THE TERRITORY EXERCISING TERRITORY JURISDICTION

FILE NO: 124 of 2004 (20420579)

DELIVERED: 12 October 2004

HEARING DATES: 16-17 September 2004

JUDGMENT OF: MILDREN J

CATCHWORDS:

INJUNCTION – interlocutory injunction – whether there is “a serious question to be tried” or “a prima facie case” – whether plaintiff was “owner” of tanks

Sale of Goods Act (NT), ss 5(1), 22, 26(1), 27

Meagher, Gummow and Lehane, Equity, Doctrines and Remedies, 4th ed, para 20-040, para 21-210, and para 21-340 to 21-390

Australian Broadcasting Corporation v Lenah Game Meats Pty Limited (2001) 208 CLR 199 at 218; Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153; Nelson v Healy (1948) VLR 415 at 417; Pacific Carriers Ltd v BNP Paribas (2004) 78 ALJR 1045 at para [36], referred to

REPRESENTATION:

Counsel:
Plaintiff: M. Grant
First Defendant: J. Reeves QC
Second Defendant: D. De Silva

Solicitors:
Plaintiff: Morgan Buckley
First Defendant: Cridlands
Second Defendant: De Silva Hebron

Judgment category classification: B
Number of pages: 16

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN

Betapave v Shell Co & Anor [2004] NTSC 55
No. 124 of 2004 (20420579)

BETWEEN:

BETAPAVE PTY LTD
Plaintiff

AND:

THE SHELL COMPANY OF AUSTRALIA LIMITED
First Defendant
MCMAHON SERVICES AUSTRALIA PTY LTD
Second Defendant

CORAM: MILDREN J

REASONS FOR JUDGMENT

(Delivered 12 October 2004)

[1] This is an application for an interlocutory injunction by the plaintiff to restrain the defendants until trial of the action from demolishing, destroying or otherwise dealing with 4 minor vertical tanks (S10, S11, 6 and 7) and all associated pipework and three 450 tonne capacity bitumen storage tanks situated at the Shell Bitumen Facility, Kitchener Drive, Darwin.
[2] The plaintiff’s claim is as purchaser of the tanks pursuant to a contract of sale between the plaintiff and the second defendant, McMahon Services Australia Pty Ltd (hereinafter referred to as “McMahon Services”). The remedies the plaintiff seeks as against the first defendant, The Shell Company of Australia Limited (hereinafter referred to as “Shell”), is a declaration that it has property in the tanks, an order for access to the land to remove the tanks and an order in detinue or alternatively for damages. As against McMahon Services the plaintiff seeks specific performance or alternatively damages for breach of contract.
[3] After hearing the plaintiff’s application for an interlocutory injunction, I ordered that the application be dismissed. I said that I would publish my reasons at a later time. These are those reasons.
[4] Shell is the lessee from the Darwin Port Authority of land situated at Kitchener Drive, Darwin on which, until recently, it operated a bitumen plant.
[5] The lease term was for a period of six years commencing from 1 December 1996, but it appears that Shell was the lessee for a long period of time previously and it appears to have been extended upon the same terms and conditions for a further term after it expired in 2002. In early to mid 2004 Shell was informed by the landlord that it did not intend renewing the lease and agreement was reached by which Shell would vacate the land in November 2004.
[6] Pursuant to clause 32 of the lease, prior to the expiration or earlier termination of the term, Shell was required to remove all or any of the buildings improvements, plant equipment, fixtures and fittings installed or erected by Shell on the demised premises either before or during the term and to restore the demised premises to the condition in which they were at the commencement of the lease.
[7] Shell sought tenders for demolition of Shell’s bitumen plant on the land. McMahon Services tendered for that work. By letter dated 18 June 2004, Shell advised McMahon Services that its tender for the work had been accepted. The contract as between Shell and McMahon Services contemplated the demolition of the tanks on the land which are the subject of these proceedings.
[8] By letter on 12 May 2004 Shell wrote to the plaintiff in the following terms:
This letter is to confirm that the Shell Bitumen facility at Fort Hill will close for business on 15 July this year. The facility will be demolished following its closure and the land will be resumed by the Northern Territory Government as part of the plans for the redevelopment of the wharf precinct area.
[9] The letter went on to say that Shell intended to remain a major supplier of bitumen within the Northern Territory and that supply after 15 July would be the subject of further correspondence. However, it does not appear that Shell had taken any steps to continue to supply bitumen into Darwin in similar quantities as it had been supplying prior to July 2004. In consequence, the plaintiff, which conducts business as a bitumen surface contractor spraying bitumen, line marking and related works for roads, airstrips, car parks and the like, decided to take steps to ensure that it could maintain a supply of bitumen for its future contracting needs and to become involved in the business of the supply of bitumen to others.
[10] On 20 July 2004 the plaintiff engaged LMPA Project Marketing Services to make enquiries as to the availability of large storage tanks for a bitumen supply plant. Enquiries were to be made Australia wide without disclosing the identity of the client.
[11] On about 29 July 2004 Mr David Loveridge, the Principal of LMPA Project Marketing Services, telephoned Mr John Stennett, the Operations and Maintenance Supervisor Northern Territory for Shell. According to Mr Loveridge, he had the following conversation with Mr Stennett:
LOVERIDGE: I am looking for some tanks and have heard that you may have some for sale.
STENNETT: We don’t have any interest in the tanks. There is a contractor who has been engaged to remove the tanks by the name of Andrew McMahon. His number is 0418 817 732.
LOVERIDGE: Thank you, I will give him a call.
[12] Following that conversation, Mr Loveridge spoke to Andrew McMahon, the General Manager of McMahon Services, concerning the tanks. According to Mr Loveridge, Mr McMahon indicated that the tanks were for sale.
[13] Mr Loveridge eventually made an offer to purchase three of the tanks by an email sent to Andrew McMahon on 17 August 2004.
[14] On the 19 August 2004, Andrew McMahon happened to be at the plaintiffs’ yard looking for some scrap metal when he met Mr McCue, the Managing Director of the plaintiff. In conversation it is alleged that Mr McMahon said that he had tanks which he was dismantling at Shell’s bitumen plant which could be of interest to the plaintiff. Mr McCue said, “What would Shell have to say about it?” It is alleged that Mr McMahon said, “It’s got nothing to do with Shell, they belong to us. Are you interested in having a look?”
[15] As a result, on the following morning Mr McCue attended at the site and inspected the tanks. Next day, Mr McCue telephoned Mr McMahon and offered to purchase the tanks. By a facsimile dated 21 August 2004, Mr McMahon made an offer to Mr McCue to sell the tanks on certain terms. That offer was accepted by Mr McCue sending to Mr McMahon a fax on the 23 August 2004.
[16] On or about 24 August 2004, Mr McMahon spoke to Mr Stennett by telephone to advise that the tanks had been sold to the plaintiff and that the plaintiff’s employees would be commencing on site on 25 September 2004.
[17] On 25 August 2004 at 10.00 am, the plaintiff’s employees were “inducted” at the site in the defendants’ safety procedures for the site by Trevor Boothey, an employee of McMahon Services in the presence of a Mr Phil Mount an employee of Shell. On the 26 August 2004, Mr McMahon was advised by Shell to withdraw the tanks from sale. On either that day or the following day, Mr McMahon advised Mr McCue that Shell objected to the tanks being sold and/or that the plaintiff could no longer have access to the site.
[18] In Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153, Mason ACJ summarised the principles governing the grant or refusal of interlocutory injunctions in both private law and public law litigation. His Honour said:
In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction.
(See also Australian Broadcasting Corporation v Lenah Game Meats Pty Limited (2001) 208 CLR 199 at 218.)
[19] There is a great deal of discussion in the authorities as to what is meant by “a serious question to be tried” or “a prima facie case”. I do not intend to add to that discussion, but merely point out the views of Meagher, Gummow and Lehane, Equity, Doctrines and Remedies 4th ed, para 21-340 to para 21-390. There seems to be support for the opinion that what is meant by these expressions is that the plaintiff must show a strong possibility of ultimate success - “something more than an outside chance, but not necessarily as strong as an odds on prospect”: see Meagher, Gummow and Lehane supra, at para 21-370.
[20] The first question therefore is whether the plaintiff can establish that there is a serious question to the tried / a prima facie case in the relevant sense in this case. That means the plaintiff must show that on the facts there is a case in the relevant sense that Shell sold the tanks to McMahon Services which in turn sold them to the plaintiff, or that Shell is precluded by its conduct from denying otherwise by virtue of the provisions of the Sale of Goods Act. The first involves primarily a consideration of the terms of the contract between Shell and McMahon Services and the second involves a consideration of Shell’s conduct.
[21] As to the question of construction, I am satisfied that under the terms of the contract the intention of the parties was that property in the tanks did not pass from Shell to McMahon Services until after the tanks had been demolished, that is to say destroyed.
[22] In broad terms I accept the submission of Mr Reeves QC for Shell that this is a contract for demolition and removal rather than a contract for sale and removal. The contract documentation in a number of separate provisions refers to the contract as one for “bitumen plant demolition”. In section 5 of the works specification it is provided under “Scope of Work” as follows:
1.0 Scope of Work
1.1 General
This scope of work is to demolish the Shell Darwin Bitumen Plant. The whole site is to be demolished as part of this tender.
In summary the following is to be demolished:
• …
• Four minor vertical tanks – S10, S11, 6 & 7 and all associated pipework.
• …
• Three bitumen storage tanks – each tank is 450 ton in capacity
• …
• NOTE: All these items become the property of the demolition contractor who is responsible for disposal from site.
• NOTE: All site improvements are to be demolished this includes all concrete and pavement areas.
[23] Elsewhere in the same document it provides as follows:
The scope of work involves the complete demolition of the site infrastructure.
The following work is to be completed by others:
• …
• The tank S10, S11, 6 & 7 are to be cleaned prior to removal by demolition contractor.
• The bitumen tanks will be cleaned by others prior to demolition by others.
• …
The demolition contractor is to submit a fully prepared work method statement for each of the following activities during the demolition:
• …
• Demolition of bitumen storage tanks
[24] Section 6 of the contract under the heading “Technical Specifications” provides under the heading “Scope of Work”:
The Contractor is to demolish, remove and dispose of the items nominated below in a safe manner which minimises the impact to the environment.
• vertical storage tank(s), including removal of thermowell (which is full of hydrocarbon) and other fittings
• …
The detailed description of the demolition procedure and its implications on the safety of the works is an important part of the criteria used to evaluate tenders.
[25] The task appreciation and methodology prepared by McMahon Services which forms part of the contract provides in para 3 under the heading “Method and Sequence of Works” as follows:
3. Demolition of Tanks
3.1 Form an access road to all tanks so that the excavator and other vehicles can travel between the various works areas.
3.2 Inspect tanks to ensure that all residual scale/sludge has been removed.
3.3 Remove any residual scale and then sign off as ready for demolition.
3.4 Demolish tanks sequentially as follows:
3.4.1 Slice down the side the tanks from top to bottom using the excavator fitted with the extension arm and ripper tyne.
3.4.2 Repeat the above approximately one sixth of the way around the tanks.
3.4.3 Separate the roof of the tank from the section of wall that has been freed up.
3.4.4 Pull over section of wall that has been freed up and separate from the floor.
3.4.5 Place sheet into stockpile ready for shearing up then loading into road trains for disposal off site to a smelter.
3.4.6 Repeat above procedure until half of the tanks have been demolished.
3.4.7 Remove roof of tank with excavator fitted with extension arm and ripper tyne.
3.4.8 Pull down remainder of the tank walls with the excavator fitted with arm and ripper tyne.
3.4.9 Shear up all of the plate and load into road trains for disposal off site to a smelter.
[26] I consider that it is abundantly plain that the parties contemplated McMahon Services would demolish the tanks in the manner provided for in the task appreciation methodology statement. That is consistent with the normal meaning to be given to the word “demolish”. In Nelson v Healy (1948) VLR 415 at 417, O’Bryan J said:
On the other hand the usual meaning of the word “demolish” is to destroy (particularly in relation to a building) by violent disintegration of its fabric; to pull or throw down; pull to pieces; reduce to ruins. Demolition is the act of demolishing (see New Oxford Dictionary – ed. Murray). To extend “demolition” to cover the removal from the land upon which its stands of a house as an undamaged whole would be to give the word a new or at least a very unusual meaning.
[27] On behalf of the plaintiff it was argued that pursuant to the terms of section 5 of the tender documents, property in the tanks passed to McMahon Services. It was submitted that property passed on 26 July 2004 when McMahon Services took possession of the site.
[28] At that stage, of course, the tanks were still fixed to the ground but I accept the submission of Mr Grant for the plaintiff that nevertheless they may be “goods” within the meaning of s 5(1) of the Sale of Goods Act, which defines goods to include
“…all chattels personal other than things in action and money. The term includes emblements and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”.
[29] The question then is when did property in the “goods” pass from Shell to McMahon Services.
[30] S 22 of the Sales of Goods Act provides as follows:
22. Property passes when intended to pass
(1) Where there is contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
(2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case.
[31] I pause to observe here that s 23 of the Sale of Goods Act provides certain rules for ascertaining the intention of the parties as to the time at which property in the goods is to pass to the buyer. None of the rules apply to the circumstances of this case, and it was not contended otherwise by any of the parties. However, in my opinion the terms of the contract and the circumstances of the case generally plainly indicate that property in the tanks was not to pass until after they had been demolished.
[32] Counsel for the plaintiff submitted that there was conduct on the part of Shell which negatived that intention. Insofar as the conduct consisted of the telephone conversation between Mr Stennett and Mr Loveridge, I note that the conversation is denied by Mr Stennett but for the purposes of this application I treat it as having occurred as alleged. Nevertheless that conversation is a conversation between Mr Stennett and a third party to the contract who was acting for an undisclosed principal. There is nothing in the circumstances of Shell’s conduct vis a vis McMahon Services which indicates that Shell had acknowledged that property had already passed in the tanks to McMahon Services. The moment that Shell became aware that McMahon Services had purportedly sold the tanks intact it acted promptly so as to prevent that sale from happening and to insist upon the tanks being demolished. So far as the induction meeting is concerned, there is no evidence that anyone with apparent or ostensible authority on the part of Shell to make binding admissions on behalf of Shell either knew about or consented to or was present at the induction meeting: see Pacific Carriers Ltd v BNP Paribas (2004) 78 ALJR 1045 at para [36].
[33] Counsel for the plaintiff also relied upon s 26(1) of the Sale of Goods Act which provides as follows:
26. Sale by person not the owner
(1) Subject to this Act, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.
[34] Again I do not think that there is any evidence that Shell had by its conduct held out McMahon Services as having authority to sell the tanks to the plaintiff. The only evidence which the plaintiff is able to call upon in aid of this argument is again the conversation which Mr Stennett had with Mr Loveridge. According to the evidence, this conversation occurred on or about 29 July 2004. Mr McCue in his affidavit deposes that he was told by Loveridge that, after speaking with Stennett, Loveridge was referred to Andrew McMahon who provided him with information on prices for the tanks, as a result of which he instructed Loveridge to make an offer for them. According to Loveridge this offer was made to McMahon Services on Tuesday 17 August, but the evidence is that that offer was not accepted. There is, moreover, no evidence that McCue was told by Loveridge that Stennett had said that Shell had no interest in the tanks or that the tanks were for sale by McMahon Services. It is clear that Mr McCue knew from Shell’s letter that the tanks were to be demolished. That Mr McCue did not rely on anything Mr Loveridge may have said to him is clear from his question to Mr McMahon, “What would Shell have to say about it?” There is no evidence from Mr McCue that he relied on what Mr Stennett told Mr Loveridge. There is therefore no serious question to be tried based upon s 22 of the Sale of Goods Act.
[35] Alternatively, Mr Grant argued that the plaintiff may have obtained title vide s 27 of the Sale of Goods Act. That section applies only were the seller has a voidable title to the goods. There is no evidence that McMahon Services had a voidable title.
[36] Accordingly, there is no serious question to be tried as against Shell that the plaintiff is entitled to a declaration that it has property in the tanks. Similarly, there is no serious question to be tried against McMahon Services that the plaintiff is entitled to specific performance of the contract of sale between it and McMahon Services.
[37] Furthermore, in my opinion damages are an adequate remedy. There is no evidence that the tanks are unique or irreplaceable in the marketplace or have special value to the plaintiff: c.f. Meagher, Gummow and Lehane, supra, para 20-040 and para 21-210. According to Mr McCue, the plaintiff has already purchased another tank from Mobil Oil Australia Pty Ltd situated at Mt Todd. This tank has a storage capacity of about 900 tons. According to Mr McCue, this tank could be in situ by December 2004. However, even if the purchase of the tanks, the subject of this action, went ahead as planned, the plaintiff would not have the tanks ready to store bitumen before the end of September and bitumen would not be available to store in the tanks before about 9 October. The evidence shows that at worst the plaintiff will be delayed in obtaining a significant storage capacity for bitumen for perhaps two or three months. However there is already storage capacity in Darwin amongst the plaintiff and two other companies of 750 tons capacity. The plaintiff’s future contracts for the supply of bitumen products include the laying of a bitumen airstrip at Lake Evella (150 tons) and possibly bitumen spray works at the Gove Airport and a possible contract at Gove relating to the expansion of the Alcan plant, at some future indefinite time. So far as the Lake Evella contract is concerned, Lake Evella is a remote community in Arnhem Land. There is no evidence as to how 150 tons of bitumen could be transported there. Perhaps the bitumen would have to be transported there by road from the Central Arnhem Road either by shipping it first to Nhulunbuy or by transporting it by road from Darwin. There may be other ways. The evidence is that bitumen is imported to Darwin from Singapore. Even if there is no supply available from Singapore to Darwin because of inadequate storage capacity, there is no evidence that bitumen cannot be delivered to Nhulunbuy by ship or by road from interstate. If delivery of the bitumen is more expensive than it otherwise might have been or if there is loss of profits due to delay, these are compensable in damages. There is no evidence that McMahon Services or Shell would be unable to meet a claim in damages.
[38] Finally, I consider the balance of convenience favours Shell as against the plaintiff. Shell is under an obligation to clear the site. It is clear that Shell is concerned about the possibility that the tanks might leak if transported intact, which could cause environmental pollution as well as perhaps endanger human life, for which it could be held legally responsible. Mr McHugh disputes the possibility of any risk, but Shell’s contract documents with McMahon Services indicate that Shell is concerned with the risk as a number of provisions of the contract deal specifically with it.
[39] Accordingly, the application for an interlocutory injunction is refused.

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