Adani Abbot Point Terminal Pty Ltd v Lake Vermont Resources Pty Ltd
[2020] QSC 260
•26 August 2020
SUPREME COURT OF QUEENSLAND
CITATION: | Adani Abbot Point Terminal Pty Ltd v Lake Vermont Resources Pty Ltd & Ors [2020] QSC 260 |
PARTIES: | ADANI ABBOT POINT TERMINAL PTY LIMITED ACN 149 298 206 (applicant) v (first respondent) |
FILE NO: | BS 9440 of 2017 |
DIVISION: | Trial |
PROCEEDING: | Trial |
ORIGINATING COURT: | Supreme Court of Queensland |
DELIVERED ON: | 26 August 2020 |
DELIVERED AT: | Brisbane |
HEARING DATES: | 24 February 2020 – 28 February 2020, 20 May 2020, and 23 June 2020 |
JUDGE: | Dalton J |
ORDERS AND DECLARATIONS: | 1. Judgment is given for the first respondent against the applicant in an amount of $37.9 million. 2. Judgment is given for the second respondent against the applicant in an amount of $25.3 million. 3. Judgment is given for the third respondent against the applicant in an amount of $31.7 million. 4. Judgment is given for the fourth respondent against the applicant in an amount of $11.9 million. 5. Declare that on the proper construction of the user agreements between the applicant and the respondents, revenue received by the operator as charges for berthage and mooring from ships to be loaded with coal pursuant to a user agreement must be deducted from the operator’s variable operating costs in calculating OVC as defined by cl 7.3(b)(i)(A) of those agreements. 6. Declare that the applicant has not demonstrated that the OFC and OVC agreed between it and the operator in the financial years commencing 1 July 2017 and 1 July 2018 represent reasonable charges having regard to the efficient operation of the Terminal in accordance with cl 7.6(b) of the user agreements between the applicant and the respondents. 7. Declare that since 1 July 2017 the applicant has been in breach of cl 25.1(a)(v) of the user agreement it has with the fourth respondent because it has charged Clermont Coal Mines Ltd less than Sonoma is charged to handle the coal which it presents to the terminal under its user agreement. 8. Leave is given to the first respondent to amend its counterclaims in accordance with [40] of the Appendix to this judgment. 9. Leave is given to the applicant to amend its answer to the counterclaim of the first respondent in accordance with [45] of the Appendix to this judgment. |
CATCHWORDS: | TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – UNCONSCIONABLE CONDUCT – WHAT CONSTITUTES – where the applicant is the owner, and the respondents are users, of a coal terminal – where user agreements exist between the applicant and the respondents –– where the respondents argue that as the result of a series of agreements the applicant in effect received payment of a previous user’s future obligations while requiring the remaining users to pay the equivalent of those obligations as charges under the user agreements – where the applicant was in a monopolistic position – where market conditions put the respondents in a vulnerable position – where applicant was acting in the interests of related corporation as well as its own interests – where there were alternative courses of action available to the applicant – whether applicant went beyond its legitimate commercial interests – pricing of monopoly asset – situational disadvantage and vulnerability – where there was no breach of contract – dishonest behaviour and want of good faith – whether the applicant’s conduct was in all the circumstances unconscionable in contravention of s 21(1) of the Australian Consumer Law CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where user agreements exist between the applicant, as the owner, and the respondents, as users, of a coal terminal – where pursuant to the user agreements a user must pay fixed costs for each tonne of the user’s coal handled by the terminal – where following one user’s departure the fixed costs for all other users increased – where in calculating the fixed costs the applicant has not taken into account any part of the money it received through transactions related to the previous user’s departure – whether it is in breach of contract for the applicant to charge the new higher fixed costs CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where user agreements exist between the applicant, as the owner, and the respondents, as users, of a coal terminal – where the operator levies berthage and mooring charges on ships which come to the terminal to be loaded with coal – where pursuant to the user agreements the operator is obliged to handle the coal which a user delivers to the terminal onto ships at the terminal – whether revenue received by the operator as charges for berthage and mooring of ships should be deducted from the operator’s variable operating costs CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where user agreements exist between the applicant, as the owner, and the respondents, as users, of a coal terminal – where contract provides that the applicant must demonstrate that its charges are reasonable having regard to the efficient operation of the Terminal – whether applicant has made demonstration CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where user agreements exist between the applicant, as the owner, and the respondents, as users, of a coal terminal – where the fourth respondent’s user agreement contains a clause which provides “… No other Access Holder Presenting Coal for Handling at the Terminal will be charged less than the User is charged at that time for a substantially similar commercial arrangement” – where the applicant charges another user less to handle its coal than it charges the fourth respondent – whether the user agreements of the fourth respondent and the other user are “substantially similar commercial arrangements” – whether applicant’s conduct is in breach of contract Competition and Consumer Act2010 (Cth), The Australian Consumer Law ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue of New South Wales (2012) 245 CLR 338 |
COUNSEL: | L Kelly QC with S Cooper QC and M Johnston for the applicant |
SOLICITORS: | Clayton Utz for the applicant |
Table of Contents
I UNCONSCIONABLE CONDUCT
Relevant Provisions of the User Agreements
QCPL Transactions and Security Deposit Agreement
Effect of QCPL Transactions on TIC and HCF charged to the Respondents
Credit Findings
Negotiation of the QCPL Transactions
Mr Wicks’ Evidence about Derivation of Consideration for QCPL Transactions
Factual Findings about the Negotiation of the QCPL Transactions
Want of Credit Support not a Motivation for the QCPL Transactions
Findings about Want of Credit Support
QCPL Transactions and Security Deposit Agreement – Reprise
Applicant Received Total QCPL Consideration
Period to which $255 Million Payment Relates
Three Agreements Not One
Unconscionability – Analysis
Parties’ Relative Strengths, Bargaining Positions at the time of Contract
No Breach of Contract
Unusual Aspects to User Agreements
Parties’ Relative Strengths, Market Conditions at the time of Impugned Conduct
The identity of the Supplier, and its Commercial Motivations
Beyond the Applicant’s Legitimate Interests
Alternatives Available to the Applicant
Calculated Conduct
Lack of Good Faith and Commercial Morality
Conclusions as to Unconscionable Conduct
Remedy for Unconscionable Conduct
II CONSTRUCTION OF CL 7.2 OF THE USER AGREEMENTS
III BERTHAGE AND MOORING
IV HANDLING CHARGES, CL 7.6, DEMONSTRATION
Preliminary matters
Chronology of Dispute
PWC Reports, September 2017 and August 2018
Conclusions to be drawn from the PWC Reports
Evidence in this Proceeding
Glencore Incentive to Fix Reasonable Charges for OFC and OVC
The evidence of Mr Poulton and Mr Freeman
Lack of Operational Evidence
Finding: No Demonstration
Indications as to Inefficiency
Evidence of Expert Economists
Terms of the Contracts Between the Owner and Operator
Common Costs
Capitalisation
Allocation to Fixed and Variable Categories
Market Conditions and Payment for Operator’s Services
V THE MOST FAVOURED NATION CLAUSE
Preliminary Point, cl 13.2
Construction of cl 25.1(a)(v)
Substantially Similar Commercial Arrangement
Miscellaneous
APPENDIX
Second to Fourth Respondents
UCPR rr 149 and 166
The First Respondent
The Abbot Point coal terminal is situated at the end point of a railway line on the Central Queensland Coast. It has facilities for coal to be received from trains, stockpiled, and loaded onto ships. The respondents have coal mines in central Queensland. To export coal, they need access to the terminal; there is no other terminal they can use.
The terminal began operations in 1984. Until May 2011 it was owned by Ports Corporation of Queensland, a Government Owned Corporation. Until 2005 Mount Isa Mines Limited (now Glencore Coal Queensland Pty Ltd) was the sole user of the terminal. Between 2000 and 2016 the terminal was operated by Abbot Point Bulk Coal Pty Ltd (APB and the original operator). The original operator was a related entity of Glencore. Until 2011, it operated the terminal under a contract with Ports Corporation (the operating agreement).
In 2005 the second respondent became the second company (other than Mt Isa Mines) to use the terminal. In 2008 the second respondent’s user agreement was novated to the fourth respondent, Sonoma. Perhaps because it was the first of the user agreements (after Mt Isa Mines), the Sonoma user agreement has some differences from subsequent user agreements. The difference of relevance here is cl 25.1(a)(v), which has become known amongst users as ‘the most favoured nation clause’. That clause attempts to ensure that no other user will be charged less than Sonoma pays under its user agreement.
After 2005 the remaining respondents (and other mining companies who are not parties to this proceeding) entered into individual user agreements with Ports Corporation.
The user agreements contain clauses compelling the parties to them to keep various matters confidential. As to these clauses, I agree with the observations of Jackson J in Velocity Frequent Flyer Pty Ltd v BP Australia Pty Ltd[1] and the comments of Heenan J in Southern Cross Pipelines Australia Pty Ltd v Michael.[2]The fundamental principle is one of open justice.
[1][2019] QSC 29, [21]-[22].
[2][2002] WASC 171, [19], cited in Velocity Frequent Flyer Pty Ltd at [20].
Having said that, so far as I am aware, in writing these reasons it has only been necessary to refer to confidential information twice, and on both occasions the need has arisen in formulating the terms of my formal judgments and declarations.
●In some of the written material I have received the amounts in which I am asked to give judgment are highlighted so as to indicate they are confidential. These amounts are not themselves confidential information protected by the user agreements. Perhaps a mathematical person could use the amounts to ‘reverse engineer’ their way to discover information that is confidential.
●In running this proceeding, the applicant and the fourth respondent kept the identity of the other user referred to at [346] ff confidential, apparently even from the first respondent. I wrote my reasons for judgment at Chapter V below without mentioning that user’s name in deference to this. However, it seems to me that I cannot make a proper (in the sense of sufficiently precise) declaration in relation to this matter without revealing the name of that other user.
The confidentiality clauses in the user agreements are not a sufficient reason for my refraining from publishing the amounts of the judgments and making the declaration which is appropriate on the evidence. As Street CJ said in David Syme & Co Ltd v General Motors Holden Ltd:
“Important as it is that proceedings and reasons should be heard and stated in public, it is even more important that the solemn formality of a curial order should be capable of publication.”[3]
[3][1984] 2 NSWLR 294, p 301.
Otherwise, so far as confidentiality is concerned, I intend to publish the reasons to the parties’ lawyers and give them a limited time to bring anything of concern to my attention before I publish the judgment more widely. If any editing is necessary, that will be explicit in the final published version.
The user agreements are each called “Standard Abbot Point User Agreement (Coal)”. As the name implies, and as the respondents all assumed, each agreement is in very similar terms to the others. The user agreements are of many years’ duration. They are take-or-pay contracts, ie, users are entitled to have a certain amount of coal handled through the terminal each year, viz. their Annual Maximum Tonnage, and they are charged the fixed costs for that amount of coal to be handled, whether or not they present it at the terminal.
The users pay three charges to the owner under the user agreements:
(a)A Terminal Infrastructure Charge (TIC) is the primary charge in relation to infrastructure. It is fixed according to a formula. The formula fixes a figure based on elements of the owner’s capital costs and a return on its asset. That figure is divided by the total of all the users’ Annual Maximum Tonnages to produce a charge per tonne of coal. The more the total tonnage, the less the charge per tonne and the less each user pays. The secondary infrastructure charge, the Take-or-Pay Component (TPC), is for any part of a user’s Annual Maximum Tonnage not presented to the terminal for handling. It is the same price per tonne as the TIC.
(b)Fixed Handling Charges (HCF) are a reimbursement to the owner of the price it pays the operator to provide fixed cost services under the operating agreement. It is a fixed charge so, as with the TIC, the more the total tonnes of coal handled by the terminal, the less the HCF per tonne of coal, and the less each user pays.
(c)Variable Handling Charges (HCV) are a reimbursement to the owner of the price it pays the operator to provide variable cost services under the operating agreement.
The Adani Group, through Adani Mining Pty Ltd (AMPL), wishes to develop a huge coal mine in the Galilee Basin, to the south-west of the terminal. AMPL will require port services to export coal, just as the respondents do. The Abbot Point terminal is the only terminal which it is possible for Adani to use.
In May 2011 Mundra Port Holdings Pty Ltd (part of the Adani Group) acquired a 99 year lease of the terminal. The applicant (also part of the Adani Group) took a sublease of the terminal from Mundra and assumed the rights and obligations of Ports Corporation under the user agreements, and under the operating agreement.
The original operator continued in its role. However, by 2015 the applicant and the original operator were in dispute. In October 2016 an Adani company, Abbot Point Operations Pty Ltd (APO), became the operator. The contractual arrangements are such that APO is obliged to provide the same services as the original operator. In fact Adani bought the shares in the original operator, and APO subcontracted the provision of operator services at the terminal to the original operator. Except where it is necessary to distinguish between APO and APB (Chapter IV below), I will simply refer to the operator after October 2016 as the Adani operator.
Queensland Coal Pty Ltd (QCPL), a subsidiary of Rio Tinto, was one of the users of the terminal. By an agreement dated 31 October 2016, between AMPL, QCPL and the applicant, QCPL assigned its rights to have coal handled at the terminal from 1 July 2022-30 June 2028 to AMPL, and agreed to pay AMPL an amount of $138 million (the novation agreement). As a result, AMPL will become a user of the terminal from 1 July 2022. By a separate agreement also dated 31 October 2016, QCPL and the applicant agreed to terminate their user agreement and QCPL agreed to pay the applicant $117 million (the termination agreement). The parties to this proceeding call these two agreements the QCPL transactions. By a third agreement (the security deposit agreement), also dated 31 October 2016, the applicant and AMPL agreed that AMPL would pay the $138 million it received under the novation agreement to the applicant, subject to various conditions.
Issues for Determination
The parties are in dispute about five matters:
IThe respondents allege unconscionable conduct in contravention of s 21(1) of Schedule 2 of the Competition and Consumer Act 2010 (Cth), The Australian Consumer Law (ACL). They rely on the applicant’s charging them TIC and HCF under the user agreements at a higher level consequent on the termination of the QCPL user agreement, in circumstances where they say the applicant has received a total of $255 million ($117 million and $138 million) under the QCPL transactions.
IIThe respondents say that to charge the new higher HCF in the above circumstances is in breach of cl 7.2 of the user agreements.
IIIThe respondents say that, on the proper construction of cl 7.3 of the user agreements, money collected by the Adani operator from shipping companies as fees for berthage and mooring should be taken into account in their favour when calculating HCV.
IVOnce the original operator was replaced, a precondition to the users paying handling charges arose pursuant to cl 7.6(b) of the user agreements. The respondents say that this precondition has not been fulfilled.
VThe fourth respondent claims that the applicant has breached the most favoured nation clause because it charges another user less to handle its coal than it charges Sonoma.
Effect of Arbitration
Before moving on to consider each of these issues I should mention that after the departure of QCPL, the respondents were unable to agree a TIC through the contractual process, and exercised their rights pursuant to their user agreements to arbitrate the amount of TIC. That arbitration concerned not just mathematical or economic matters as to the amount of TIC, but a determination by the arbitrator of the respondents’ claims that the user agreements contained implied terms which required the applicant to take into account the amounts it had received under the QCPL transactions when calculating the TIC. The arbitrator, the Honourable Mr Michael McHugh, gave a partial award on 15 May 2019 and a final award on 23 August 2019. He fixed the TIC on the basis that he rejected the respondents’ claims about implied terms.
A large part of the applicant’s replies and the respondents’ rejoinders concerned the effect of the arbitration award on this proceeding. Largely these issues were resolved before the trial because the respondents amended their pleadings to remove claims based on implied contractual terms. There remained some limited dispute between the parties as to the effect of the decisions of the arbitrator. At paragraph 3.14(a)(i) and (ii) of both its replies, the applicant accepted that the respondents could agitate matters going to the construction of cl 7.2 of the user agreements and the unconscionability claim in this proceeding.[4] In my view, that concession was properly made. The arbitration was to determine the TIC, not handling charges. Further, the arbitrator records that the respondents to this proceeding conceded that he had no jurisdiction to hear the unconscionability claim, and he did not hear or determine it.
[4]See also t 1-20. So far as its concession is concerned, the applicant appears to have overlooked the separate argument of the respondents about cl 7.3 of the user agreements. This concerns variable handling costs and is properly treated as outside the scope of the arbitration.
Because matters which bore on the arguments for implied terms before the arbitrator were also relevant to the claims based on cll 7.2 and 7.3, and to the unconscionability claim, there was some overlap both in the evidence, and in the type of arguments, before me and before the arbitrator. My view is that the respondents before me were free to make whatever arguments they wished in relation to both unconscionability and the construction of cll 7.2 and 7.3 of the user agreements. The arbitrator’s findings determined rights and obligations pursuant to the contract and in relation to the calculation of TIC.[5] Before me the respondents did not argue that the conduct they said was unconscionable was in breach of contract, and they did not argue to the contrary of any of the arbitrator’s findings[6] so far as their arguments concerned the construction of cll 7.2 and 7.3 of the user agreements.
[5]See for example the determinations pleaded at paragraphs 3.12(i) and (j) and 3.21(d) and (e) of the replies.
[6]That is, those matters which the arbitrator found as the “ultimate facts” on which his award was based – Blair v Curran (1939) 62 CLR 464, 531-532.
Respondents to this Proceeding not all the Users
I will dispose of one last matter at the outset. The applicant emphasised that only four of eight current users are respondents to this proceeding. This cannot logically have a bearing upon my determination of the issues in dispute between the current litigants. For one thing, the duration, tonnage, and monetary terms of all the user agreements differ. Secondly, the respondents were unable to agree a TIC with the applicant and, for them only, the TIC was determined by the arbitration hearing. In addition to these known differences between the group of users who are respondents to this litigation, and the group of users who are not, there may be any number of reasons why the other users have not joined in this proceeding. There is no logical inference available, even on the balance of probabilities, in favour of the applicant.
I UNCONSCIONABLE CONDUCT
Relevant Provisions of the User Agreements
As already noted, the user agreements are for long terms. Furthermore, neither the owner nor the user has the right to terminate except for breach – see cll 3.2 and 3.3.
A user has the right to have a certain amount of coal handled at the terminal each year, its Annual Maximum Tonnage. The TIC is an amount paid, “for each tonne of the user’s coal handled through the terminal” – cl 5.1(a)(i). Every fifth year there is a wholesale review of the TIC in accordance with schedule 7 of the user agreements – cl 8.1.
By cl 5.1(a)(ii) the users are obliged to pay TPC, a price per tonne, “for every tonne … by which the tonnage of the user’s coal actually handled is less than the Annual Maximum Tonnage for that financial year”. TPC is the same price per tonne as TIC. The obligation to pay handling charges is found at cl 5.2. The users must pay two amounts, HCF and HCV.
There are some provisions of the user agreements which mitigate the rigid structure brought about by the fixed nature of the Annual Maximum Tonnage concept and the take-or-pay nature of the contracts:
(a)Clause 10.1(a) provides that a user may request a reduction in its Annual Maximum Tonnage and that the owner may “in its absolute discretion” accept or reject the request.
(b)Clause 10.1(c) allows a user to request an increase to its Annual Maximum Tonnage. The owner is to determine whether or not there is “available unallocated Terminal Capacity to meet the requested increase”.
(c)Clause 10.2 provides that if a user is not presenting its Annual Maximum Tonnage, and the owner has one or more requests from miners wishing to use the terminal which it cannot presently satisfy from “uncommitted terminal capacity”, the owner may reduce the user’s Annual Maximum Tonnage.
(d)Clause 10.3 provides:
“Capacity to be taken into account only once
If PCQ reduces the User’s Annual Maximum Tonnage under Clauses 4.6[7] or 10.2 of this Agreement and subsequently provides that capacity to another Access Holder, it will not charge the User any TPC or HCF in relation to that reduced tonnage from the time that it is provided to the other Access Holder.”
(e)Clause 14.2 gives a conditioned right to a user to assign “all or part of its rights or entitlements under this Agreement (including, in particular, all or part of its Annual Maximum Tonnage, either permanently or in respect of a period of time…)” with the consent of the owner. Clause 14.2(c) provides that unless the owner approves “in its absolute discretion”, an assignment under cl 14.2 must not give effect to an arrangement under which the assignee gives any consideration to the user in respect of the rights the assignee gains. Clause 14.2(d) provides that once the assignment has taken effect, the user is discharged from all obligations under the user agreement “in respect of the rights and entitlements assigned”.
(f)Clause 14.3 provides a more informal method whereby, with the consent of the owner, not to be unreasonably withheld, the user may permit a third party to present coal to the terminal for handling. Again there is to be no arrangement where the third party pays the user without the consent of the owner, in its “absolute discretion”.
[7]Clause 4.6 allows the owner to reduce a user’s Annual Maximum Tonnage if the user does not present its coal at the terminal in accordance with the owner’s requirements.
By cl 4.2(a)(i) the owner is obliged to operate the terminal to enable the user’s Annual Maximum Tonnage to be handled each financial year.
At cl 25.1(a)(ii) the owner warrants that it will cause its operator to ensure that the terminal is maintained so that “as far as practicable” it operates at design capacity.
At cl 25.1(a)(iv) the owner warrants that, “… it will seek to contract all uncontracted Terminal Capacity from time to time … but will not deliberately enter into a User Agreement which can reasonably be expected to cause Terminal Capacity to be materially exceeded to the detriment of the user”.
At cl 24.1 there is an obligation on the user to provide the owner with Credit Support by the execution date and maintain it for the duration of the agreement. It is an oddly open-ended clause in an otherwise well‑drafted contract. Credit Support is defined as, “any form of credit support, security, guarantee or undertaking required to be or in fact provided pursuant to clause 24”.
Clause 24.2 applies after execution. Subclause (a) provides that if, “in the reasonable opinion of [the owner], there is a likelihood that the user … may have ceased or will cease to be reputable or of good financial standing with the capacity to satisfy in full the user’s obligations under this agreement” the owner may give a notice to the user. The user must then provide the owner with information to establish good standing. There is a similar provision at cl 24.2(b), which provides that if the user has ceased to be, or will in the owner’s reasonable opinion cease to be, reputable and of good financial standing, with the capacity to fulfil all its obligations under the user agreement, the owner may give the user a notice to provide Credit Support. The user must then provide Credit Support which secures the user’s obligations to the owner. This security must be in an amount, form, and for a duration satisfactory to the owner.
Failure to provide Credit Support after a notice pursuant to cl 24:
(a)puts the user in material breach of the agreement – cl 24.3;
(b)allows the owner to call on any existing Credit Support – cl 24.3; or
(c)suspend the user’s rights to have its coal handled at the terminal, but not its obligations under the agreement – cl 3.5.
Clause 24.4(a) provides that the owner may call on the Credit Support at any time it becomes entitled to terminate the agreement for breach by the user.
QCPL Transactions and Security Deposit Agreement
These three agreements were all made on 31 October 2016. The respondents describe these agreements as artificial constructs. I come back to that at [123] ff below. At this point in my judgment I will simply outline what the documents provide at face value.
The novation agreement is between the applicant, QCPL and AMPL. The recitals say that QCPL is party to a user agreement which gives it the right to present an Annual Maximum Tonnage of coal to the terminal, and go on:
“…
CQCPL no longer has any need for capacity under the User Agreement at the Terminal and has been unable to identify willing acquirers with demand for that Terminal capacity.
DSubject to the terms of this Deed QCPL has approached AMPL to assign the rights, and AMPL has agreed to accept that assignment and assume the corresponding obligations, relating to QCPL’s Annual Maximum Tonnage under the QCPL User Agreement for the financial years commencing on 1 July 2022…
…
IQCPL has agreed to make the payment to AMPL provided for in this Deed (Novation Payment) in consideration of AMPL accepting the obligations which AMPL is required to under this Deed.
JAMPL has satisfied [the applicant] that AMPL will provide appropriate credit support under and for the purposes of Clause 14.2(b)(ii) of the User Agreement via Security Deposit Terms (The Security Deposit Terms).
…”
By the agreement, QCPL assigns to AMPL its rights to have its Annual Maximum Tonnage handled in the financial years beginning 1 July 2022 and ending 30 June 2028 – cl 3.1(a). The agreement defines this tonnage as the Annual Contract Tonnage Assigned. AMPL accepts the assignment and agrees to comply with the terms and conditions of the QCPL user agreement to the extent that they relate to the Annual Contract Tonnage Assigned – cl 3.1(c). Clauses 3.1(d) and (e) provide:
“(d)by force of this subclause (d), [the applicant] and AMPL shall be deemed to have entered into an agreement in respect of the Annual Contract Tonnage Assigned upon the same terms as the QCPL user agreement such that the relevant part or portion of rights and obligations of QCPL under the QCPL user agreement in respect of the Annual Contract Tonnage Assigned shall be novated to AMPL and the rights and obligations of QCPL in relation to that tonnage under the QCPL user agreement shall be extinguished;
(e)by means of the assignment and novation provided for within the preceding paragraphs of this clause 3.1, QCPL assigns absolutely to AMPL the Annual Contract Tonnage Assigned;
…”
Clause 8.1 provides, “In consideration for AMPL’s acceptance of the obligations under the novations or assignments provided for in this Deed, QCPL will pay to AMPL the Novation Payment of $138 million …”. The payment is to be made by three equal instalments.
Clause 3.1(g) provides the Security Deposit Terms shall be deemed to be added as a variation to the user agreement between the applicant and AMPL.
The termination agreement is between QCPL and the applicant. The recitals include:
“…
GQCPL no longer has need for any capacity under the User Agreement at the [terminal] and has been unable to identify willing acquirers with demand for that [terminal] capacity.
HQCPL has not provided information as requested to [the applicant’s] request of March 10, 2016 concerning QCPL’s credit standing, and QCPL’s position is that it will not be responsive to requests from [the applicant] for Credit Support.
IQCPL has approached [the applicant] to secure the termination of the User Agreement.
JThis document sets out [the applicant] and QCPL’s agreement whereby QCPL and [the applicant] terminate the User Agreement … in consideration for the payment by QCPL to [the applicant] of the Termination Payment.
KIt is the parties’ intention that the Termination Payment will be in full and final settlement of all matters between the parties in respect of the User Agreement …”
The parties agreed that the user agreement is terminated. Clause 4.1 provided, “In consideration for the termination of the User Agreement as provided for in clause 3.1, QCPL will pay [the applicant] the Termination Payment of $117 million”. This was to be paid in three equal instalments on the same days as the novation payments.
At cl 3.4(a) the applicant gave QCPL the following unusual indemnity:
“[The applicant] indemnifies QCPL … against any claim made or liability claimed by [the applicant], its Related Bodies Corporate, the Operator, Clermont Coal Mines Ltd or any other [terminal] User or Users (collectively referred to in this clause as Other Users) … arising out of or in connection with the termination … effected by this agreement …” (my underlining)
Schedule 3 of the termination agreement is detailed. It establishes a procedure whereby QCPL must notify the applicant should it receive any claim for which it wishes to claim indemnity. QCPL must not make any admission of liability without the authorisation of the applicant, and the applicant will, at its cost, assume the defence of any such claim. QCPL is to co-operate with the applicant for this purpose. The applicant’s assuming the conduct of any proceedings in relation to a claim for indemnity is at QCPL’s election. If QCPL assumes conduct, the applicant is obliged to co‑operate in QCPL’s defence of the claim.
The security deposit agreement is entitled, ‘Deed – User Agreement – Security Deposit Terms’. The parties are the applicant and AMPL. The recitals contemplate the novation agreement bringing into existence a user agreement between the applicant and AMPL.
Clause 2 adds a clause to the user agreement between the applicant and AMPL:
“24.6 Security Deposit Terms
The parties agree that the Security Deposit Terms set out in Schedule 8 form part of this agreement and that the Security Deposit in accordance with those terms shall be deemed to provide Credit Support for the purposes of this clause 24.”
Clause 2.1 of the new schedule 8 provides as follows:
“2.1 Deposit
(a)The parties agree that [AMPL] will, within 2 business days of receiving each Novation Payment pursuant to the Deed of Novation, pay to [the applicant] the amount of each novation payment as Credit Support under clause 24 of the Agreement and as security for the performance of the Obligations.
(b)For the avoidance of doubt, [AMPL] agrees that it does not have any right, title or interest in the money paid to [the applicant] in accordance with clause 2.1(a) of this Schedule.”
Clause 2.2 of the schedule provides that the applicant will pay AMPL interest to the extent that the applicant receives an Interest Benefit. That term is defined to mean:
“… the aggregate of:
(a)the interest earned by [the applicant] from holding or investing that Deposit (if any); and
(b)to the extent any of the Deposit is used to prepay any debt owed by [the applicant], the amount of interest that is no longer payable by [the applicant] as a result of the prepayment of that debt.”
Clause 2.3 of the schedule authorises the applicant to use the monies on deposit as Credit Support to pay AMPL’s obligations under the user agreement. When an amount becomes payable by AMPL to the applicant under the user agreement, the applicant becomes obliged to return part of the security deposit in that amount to AMPL, although it is provided that the obligation may be satisfied by the applicant applying the money “by way of set-off”. These obligations under cl 2.3 are expressly subject to cl 2.4 of the schedule.
Clause 2.4(a) of the schedule provides that:
“Notwithstanding any other provision of this Schedule, [the applicant’s] obligation to make any payments under this Schedule is limited to the extent that [the applicant] is permitted to do so under the Secured Documents. [AMPL] acknowledges that [the applicant] may only be permitted under the Secured Documents to make any payments under this Schedule to the extent of amounts held in a Distribution Account (as defined in the Secured Documents) from time to time.”
The Secured Documents are defined to include the Common Terms Deed Abbot Point Coal Terminal dated 28 October 2013 between the applicant and others.
Clause 2.5 of the schedule provides:
“[AMPL] acknowledges that [the applicant] may use the amount(s) paid by [AMPL] to it in accordance with clause 2.1 of this Schedule in such manner as it thinks fit without any liability to account to [AMPL], provided that nothing in this clause 2.5 limits [the applicant’s] obligations pursuant to clauses 2.2, 2.3 or 2.4 of this Schedule.”
Clause 3.1(a) of the schedule provides, “This Schedule constitutes a continuing obligation regardless of … any other matter or thing until the [amount of the monies paid by AMPL as a deposit by way of Credit Support] has been fully applied in accordance with clause 2.3 of this schedule”.
The Common Terms Deed, [45] above, is an agreement between the applicant and its creditors. Clause 1(b) of schedule 5 requires the applicant to deposit all monies received by it into an Operating Account. Pursuant to cl 1(c) of the schedule, there are only 14 types of payments which can be made from the Operating Account and they are listed in order of priority. The first is taxes. The second is not relevant here. The third to thirteenth are amounts due to creditors. Finally, the fourteenth is a transfer to a distribution account, but only if conditions in schedule 4 cl 3(f) are met. These conditions are in turn a fairly complicated system to ensure that creditors’ interests are not neglected.
Effect of QCPL Transactions on TIC and HCF charged to the Respondents
After the QCPL transactions, the applicant charged the respondents more by way of TIC and HCF.
The TIC is set at five yearly reviews, on a Review Date, in accordance with schedule 7 to the user agreements. Central to the operation of schedule 7 is the concept of Annual Revenue Requirement (ARR). Broadly speaking, this is the agreed revenue to reward the owner for its investment in the terminal infrastructure. Each user pays the proportion of the ARR which their Annual Maximum Tonnage bears to the total tonnage of all the users. Calculation is by a mathematical formula, in which the ARR is the numerator, and the total tonnage of all users is the denominator. The result is a price per tonne. The TIC set at the Review Date remains applicable for the succeeding five years, subject to CPI increases.
There is no express contractual mechanism to adjust the TIC having regard to events that occur during the five year period. Therefore, events might occur during any five year period which advantage or disadvantage one of the parties to a user agreement. For example, if one month after the TIC was set for a five year period, one of the users became insolvent, the owner would be disadvantaged: the TIC paid by the remaining users would remain the same even though it had been calculated on the basis that the insolvent user would be sharing the infrastructure costs of the terminal; the owner would simply miss out on that share of the TIC which was to be paid by the insolvent user. Of course, the owner is able to protect itself against such an occurrence by using the Credit Support provisions.
Here the relevant five yearly Review Date was 1 July 2017. At the Review Date the total tonnage denominator had decreased by reason of the fact that the QCPL tonnage had gone, and AMPL had not yet become a user. The applicant received the same amount by way of ARR, but this amount was shared across less tonnage.[8] The effect is that the remaining users are, in effect, paying the amount of TIC which QCPL would have been obliged to pay under its (now terminated) user agreement. They will continue to do so until AMPL becomes a user on 1 July 2022.
[8]This analysis obviously ignores other changes to the TIC dating from the Review Date of 2017; they are not controversial before me.
Had QCPL departed shortly after 1 July 2017, the TIC would have been calculated on the basis that QCPL’s tonnage was included. It would have remained at the same level for the ensuing five years even though QCPL would not have been paying its share. It is hard to imagine an owner would agree to a user leaving at such a time, except on terms which prevented the obvious loss of revenue to the owner. Only where the owner had no choice is such a loss of revenue likely to eventuate – the example of insolvency, above, is one. Another would be where a user was entitled to terminate for the owner’s breach, and did so soon after a review date.
Here, in dealing with the departure of QCPL, the applicant was not only astute to avoid the type of loss of revenue just mentioned, it was astute to ensure that the remaining users would pay the amount of TIC referable to the loss of the QCPL tonnes. By cl 8.1(a)(ii) of the user agreements, eight months prior to the Review Date the owner must notify the users of its determination of the TIC for the succeeding five years. Here the applicant was obliged to notify the users by 1 November 2016. It did so, notifying them of a determination based on the QCPL transactions having happened the day before, 31 October 2016. During negotiations the applicant was concerned to achieve this timing – see [79] below.
By cl 7.2 of the user agreements the HCF was also a price per tonne, determined annually. The users paid a proportion of the operator’s fixed costs based on the proportion their Annual Maximum Tonnage bore to the total tonnage to be handled by the terminal each year. Once QCPL was no longer a user of the terminal, the total tonnage decreased and the HCF for all other users increased as they paid a higher proportion of the operator’s costs of running the terminal. This situation will continue until AMPL becomes a user.
While the termination agreement took effect on the date it was signed, it provides at cl 3.5 that its ‘economic effective date’ is 1 July 2016. The substance of that is contained at cl 3.1 which provides that although the user agreement terminates on 31 October 2016, QCPL is only liable to pay up to 30 June 2016. This had the practical effect that QCPL was not liable to pay fixed costs between 1 July 2016 and 1 July 2017. This did not affect the amount of TIC paid by the remaining users until 1 July 2017. 1 July 2017 was a five yearly review date for the TIC. Clause 3.1 of the termination agreement also had the effect that there was a period in 2016 when QCPL was excused from paying HCF, but the other users were not affected. However, once HCF was calculated for the next year, the QCPL tonnes were not counted in the denominator and the other users paid more on four months before 1 July 2017.
The nub of the respondents’ unconscionable conduct case is that in receiving the $255 million consideration under the QCPL transactions, the applicant in effect accepted payment for QCPL’s future TIC and HCF obligations until 30 June 2022 but required the remaining users to pay the equivalent of QCPL’s TIC and HCF obligations during this period.[9]
[9]Paragraph 17 of the first respondent’s defence.
The applicant asserted that, to the contrary, the payments made to AMPL and the applicant under the QCPL transactions were commercial payments to (1) compensate AMPL for assuming QCPL’s rights and liabilities under the user agreement from 1 July 2022 and (2) in settlement of a dispute the applicant had with QCPL about the provision of Credit Support, “in circumstances where there existed a real risk of QCPL ceasing to be reputable and of good financial standing to fulfil all its obligations under the QCPL User Agreement, thereby posing a commercial and financial risk to [the applicant].”[10]
[10]Paragraphs 8(b), 9(b), 9(c) and 13(c) of the applicant’s reply.
Credit Findings
The applicant did not call evidence from anyone who made the decisions to enter into the QCPL transactions and the security deposit agreement. Its only evidence-in-chief as to the QCPL transactions was from a Mr Christopher Wicks. Despite the fact that the applicant filed an affidavit of evidence-in-chief from a Mr Dwayne Freeman, and the fact that Mr Freeman was far more involved in negotiating the QCPL transactions than Mr Wicks, Mr Freeman’s affidavit of evidence-in-chief did not deal with the QCPL transactions.
Submissions were made as to the credit of both Mr Wicks and Mr Freeman. Mr Freeman was uncomfortable and reluctant at times in his evidence.[11] However, I accept that Mr Freeman approached giving evidence in a genuine way and that he answered questions honestly. I accept his evidence, except where I specifically say otherwise.
[11]See for example, tt 3-36-38.
On the other hand, my conclusion is that I cannot rely on Mr Wicks’ evidence. The primary reason for my credit finding against him is that the substance of his evidence was false in significant respects. There are two major points in that regard and I deal with them at [95] ff and [104] ff. His demeanour was also important to my findings, and I deal with that now.
Mr Wicks was the Manager, Regulation Access Pricing, for the applicant and by 31 October 2016 was General Manager of the applicant. He had a university degree in business.[12] There is no doubt that Mr Wicks is capable of concise and precise communication and is able to be astute to commercial issues.[13] Generally in evidence he was vague and dithering, using generalised terms and speaking at such a level of abstraction that at times his evidence was simply meaningless.[14] His answers were often over-inclusive of irrelevant detail, ambiguous, and not responsive to the questions asked to an unusual degree. Even when he was literally responsive to the question, he often managed to escape the substantive import of it in answering.[15]
[12]It took me three questions to elicit this piece of information, and then it was downplayed as far as it could be – it was an undergraduate degree, not a postgraduate degree, and was something that apparently one might consider not “counting” as a professional qualification – t 2‑84. I had initially asked the question because I was surprised by the lack of understanding seemingly betrayed in the exchange immediately preceding my questions. I suspect my purpose was evident to Mr Wicks and caused the downplaying just described.
[13]See exhibit 14 as an example of his written communication displaying all these characteristics.
[14]For example, tt 2-74-77; tt 2-81-83, and then further at tt 2-85-86 as to his role in considering the proposed QCPL transactions. His evidence as to whether he considered that Court action should be taken to compel QCPL to either provide information as to its credit-worthiness, or provide Credit Support under the user agreement is a particularly pronounced example of this – see t 2-99 and t 3-4 at lines 5-15.
[15]For example, t 2-39.
On some topics he was entirely unco-operative. He could not say which Adani company Mr Freeman worked for, or what Mr Freeman’s position was, or why it was Mr Freeman who was negotiating the QCPL transactions alongside himself.[16] Even though it is plainly documented in the contemporary correspondence between Clayton Utz and PWC that Mr Wicks provided the information which PWC needed to write the reports dealt with below, Mr Wicks had to be asked several times before he would concede this – see tt 3-20-21.[17]
Negotiation of the QCPL Transactions
[16]Tt 2-72-73, tt 2-75-76 and tt 2-79-80. Even when shown an Adani email, which he accepted was from Mr Freeman, he could not say if the footer recording Mr Freeman’s position was correct – he remained “unaware” – t 2-87. During the events material to this case Mr Freeman, like Mr Wicks, was working for the applicant, spending his time at the terminal and at the Brisbane office, on the same floor as Mr Wicks – t 3‑63. The two men had known each other for over 10 years and it was Mr Freeman who recruited Mr Wicks to work for Adani – t 3-62.
[17]His evidence between t 3-18 line 19 and t 3-20 line 11 is an example of a deliberately prevaricating and avoidant style of answering questions.
In May 2014 QCPL sold such of its coal mining interests as were serviced by the terminal. Thereafter it presented no coal to the terminal, although it continued to pay its obligations under its user agreement on time – t 2-72. It was unable to find another party to whom it could assign its entitlement to have coal handled at the terminal.
On 27 October 2015, and again on 11 February 2016, QCPL enquired of Mr Freeman whether Adani (to use a non-specific name, as the correspondence does) wished to acquire its terminal capacity. The earlier of these communications (ex 6) begins, “as we have discussed previously…”. Mr Freeman thought these previous discussions were in September 2015, or early October 2015, and that at the time of that initial approach from QCPL he informed Mr Wicks of it – t 3-33.
Early on it was made clear to QCPL that Adani would not be acquiring anything; if QCPL wished to terminate, the question would be what price it would pay to be relieved of its obligations. This was recognised by QCPL in its 11 February 2016 communication.
Before 1 April 2016 Mr Freeman was working for AMPL and was looking for port capacity. However he did not consider that he was approached by QCPL because he was at AMPL; he considered it a general approach to the Adani Group – tt 3-34-35. Mr Wicks was involved because he worked for the applicant – t 3-36.
On 18 March 2016 QCPL sent a term sheet to the applicant – ex 7. It proposed a payment in three instalments by QCPL in exchange for termination of the user agreement effective 1 July 2016. By 6 April 2016 the term sheet included QCPL’s figure of $180 million as the price it would pay – ex 8.
QCPL requested a term giving it an unusual indemnity:
“[The applicant] will grant an indemnity in favour of QCPL in respect of any claim against, or any loss, damage or increased cost to, QCPL arising from any dispute or litigation in connection with the relinquished terminal capacity after 1 July 2016.”[18] (my underlining)
[18]Ex 7 and ex 8.
From 1 April 2016 Mr Freeman worked for the applicant as Head of Commercial Port Operations. From this point in time he understood that the only obligations QCPL had to the applicant were to pay the TIC/TPC and HCF – t 3-38, and that the amount of money QCPL would pay under the proposed QCPL transactions would necessarily relate to those obligations – t 3-38. The basis for the initial negotiations was what percentage of the present value of those obligations QCPL would pay to terminate – tt 3-38-39. Negotiations were between the applicant and QCPL; AMPL was not involved.[19]
[19]After a short initial period where AMPL was involved – t 3-40.
To the 6 April 2016 term sheet Mr Freeman sent “a high level response” on 29 April 2016 (ex 8). This included:
“…
3.There will be a requirement to either add Adani Mining Pty Limited to the term sheet or have separate term sheets for the port and rail transactions as they are with different Adani entities.
…
11.Exclusion of liability and indemnity cannot be accepted in its current form.
12.Future payment obligations by QCPL to AAPT, discounted to today’s dollars is in the order of $400M-$450M NPV.
13.AAPT expects the port relinquishment fee to be in the range from $350M-$400M.
…”
Mr Freeman’s evidence was that the note at point 3 above was a reference to AMPL needing port capacity – t 3-42. I find he was mistaken about this. While I accept that Mr Freeman was looking for port capacity while he was at AMPL, and that this need on the part of AMPL continued, I reject the notion that this note referred to AMPL receiving port capacity as part of the transaction: the document says quite clearly that AMPL may need to be joined because it wants rail capacity.[20] That is, the deal being proposed was a simple relinquishment for a price; it did not involve AMPL taking an assignment of QCPL’s rights to have coal handled at the terminal.
[20]QCPL’s term sheet of 6 April 2016 (ex 8) had recited that QCPL held rail capacity to the terminal under an Access Agreement between QCPL and “QR Network Pty Ltd (now Aurizon Network)”, and that the parties were discussing QCPL granting to Adani a right of first refusal to acquire that rail capacity – see Recitals E and F. The evidence does not reveal what became of the proposal to assign rail capacity; it is something separate to the subject matter of this litigation.
So far as point 11 of Mr Freeman’s response is concerned, Mr Freeman explained that QCPL wanted indemnity from the applicant against claims from other users. It had concerns about “reputational risks” associated with relinquishment – t 3-42. QCPL feared that, “… if the other users found out about what had happened [QCPL] might get sued …” – t 3‑43. That is evident from the underlined parts of the QCPL draft clause above. At the end of the day QCPL was successful in having an indemnity included, [37] above. The underlined parts of the final clause evidence QCPL’s fear that it might be sued.
Points 12 and 13 of Mr Freeman’s response produced the following response from QCPL on 3 May 2016:
“…
13.Previously Agreed Value Sharing Principle
●Discussion needs to move quickly back to sharing value.
●Credibility of the proposal has been damaged with this response. We have moved substantially away from original value sharing principles.
●AAPT revenue is limited to TIC … claim is greater than the TIC!!
…
●AAPT can make substantial gains through a sensible value sharing approach.
●[QCPL] has limited ability to move from the original offer.
12.Future payment obligations – NPV (discount rate?)/ Period 15/16 to 27/28?
●AAPT revenue is limited to TIC/our obligations include HCF.
●But remain happy to contemplate value sharing TIC/HCF.
●Future obligations value is critical ….. need a clear understanding of calculation.
●To date – I have calculated around $400m including 15/16.
●If we can move to back value sharing principle – require a common view as a starting point.
●Keen to understand AAPT’s assertion of [QCPL’s] payment obligation.” – ex 9 (underlining and paragraph numbering error in the original).
The concept of value sharing mentioned in this email needs to be understood. It referred to the applicant and QCPL sharing QCPL’s future financial obligations under its user agreement, ie, QCPL would only pay a percentage of the present value of those obligations to be released from them.[21] QCPL’s unhappiness with exhibit 8 was because, before it was sent, QCPL had told Mr Freeman that it had approval from Rio Tinto in London to agree to a 50/50 split of the present value of its obligations under the user agreement and Adani’s figures were well above that – t 3-53 line 40.
[21]T 3‑44 line 35 and see t 3-45 lines 1‑25 and t 3-53 line 20. Mr Freeman’s evidence became slightly confused about this. At t 3-43 he agreed with leading questions as to the meaning of the term when he ought not to have. However, his evidence was clarified at tt 3-44-45. In this context I interpret the passage at t 3-44 to mean that the concept of value sharing was “always there” – and this can be seen to be so when exhibit 9 is considered.
A further communication from QCPL was made on 9 May 2016 (ex 10):
“In terms of the port contract relinquishment I am happy to table the following series of payments with an NPV of $186.53m for your consideration.
A couple of points –
●You will understand that I am seeking to keep my annual payments under what I would otherwise have paid in terms of the total T/P [the TNPR] (TIC/HCF).
●I suspect this may also suit your preferred tax effective position.
●From your perspective this $186.53m should more than compensate for the expected loss of income likely in the next price reset.
●This represents around 6 years of our forecast TIC payments or around 4.5 years of our forecast (TIC + HCF) payments.
●Whilst the NPV provides a reference point for both parties the only certainty in this equation is what is able to be agreed. $186.59m is a considerable sum of money with certainty attached.
●Adani Ports in addition to acquiring the $186.59m contract relinquishment fee retains the upside of on selling/reusing this capacity all the while also maintaining its socialised port revenue base.” (my underlining)
This email annexes a table showing QCPL’s forecast of its TIC and HCF for the financial years 2017 to 2028.
This email contains the first mention of ‘socialisation’. Mr Freeman (or perhaps the cross-examiner) explained the concept well at t 3-43, “… that [the applicant] would take the payment from QCPL, reduce QCPL’s tonnes under the agreement to zero and then bump up … every other user’s payment for the TIC on the basis that the payment made by QCPL didn’t count”.[22]
[22]Unfortunately, due to the confusion mentioned at fn 21 above, the concept is called value sharing in the questions at that part of his evidence. Nonetheless, it is clear that what he was describing was socialisation – see t 3-46 lines 1‑5.
Mr Freeman acknowledged that the applicant intended to socialise the effect of the proposed QCPL transactions, although he was concerned to make clear in his evidence that it was not his plan, but the plan of others controlling the applicant who “instructed” him – tt 3-46-47. This attempt to distance himself from the actions of his employer was reminiscent of answers he gave early in cross-examination when the extent of his involvement in negotiations with QCPL was being explored. He said:
“My – my job was purely to negotiate a price and to convince Rio that there was a transaction to be done. That was my job … Because that’s what I was instructed to do. I was following a legal and lawful instruction to get a price from Rio for the relinquishment of their capacity.” – t 3-36.
Mr Freeman accepted that the significance of the term sheets providing that the QCPL transactions had an effective date of 1 July 2016 was that the date marked the beginning of the review process for the TIC.[23] Mr Freeman admitted that this was what the applicant wanted, but again sought to distance himself personally from this matter – t 3‑47.
[23]T 3-47 lines 1-25 and t 3-52 and see cl 8.1(a) of the user agreements.
On 12 May 2016 Mr Freeman on behalf of the applicant responded to QCPL as to price in the form of a table showing the applicant’s estimate of QCPL’s obligations in relation to TIC and HCF for the years 2017 to 2028 – ex 11. The table shows a net present value of $423 million and shows the applicant’s preferred price for relinquishment of $350 million paid in three instalments in the financial years 2017, 2018 and 2019. The table shows these three payments as having a present value of $310 million, and a figure, $112 million, as a gain for QCPL – ie, a discounting (or value sharing) of that amount on the present value of its TIC obligations.
The email says:
“[The applicant] considers any risk associated with the transaction is borne by [the applicant] which suggests the majority of the NPV to be allocated should be attributed to [the applicant].”
Mr Freeman said the risk referred to in this email was to reputation and of litigation arising from the implementation of socialisation – t 3‑48. He and his superiors at Adani regarded this as a real risk and the applicant had already taken formal legal advice about it before he moved from AMPL, ie, before April 2016 – t 3-48.
On 13 June 2016 a Mr Gupta, from AMPL, not the applicant, approved the basis for the applicant’s agreement with QCPL by email (ex 3) which read in part:
“In summary, the initial payment would be $260m (plus 50% share of tax benefit that Rio would get). If the socialisation is successful, [the applicant] would refund $50m (and 50% of the associated tax impact). However, if socialisation is unsuccessful, Rio would pay additional $50m (plus 50% share of tax benefit that Rio would get). Therefore, [the applicant] would either get $210m or $310m (plus associated tax).”
The table which followed this in fact showed QCPL paying a total of $242 million ($97 million to the applicant and $145 million to AMPL) if the payment was socialised. If it was not socialised, the table showed QCPL paying a total of $357 million; $143 million to the applicant and $214 million to AMPL. This had the effect that QCPL would pay 50% of the present value of its take-or-pay obligations if there was successful socialisation, and 73% of the present value of its take-or-pay obligations if there was not.[24]
[24]See the boxes labelled Scenario 1 and Scenario 2 which are part of ex 3.
Exhibit 3 contained the following:
“Outcome:
[The applicant] secures the capacity [for] AMPL for the period from July 2023.
AMPL gets $179 million for the assignment of contract by Queensland Coal. AMPL subsequently pays this money to [the applicant] towards deposit.
[The applicant] gets $120 million from Queensland Coal for cancellation of the User Agreement and $180 million from AMPL as deposit.
[The applicant] uses the above fund to repay its debt.
[The applicant] would need to repay $50m Rio if [the applicant] is successful in ‘socialising’ the port costs to the remaining users, but would get additional $50m, if it is not able to ‘socialise’.
…” (my underlining)Mr Freeman said that his receipt of this email was the first notice he had that there was to be a split in the payment between the applicant and AMPL – t 3-49. He did not trouble QCPL with that information when he brought negotiations on price to a close over the next two days.[25]
[25]Exhibit 4 and t 3-49.
On 13 June 2016 Mr Freeman went back to QCPL with a position he said was “based on a pure 50% split of the value and risks of the transaction including taxation implications and legal risk”, (ex 4). This was illustrated in a table as follows:
A Initial Bullet Payment $ 210 m B Plus refundable pricing risk fee $ 50 m C Tax @ 30% (A+B) @ 50% $ 39 m D Total initial Payment $ 299 m Positive pricing risk outcome E Return of pricing component ([the applicant] pays Rio Tinto) $ 50 m F Return of pricing risk tax component ([the applicant] pays Rio Tinto) @ 30% @ 50% $ 7.5 m G Total $241.5 m Negative pricing risk outcome H Additional pricing risk component (Rio Tinto pays [the applicant]) $ 50 m I Additional pricing risk tax component (Rio Tinto pays [the applicant]) @ 50% $ 7.5 m J Total $356.5 m
On 13 June 2016 there was discussion about the idea of the $50 million refund as per exhibit 3 and exhibit 4. That idea was abandoned early as the participants recognised that it “was going to be too difficult and we’re better off just negotiating a number” – t 3‑54. There were difficulties in how to document the idea, and also how to provide each of the parties with security for future obligations. Further, QCPL wished to have an agreement that ended the relationship once and for all.
At a meeting between Mr Freeman and the representatives of QCPL on 14 June 2016, a figure of $255 million was agreed as the price QCPL would pay to the applicant – t 3-55. This was subject to Mr Gautam Adani’s approval.[26] QCPL knew that Mr Freeman had no authority to bind the applicant.[27]
[26]T 3-55.
[27]T 3-52.
It is significant that the decision makers for the applicant were not its directors or employees, but those in other Adani Group companies. Mr Freeman’s instructions came from AMPL in the form of exhibit 3, and the bargain was only binding if approved by the chairman of the Adani Group.[28]
[28]For the directors of the applicant, see the company search at p 5350 of the Trial Bundle.
Mr Freeman had little to do with the QCPL transactions thereafter – t 3-56. There is no further evidence as to how the parties negotiated the final terms of the QCPL transactions.
Exhibit 12 is a PWC document dated June 2016. It gave Adani advice as to “the appropriate share of the total $255 million payment” to “be provided to [the applicant] … and that share which would be retained by [sic] AMPL …” – p 2. Mr Wicks said that he was in charge of having PWC give that advice; he could not bring himself to say that he instructed PWC – t 2-96. Mr Freeman had never seen the PWC analysis and did not know it had been undertaken – t 3-56.
PWC consider two approaches to allocating the $255 million payment between the two periods produced by the QCPL transactions: 1 July 2016 to 30 June 2022, and 1 July 2022 to 30 June 2028. Both approaches assume the consideration for the whole period, 2016-2028, is based on the relinquishment of the forecast obligations of QCPL under its user agreement. Given this similarity in approach, it is hardly surprising that the two PWC approaches yield figures similar to each other, and to those found in exhibit 3. One approach is to calculate the present value of QCPL’s tonnage over each of the two relevant periods. While the approach involves some mathematics, it is clearly based on the applicant’s estimate of QCPL’s future TIC. It produces an allocation of 46% to the period 2017-2022 and 54% to the latter period; this is equivalent to the figures used in the QCPL transactions – $118 million and $137 million.
The PWC analysis does not identify any separate commercial motivation or justification for the novation agreement; it is simply based on present value of QCPL’s obligations under the user agreement.
Mr Wicks’ Evidence about Derivation of Consideration for QCPL Transactions
As to the issue which I have described at [57] and [58] above, Mr Wicks swore to the applicant’s pleaded case in his affidavit of 12 February 2019:
“167.The termination payment of $117 million payable by QCPL to AAPT under the Termination Agreement represented a negotiated settlement agreed between the parties and was not an amount worked out by reference to a calculation based on forecast charges payable by QCPL under the QCPL User Agreement.”
Mr Wicks conceded that he did not know how the amount was worked out. However, he claimed more than once that the statement was correct, and that he could make it, “because I was familiar with the documentation that was being passed around, though I had no direct involvement in the negotiations”. – tt 2-70-71. If there is anything that stands out clearly from the documents evidencing the negotiations towards the QCPL transactions, it is that the amounts to be paid by QCPL were very much based on its future obligations under its user agreement.[29] So was the PWC advice of June 2016 – ex 12.
[29]In chronological order: exhibit 8, page 2, paragraph 12; exhibit 9, numbered page 99, paragraphs 12 and 13; exhibits 10 and 11; exhibit 4, numbered paragraph 1; exhibit 3, table and calculations in the attachment.
Mr Wicks is shown as being copied into the emails which are exhibits 8, 9, 10 and 11, and admitted having seen a copy of exhibit 3 between June 2016 and October 2016 – t 2-88. He obtained the PWC advice. That QCPL’s future obligations are very significant inputs in determining the amount of the QCPL payment or payments is unmistakeable. So much was freely acknowledged by Mr Freeman in his evidence, see [70] above. Further, as to items 12 and 13 in his “high level response” of 29 April 2016 (ex 8) Mr Freeman said:
“So that’s just an explicit indication that the amount of payment was tied to the amount of QCPL’s obligations under the user agreement; correct?--- Absolutely, yes.” – t 3-43.
Mr Wicks ought not have sworn paragraph 167 of his affidavit, because he had no requisite knowledge. He gave false explanations on oath before me as to why the content of the paragraph was correct.
Factual Findings about the Negotiation of the QCPL Transactions
There is no evidence of any negotiations between QCPL and AMPL. The only evidence is that the applicant negotiated the figure of $255 million with QCPL as the price for QCPL’s release from its user agreement, ie, from 1 July 2016 to 30 June 2028.[30]
[30]See Mr Freeman, t 3-52.
The split of consideration between the termination agreement and the novation agreement occurred after the $255 million price had been fixed. It resulted from PWC’s advice to the applicant as to what suited the applicant and AMPL.
The evidence is overwhelming that the amounts of $255 million, $138 million and $117 million were based on QCPL’s future financial obligations for both TIC and HCF under its user agreement.
It was said on behalf of the applicant that the amount of $255 million could not be regarded as a payment based on QCPL’s future obligations because the amount of those obligations could not have been accurately determined at the time of the QCPL transactions.[31] The amount QCPL would become obliged to pay under its user agreement could not be calculated to the very last cent at the time of the QCPL transactions. However, it was able to be very well estimated: both the applicant and QCPL did so during the course of negotiations; PWC did so in June 2016 (ex 12), and Mr Houston did so for the purpose of his evidence in these proceedings. It is true that everyone who did the exercise came to a slightly different figure. It is also true that the $255 million figure represents what was a commercially acceptable figure to the parties; as the QCPL negotiator put it, “Whilst the NPV provides a reference point for both parties the only certainty in this equation is what is able to be agreed.” – ex 10. Notwithstanding all of this, the reality remains that the basis for negotiations was a proportion of the present value of QCPL’s future obligations and the amount of $255 million was an amount which the parties agreed would be paid so that the applicant released QCPL from all its obligations under its user agreement.
[31]Paragraph 9(a) of the applicant’s reply.
Want of Credit Support not a Motivation for the QCPL Transactions
As noted above at [58], part of the applicant’s case is that the QCPL transactions were the result of a settlement agreement with QCPL in circumstances where there existed a real risk of QCPL ceasing to be of good financial standing and being able to fulfil its obligations under its user agreement. On this issue I find for the respondents: the apparent concern with Credit Support expressed by the applicant was an attempt to disguise the nature of the QCPL transactions.
In his affidavit of 12 February 2019 Mr Wicks swore:
“166.I considered at this time that there was a risk of QCPL ceasing to be reputable and of good financial standing so as to fulfil all of its obligations under the QCPL User agreement and there was a significant commercial and financial risk to AAPT that if QCPL was to default under its User agreement then AAPT would be unable to secure replacement tonnage on equivalent terms for the QCPL capacity. A significant factor in AAPT entering into the Deed of Novation and the Termination Agreement was due to the presence of these risks.” (my underlining)
In relation to the underlined sentence, Mr Wicks conceded that he was not the relevant decision‑maker and said he did not know who was. Thus he conceded that, “I wouldn’t be able to say that…” – t 2-69. Mr Wicks had sworn an identical paragraph in an affidavit in the Arbitration and on 20 February 2018 made the identical concession in cross‑examination before the arbitrator – tt 3-11‑13. He refused to acknowledge the obvious difficulty with this and refused to acknowledge that the affidavit sworn in this proceeding was misleading –tt 3-13-14.
Mr Wicks swore that he became concerned about Credit Support in September or October 2015. This is the same time Mr Freeman swore he told Mr Wicks that QCPL was looking to relinquish its terminal capacity – [65] above. That is, there is no evidence that concern about Credit Support pre‑dated the possible QCPL transactions. Mr Wicks’ evidence is that his concern was brought about by ratings agencies downgrading the credit ratings of coal companies, and there is some evidence that was occurring at around this time. The applicant wrote to all users, including QCPL, on 26 and 27 November 2015, requesting financial information because of the downturn in the coal industry.[32] QCPL refused to provide information.
[32]Trial Bundle Vol 3, p 1779.
In one of the most inconsistent and unconvincing parts of his evidence Mr Wicks swore that he did consider taking action in a court against QCPL in relation to Credit Support in December 2015 – t 2-99 - t 3-4. I am not able to put any reliance on this evidence if he meant to say (and I find it impossible to tell) that he did anything more than consider whether or not this was a sensible thing for the applicant to do. Clearly enough, at least by 15 February 2016, he did make that limited consideration; decided that it was not a sensible thing for the applicant to do, and passed that information on to his superiors – see ex 14.[33]
[33]Exhibit 14 and t 3-4 line10.
On 25 February 2016 PWC sent Mr Wicks a one page letter saying that it had “developed a scoring framework to determine the creditworthiness of Adani’s counterparties”. [34] In relation to eight of the 10 users, PWC’s advice was that they ought to be asked for a guarantee of 100% of their future obligations. In relation to one of the 10 users, nothing was recommended. In relation to QCPL, it was recommended that a guarantee of 50% of its future obligations be sought. Some preliminary version of this advice must have been provided to Mr Wicks, for he shows that he is acquainted with its contents in his email of 15 February 2016, ex 14.[35]
[34]Trial Bundle Vol 3, p 1789.
[35]PWC were engaged to give this advice in September 2015 – Trial Bundle p 704.
On 10 March 2016 (the date mentioned in recital H to the termination agreement, [35] above), the applicant wrote to QCPL saying that it had “formed the opinion … that there was a likelihood that [it] may have ceased or will cease to be reputable and of good financial standing with the capability to satisfy in full [its] obligations under the [user] agreement” – ex 15. That letter requested information as to QCPL’s finances. In reply, on 29 April 2016, QCPL said that the applicant had no basis to form a reasonable opinion as required by cl 24.2 of the user agreement, but nevertheless gave some substantive information as to its assets and the support of its parent, Rio Tinto Group.[36] There was no evidence that this matter was genuinely pursued after the refusal of 29 April 2016. As to events of 15 July 2016, see below, [117] ff.
[36]Trial Bundle Vol 3, pp 1804-1805.
Mr Wicks swore that while initial (November 2015) letters were sent to all users, no Credit Support was pursued from any other user but QCPL.[37] There was no explanation as to why the applicant would pursue QCPL, when eight of the other users were assessed as having a significantly worse credit profile. It is true that QCPL had no more coal to ship through the terminal, but it had always paid its obligations on time, and by 11 February 2016 was negotiating to pay a significant amount of money to Adani to terminate its right to have coal handled at the terminal. That is, it was dealing openly and honestly with the fact that it no longer needed to use the terminal. There was not the slightest indication that QCPL would act dishonourably in relation to its obligations under its user agreement.
[37]T 3-4 and t 3-5, Trial Bundle p 703.
Mr Freeman’s instructions from AMPL on 13 June 2016, exhibit 3, contained the following:
“Steps followed for the assignment and cancellation Rio contract:
1.AMPL requests [the applicant] for capacity at T1 for the period from July 2023.
2.Rio (the parent entity of Queensland Coal) requests the cancellation of its user agreement with [the applicant].
3.[The applicant] assesses the creditworthiness of Queensland Coal and requests further information from Rio.
4.Rio refuses to provide further information regarding Queensland Coal.
5.Based on assessment performed by [the applicant], by considering the available information, [the applicant] forms the opinion there is an elevated risk of default by Queensland Coal its obligation under the user agreement.
6.[The applicant] facilitates discussions between AMPL and Rio for assignment of contracted capacity of Rio for the period from July 2023 to June 2028.
7.AMPL and Rio agrees to enter into assignment deed for consideration.
8.Rio agrees to pay $179 million to AMPL in order for AMPL agreeing to take the assigned capacity and related liabilities.
9.AMPL agrees to deposit $179 million received from Rio as cash guarantee to [the applicant] against future capacity liabilities.
10.[The applicant] agrees to terminate the Rio’s user agreement for the period from July 2016 to June 2023 in return for the payment by Rio of $120 million.
11.[The applicant] agrees to refund $50m to Rio if [the applicant] is successful in ‘socialising’ the port costs to the remaining users and Rio agrees to pay additional amount of $50m, if [the applicant] fails to ‘socialise’.”
These notes appear to be the plan for the QCPL transactions and the security deposit agreement. At the time the email was sent to Mr Freeman, the first four numbered points, although worded in the present tense, had occurred. Points numbered 6-11 had not occurred; they are clearly a plan for the future. There is no evidence, except for Mr Wicks’ testimony, which I am not prepared to act upon, that the fact recorded at point five ever occurred. The objective evidence is to the contrary.
That the references to QCPL’s credit are included in a list of steps to be followed, “for the assignment and cancellation of Rio contract” is an indication that the idea of QCPL’s creditworthiness was only raised as a construct to show some commercial purpose for payment by QCPL to the applicant and AMPL which was not related to the extinguishment of QCPL’s future financial obligations under its user agreement.
In his oral opening counsel for the second to fourth respondents gave an example of a case which he was not running; one that was more extreme and clearer than the one he was running. He said, “… if, for example, [the applicant] were a competitor of our clients and their motivation – their reason for [entering into the QCPL transactions] was to inflict some kind of harm upon us, one would have thought that was quite a strong case for saying there was unconscionable conduct”.
It is noteworthy that there was never any objection to evidence on the basis that the respondents had not pleaded that the applicant was acting in AMPL’s commercial interests, and no objection was taken to submissions to that effect made by the second to fourth respondents, even though other objections were taken to other parts of the respondents’ submissions on the basis that they were outside the pleaded case. In telling contradistinction, at paragraph 53(f) of its reply submissions dated 27 March 2020, the applicant did take objection to the second to fourth respondents’ submissions that AMPL was a competitor:
“The [second to fourth] respondents in [their] closing submissions are [472] assert that Adani Mining is a ‘competitor of the users’. This was not alleged or proved. No one proved what relevant coal markets particular users were operating in and it was not relevant on the pleadings.”
UCPR rr 149 and 166
Before moving on to consider the position of the first respondent, I need to deal with a collection of cases which the applicant said stood for the proposition that, because the pleading at paragraph 39A(c)(i) of the second to fourth respondents’ rejoinder was part of a reason for its denying paragraph 29(b)(iii) of the reply, it could not be regarded as pleading material facts upon which the second and fourth respondents rely on to make their case in the proceeding. The reason was said to be that r 166(4) of the UCPR requires a party to explain a denial, whereas the obligation to plead material facts is imposed by a separate rule – r 149(1)(b) and (c).
The rules as to when an issue is fairly raised by a pleading predate the advent of the UCPR by hundreds of years. As a general proposition, the UCPR contains rules aimed at making the passage of civil litigation through the Courts more efficient and less technical – see r 5. It would be an odd result if it introduced a technical rule which would invalidate a pleading which was otherwise good.
Rule 166 was a new rule introduced by the UCPR with that aim. It aimed to prevent the previous practice which allowed parties to not admit or to deny allegation after allegation in a pleading simply to put the other side to proof, or to frustrate the efficient progress of a proceeding. The requirement to give a direct explanation for a denial means that a party is required to have a proper reason for denying an allegation. Secondly, the party is required to state what that explanation is, so that the other party no longer has to guess what factual dispute (or other reason) underlies a denial. The issues in dispute between the parties are thus clarified. Efficiency in litigation is promoted.
Rule 149(1)(a)-(d) lists matters long established by the case law. At 1(e) it makes a change to the previous position in order to prevent surprise and make litigation more efficient. Nowhere does r 149 (or for that matter r 166) say that a material fact may not be pleaded in a part of a pleading which explains a non-admission or denial.
In these circumstances it seems to me most unlikely that cases concerning rr 149(1) and 166(4) would establish the proposition the applicant contends for. When the cases relied upon by the applicant are examined, it is apparent that they do not.
The first is Gilbert v Goodwin (No 3).[183]This is a report of ex tempore reasons given by Helman J refusing an application for further disclosure. The reasons are seven sentences long. It appears that, in providing an explanation in compliance with r 166(4), a pleader referred to documents. An application was brought to compel disclosure of those documents. Helman J refused disclosure saying:
[183][2006] 1 Qd R 499.
“… the respondents should not be required to produce the documents or give the particulars sought because, by referring to them by way of explanation for the respondents’ pleading, the respondents did not put the contents of those documents or the facts referred to in issue in the proceeding. In the case of a denial, the fact in issue is the fact denied. In the case of a non-admission, the fact in issue is the fact not admitted. The explanations given in the amended defence were included to comply with the rules but did not thereby create issues of fact for determination at the trial of the proceeding.
… It appears to me that the acceptance of the proposition advanced for the applicants that the direct explanations create further issues for determination at the trial of the proceeding would result in a proliferation of ancillary issues not directly relevant to the questions in issue between the parties.”
As White J remarked in Ballesteros v Chidlow,[184] the reasons given for the denial of an allegation in a pleading will be many and varied. In some cases there will be no possibility that they raise factual matters relevant to any pleaded issue: a denial on the basis that the opposing party will not particularise the allegation properly, or that a client or witness relevant to the matter is unavailable to give instructions in the time limited for pleading are examples. In other cases the explanation for a denial contains factual matters which do go to the issues in the proceeding. Because the reasons in Gilbert v Goodwin (No 3) do not set out the pleadings in that case, it is impossible to have a full understanding of the decision. The pleadings may well have been of the type where the explanation was not relevant to any pleaded issue. If that were so, it seems to me that the decision was correct. If that were not so, then, with respect, the very wide statements made may not be applicable beyond the facts of that matter.
[184][2005] QSC 285, cited in Cape York Airlines Pty Ltd v QBE Insurance (Australia) Ltd [2009] 1 Qd R 117, [25], see to the same effect [29] in Cape York Airlines.
Often facts pleaded are denied on the basis that they are not true. Soon after the introduction of the UCPR it was held that such a statement did not, by itself, provide a sufficient explanation to satisfy the requirement at r 166(4).[185] It has become common, therefore, for the pleader to say that an allegation is denied because it is not true and include, in that part of the pleading, the factual matter which is asserted to the contrary, ie, the matters which it contends show the fact pleaded is not true. This is often an efficient way to plead. It saves pleading the same factual allegation at two different parts of the pleading, which depending on the circumstances, might render the pleading prolix. It also saves pleading the factual matter once, and then referring back to it in numerous paragraphs denying or not admitting other allegations. Sometimes that latter approach may be effective, in other cases it will be better to include the factual matter in the paragraph which makes the non-admission or denial, because the factual matter will be set in its context and, as an exercise in communication, the pleading will be more effective.
[185]Groves v Australian Liquor, Hospitality and Miscellaneous Workers’ Union & Anor [2004] QSC 142, cited in Cape York Airlines Pty Ltd v QBE Insurance (Australia) Ltd [2009] 1 Qd R 116, [24].
Paragraph 39A(c)(i) of the second to fourth respondents’ rejoinder adopts the pleading style which I have described as common: it raises a factual response going to the matters in issue in the proceeding in its context as part of a denial. The pleading serves two purposes: it provides the direct explanation required by r 166(4) and it pleads a material fact in issue in the proceeding. That the plea serves these two purposes is plain on the face of the pleading. It does not create confusion or mystery. No lawyer would read paragraph 39A(c)(i) and not understand that it raised a factual matter relevant to the issues between the parties.
The first respondent points out by way of written submission that the applicant’s amended reply and answer to the amended defence and counterclaim of the first respondent is replete with examples of the applicant using this style of pleading, ie, pleas which raise matters which are clearly in issue in the proceeding itself, as well as being explanations for denying allegations.[186] The same pleading practice has been used by the applicant in the further amended reply and answer to the amended defence and counterclaim of the second and fourth respondents.[187] As I say, it is a common pleading style and often both efficient and effective.
[186]See for example paragraphs 9, 11, 13(b) (an allegation of such factual substance that it runs to 17 particulars), 16, 18 and 19.
[187]See for example paragraphs 30, 33(a), 33A(a), 47(c)(i) and (xiv), 57(a) and (h), 58(b), 61D(a), 61E.
The second case relied upon by the applicant is Holdway v Arcuri Lawyers.[188] That case concerned the admirably brief allegation in a pleading that, “12. The executor, as he was entitled to do, distributed the estate”. The responsive pleading was:
[188][2009] 2 Qd R 18, [50].
“The defendant does not admit the allegation in paragraph 12 of the statement of claim, and cannot admit same unless and until the plaintiff provides proper particulars of the matters alleged therein, save to the extent that the defendant says that the two principal assets of the estate of the deceased, being the real property described as … and the unit described as …, were not distributed by the personal representative of the said estate until 25 July 2003 when transfers of each of the said properties from the name of the deceased into the name of Francis John Virgona were registered in the Office of the Registrar of Titles.”
The trial judge relied upon the paragraph in the defence as an admission that the land was distributed by the executor as there described.
In the Court of Appeal Keane JA said:
“[50] … the defendant argues that there was no implied admission in the defence that the pieces of real property had been distributed. This argument is that the reference in paras 5 and 11 of the defence to the distribution of assets to the executor[189] is not an admission, but part of the explanation for a non-admission. It may be said immediately that this argument is less than compelling. While an explanation of a non-admission does not amount to a pleading of fact, in this case the assertions in paras 5 and 11 of the defence that the pieces of real property had been distributed to the executor, can hardly be said to be part of the explanation for the non-admission of the allegations in para 12 of the statement of claim. In truth, they were a qualification of the defendant’s non-admission.”
[189]The executor was also the recipient of the distribution.
Gilbert v Goodwin is referenced by way of a footnote after the words, “While an explanation of a non-admission does not amount to a pleading of fact”. Keane JA looked at the substance of what was pleaded, and was not deflected by the fact that an admission of a material fact was contained in a part of a pleading explaining a non‑admission. While there is an acknowledgment of Gilbert v Goodwin, it is in passing, and in circumstances where it was not necessary for the Court to deal any further with it.
The last authority relied upon by the applicant is Cape York Airlines Pty Ltd v QBE Insurance (Australia) Ltd.[190]Daubney J acknowledged the difference between a requirement to give an explanation under r 166(4) and the obligation to plead material facts at r 149 of the UCPR. He also made observations about those obligations in the context of the common pleading practice which I have referred to above. He said:
[190][2009] 1 Qd R 116, [27].
“[27] It is important, however, that the requirement for a defendant to give its ‘direct explanation’ for its belief that an allegation is untrue not be elided with the obligations on a defendant imposed by r 149(1)(b) and (c) to state all the material facts on which it relies (but not the evidence by which the facts are to be proved) and to state specifically any matter that, if not stated specifically, may take the plaintiff by surprise.
…
[30]The direct explanation itself, clearly enough, is not a statement of a material fact for the purposes of r 149. It may be, however, that the nature of the direct explanation of the party’s belief that an allegation is untrue necessarily compels the party to plead, in compliance with r 149, the material facts (not evidence) on which it will rely to controvert the allegation or other matters to prevent the opponent being taken by surprise. …” (my underlining)
In that case paragraph 5(c) of the defence was structured as follows:
“(c)denies the allegations contained in subparagraph 8(b) on the grounds that:
(i)…
(ii)…
(iii)…”
Daubney J describes the pleading at 5(c)(iii) as, “… an example of a direct explanation which led the defendant, in compliance with r 149, to plead material facts on which it will rely to controvert the plaintiff’s allegation” – [33]. While critical of the pleading in other respects, Daubney J is not critical of the material fact being pleaded in the part of the pleading which also provides the direct explanation for the denial. That is clear also at [37] where he says:
“[37] For completeness, I should also say that I would not accept in an unqualified way the submission made on behalf of the defendant that a denial of a fact alleged in the statement of claim puts the matter in issue and both sides may lead evidence about it. If, for example, a defendant’s direct explanation for a denial of an allegation of fact was that the matter simply did not occur, then the evidence which the defendant might lead on that issue would be limited to controverting the plaintiff’s evidence. If, however, the explanation for the denial was not limited to a controversion of the fact but involved the advancement of an affirmative case, one would expect that to be apparent on the pleadings.” (my underlining)
The First Respondent
The first respondent could point to no pleading of either of the issues raised at [2] above. It did not seek to take any action in relation to the point I have described at [2(b)] above.[191] As to the issue at [2(a)] above, it says that the applicant’s own pleadings put the applicant’s motivation for entering into the QCPL transactions in issue: paragraph 18(a) of the applicant’s reply to the effect that it, “was entitled to pursue its own lawful commercial interests and contractual rights under the user agreement”. This was not admitted by the first respondent. At another part of the first respondent’s pleading it alleged that the applicant engaged in the conduct it seeks to impugn with, “the purpose of advantaging itself by obtaining a windfall gain and disadvantaging users, including the first respondent”.[192] In those circumstances, I accept that the pleadings were wide enough to allow the first respondent to explore the applicant’s motivation for entering into the QCPL transactions. On those pleadings, all the evidence needed to establish the proposition at [2(a)] above was led without objection.[193]
[191]Supplementary submissions in reply, Court Document 163, paragraph 26.
[192]Paragraph 27 of the first respondent’s further amended defence.
[193]There was an objection to exhibit 3 being tendered in the first respondent’s opening. Counsel for the applicant said he was “at a loss to understand how this is relevant to unconscionable conduct”. I was against the applicant on this. As can be seen from my Reasons for Judgment, exhibit 3 is one of the most relevant documents on the unconscionability case. There was no precisely formulated objection to the document on the basis, say, that it showed AMPL was directing the negotiation of the QCPL transactions, or that the applicant was acting in AMPL’s interests and that that was outside any pleaded case.
In my view the first respondent does need leave to bring its pleading into line with the evidence led at trial. It asks for leave to amend its defence as follows:
“26.The applicant entered into the novation agreement and the termination agreement for the purpose of receiving payments from QCPL, including payments referable to the HCF, the TIC and the TPC for the financial year commencing 1 July 2017 and the years thereafter up to at least 30 June 2022, without having to bring to account the Annual Maximum Tonnage of QCPL or the payments made by QCPL.
27.The applicant thereby had the purpose of advantaging itself by obtaining a windfall gain, advantaging Adani Mining Pty Ltd and disadvantaging users, including the first respondent.” (my underlining to show proposed change)
I will grant that leave. The point was alive at the trial. The evidence was relevant on the second to fourth respondents’ pleadings, and was admitted at the trial for or against all the parties, and as going to all the pleaded issues.
The applicant opposed any amendment. It said the amendment is late and that might be conceded at once. In saying that the amendment lacks utility because nothing is pleaded to flow from it, the applicant fails to understand the respondents’ case. The respondents do not plead that anything flows from the facts alleged; they simply plead that they are part of the circumstances in which the conduct by the applicant is to be judged.
Lastly, the applicant says that it would be prejudiced if the respondents were granted leave to amend. Much of its submission in that regard relates to it wishing to pursue disclosure and evidentiary points in relation to the idea that any of the respondents, but particularly the respondent who led the evidence at [194] of my judgment, were in a position to use extra capacity at the terminal had it been available for a longer period than the five years between 2017 and 2022.[194] The difficulty with that is that paragraph 48(h) has always been part of the second to fourth respondents’ case on unconscionability, and the first respondent does not seek leave to re-plead in relation to this point.
[194]Paragraphs 5-6 of the affidavit of Ross Graham Perrett sworn 26 June 2020.
The other focus of the applicant in relation to prejudice is that it would wish to investigate by way of disclosure much of the same matters – ie, whether the respondents could have used the additional capacity relinquished by QCPL – because it says it is relevant to whether or not the applicant’s acting in AMPL’s interest or seeking to advantage AMPL caused anything.[195] As already noted, there is no allegation made by the respondents that the conduct did cause anything.
[195]Paragraphs 7-11 of Mr Perrett’s affidavit.
By Court Document 167 the applicant seeks leave to amend its pleading if leave is granted to the first respondent. I will grant leave in terms of the proposed pleading (new paragraph 15(c) at page 6 of the application), Attachment B, from the introductory words up until the end of paragraph (c)(iii)(C). The remainder of the proposed amendment relates to the issue at [2(b)] above or to the false causation point, see [42]. The first respondent does not seek leave to amend its pleading in respect of the issue at [2(b)] and so far as that issue was alive at trial, it is because it has always been part of the second to fourth respondents’ pleading. There is therefore no occasion for the applicant to amend its pleading in these respects. For the same reason, there is also no occasion for the applicant to have further disclosure of the documents it outlines in Attachment C to the application which is Court Document 167.
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