Adelaide Brighton Cement Ltd v Hallett Concrete Pty Ltd (No 2)

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ADELAIDE BRIGHTON CEMENT LTD v HALLETT CONCRETE PTY LTD & ORS (No 2)
[2021] SASC 56
Judgment of the Honourable Chief Justice Kourakis

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS - STRIKING OUT - DISCLOSING NO REASONABLE CAUSE OF ACTION OR DEFENCE
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS - PARTICULAR PLEADINGS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS - PARTICULARS - FURTHER AND BETTER
This is a contested application for leave for the respondent to re-plead its cross-claim following a decision by a judge of this Court to strike out its first statement of cross-claim as an abuse of process or on the basis that the pleading did not disclose a reasonable cause of action. The Judge declined to enter summary judgment or to summarily dismiss the counter-claim and left open the question of leave to replead a narrower case.
The applicant, Adelaide Brighton Cement Ltd (ABCL) and first respondent, Hallet Concrete Pty Ltd (Hallett), are parties to a contract, the ‘Cement Supply Agreement (the CSA), dated April 2008 and amended on 1 July 2014. The CSA contained terms whereby ABCL was obliged to supply cementitious product to Hallett on favourable terms (the most favoured customer term) and Hallett was obliged to purchase cement exclusively from ABCL (the exclusivity obligation).
Following the Judge’s decision, the respondent filed a further revised statement of counterclaim. The applicant opposes the grant of leave on the basis that the pleaded case remains speculative and without a proper foundation and would inflict onerous discovery obligations. The argument came before this Court to determine the question of leave to file the proposed statement of cross-claim.
The essence of Hallet’s revised proposed counterclaim is an allegation of breach by ABCL of its obligation to supply Hallett with cement on favourable terms. Hallett alleges that ABCL breached its implied obligation to keep and maintain proper business records to account for its dealings with other suppliers (the proper invoicing obligations). It contends that from time to time during the period from July 2014 to the April 2020, ABCL traded with other suppliers of cement on terms more favourable than it was charging Hallet and breached its obligations under the CSA by not making available to Hallett the full range of its cementitious material on the same terms on which it sold it to other customers. It also alleges that ABCL breached its implied proper invoicing obligations by failing to properly account for its dealings with other suppliers of pre-mix concrete. Hallet also alleges that ABCL repudiated the agreement by purporting to terminate the CSA on 27 April 2017 and by refusing to supply Hallett with cementitious product thereafter.
Held per Kourakis CJ granting permission to replead:
1.The case outlined by Hallett in its proposed cross-claim is not so lacking in foundation that leave to replead should be refused. The proposed cross-claim is coherent and has substance. It is not merely speculative. It would not be an abuse of process to allow it to proceed.
2.The intermediate facts which Hallett alleges are sufficiently articulated to give notice to ABCL of the factual case against it and to control party-party and third-party discovery. It is not a valid criticism of a pleading that the factual disputes it defines are complex, or that the evidence that must be marshalled is substantial, or that the burden of discovery is onerous.

Adelaide Brighton Cement Ltd v Hallett Concrete Pty Ltd & Ors [2020] SASC 161, discussed.

ADELAIDE BRIGHTON CEMENT LTD v HALLETT CONCRETE PTY LTD & ORS (No 2)
[2021] SASC 56

KOURAKIS CJ: Adelaide Brighton Cement Ltd (ABCL) is a manufacturer of cementitious products. Hallett Concrete Pty Ltd (Hallett) is a manufacturer of pre‑mix concrete. In April 2008, they entered into a Cement Supply Agreement (CSA) which was subsequently varied on 1 July 2014. The CSA requires ABCL to supply specified cementitious products to Hallett at a lower price than it supplies those products to other ‘customers’ (the most favoured customer term). In turn, Hallett is required to purchase the cement it needs for its business exclusively from ABCL (the exclusivity obligation).
In September 2019, ABCL commenced proceedings against Hallett for breach of the exclusivity obligation. ABCL alleges that from early 2018 Hallett has not purchased its cement exclusively from ABCL and that it, together with other named defendants, has entered into arrangements to circumvent the exclusivity obligation. Hallett filed a defence denying ABCL’s claim and on 14 February 2020 filed a cross-claim supported by a statement of cross-claim for breach of the most favoured customer term.
On 28 August 2020, a judge of this Court struck out Hallett’s statement of cross‑claim. However, the Judge accepted that it disclosed a sufficient basis on which at least some breaches of the CSA might reasonably be pleaded. Accordingly, the Judge did not dismiss the cross-claim, nor did his Honour enter summary judgment against Hallett. The Judge gave Hallett an opportunity to propound a more narrowly pleaded cross‑claim consistently with his Honour’s reasons. The Judge indicated that he would hear the parties further as to ‘the appropriateness and terms of any order for leave to re‑plead’.
On 26 November 2020, Hallett filed an affidavit to which was annexed its proposed ‘Statement of Cross‑claim – Revision 3’ (the proposed cross‑claim). ABCL opposed the grant of leave to file the statement of cross‑claim and the matter came on for hearing before me on 22 January 2021.
In the summary of its cross‑claim, Hallett alleges that ABCL breached the most favoured customer term in the period from 1 July 2014 to 29 April 2020 (the relevant period) by not charging it the lowest applicable price and by failing to make available to Hallett the full range of its cementitious material on the same terms on which it sold it to other customers. It also alleges that ABCL breached its obligations to correctly invoice Hallett and maintain proper records by failing to properly invoice and account for its dealings with other suppliers of pre‑mix concrete. In particular, Hallett relies on ABCL’s failure to make available cementitious products called BHP minecem and medium grade fly ash. Finally, Hallett alleges that ABCL breached and repudiated the CSA by purporting to terminate it from 27 April 2020 and by subsequently refusing to supply Hallett with bulk cementitious materials on 28 April 2020.
The loss claimed by Hallett includes:
·Excessive payments it made to ABCL over and above the payments properly chargeable pursuant to the most favoured customer term;
·Loss of substantial business profits flowing from its loss of competitiveness; and
·Loss of the benefit of the 2014 CSA after its unlawful termination by ABCL.
The proposed cross-claim pleads that certain terms, referred to as the proper invoicing obligations, were to be implied into the 2014 CSA and/or required by clause 14.5. The terms are promises by ABCL to:
·properly charge by written invoices issued to its customers and to insist upon receipts;
·seek to recover its charges from customers in the normal course of business;
·keep and maintain records;
·have in place a reliable system to determine, record and, where necessary, properly explain the comparison price applicable to its transactions for each product.
Hallett sets out in a schedule to the proposed cross‑claim the net prices ABCL charged it for product over the relevant period. Hallett pleads that the net prices charged by ABCL to Hallett for cementitious products, supplied in South Australia during the relevant period, was substantially higher than the prevailing market prices for those products in other States, and the prices charged by ABCL in interstate markets. That last plea is particularised as follows:
·The prevailing competitive market price for bulk price GP cement in Melbourne was around $160 to $170 per tonne.
·Hallett relies on an inference that the cement sold by ABCL in Melbourne and elsewhere in Victoria was sold at that competitive market price.
·From 1 November 2018 to April 2020, ABCL decreased the price it charged Hallett for cement from $235.16 per tonne to $160 per tonne in response to price competition in South Australia from another cement supplier.
At the commencement of the hearing, I was informed by counsel for ABCL that it did not press a number of its foreshadowed objections to Hallett’s defence. It maintained an objection to Hallett’s defence insofar as it picked up and repeated certain assertions in the proposed cross‑claim but asked that its objection to that part of the defence be stood over until after the determination of its objections to the cross‑claim.
ABCL also withdrew its objection to the pleading in Hallett’s cross-claim that ABCL had an obligation to actively offer all products, other than cement, at a cheaper price to Hallett’s. ABCL foreshadowed that it would bring an application for a determination of the proper construction of the CSA in that respect. ABCL adopted the same approach with respect to the proper invoicing obligation in paragraph 44 of the proposed cross‑claim.
ABCL also withdrew its objections to pleas in Hallett’s cross‑claim that ABCL had breached the most favoured customer term in its supply of cementitious product to the following entities: BHP Billiton Olympic Dam Corporation Pty Ltd (BHP)[1], Downer EDI Mining Pty Ltd (Downer)[2] and OZ Minerals Prominent Hill Project (Oz)[3]. Those mining companies used large amounts of concrete in their mining operations. The concrete was generally manufactured on, or close to, the mining site by the mining companies pursuant to longer term arrangements which might include contracts with third parties who took a part in the manufacturing process. Such customers of ABCL are referred to in the statement of cross‑claim as batching plant operators. ABCL again foreshadowed that it would bring an application for a preliminary determination of the meaning and effect of the most favourable customer term, and in particular whether the term customers includes batching plant operators. It proposed that until that preliminary matter was heard and determined, neither party would be required to make discovery on any plea relating to those batching plant customers.
[1]    Paragraph 29.
[2]    Paragraph 32.
[3]    Paragraph 33.
ABCL maintained its objection to the pleading of the cross-claim with respect to ABCL’s supply of cement to several batching plant operators, and to the independent batching plant operators.
The remaining impugned paragraphs of the statement of cross‑claim are therefore:
·Paragraph [30] which alleges a breach of the most favoured customer term in the price charged to Exact Contracting Services, Exact Mining Services and Exact Mix Pty Ltd (Exact Mix).
·Paragraph [34] which alleges a breach of the most favoured customer term in the price charged to Lendlease Corporation Ltd (Lendlease).
·Paragraphs [37] and [38] which alleges a breach of the most favoured customer term in arrangements made with Cement Australia, Holcim and Hanson.
·Paragraph [39] which alleges that ABCL breached the most favoured customer term in the price it charged to Boral Limited (Boral).
·Paragraph [40] which alleges that ABCL breached the most favoured customer term in the price charged to customers located in the South‑East region of South Australia.
·Paragraph [42] which alleges that ABCL breached the most favoured customer term in the price charged to Direct Mix Concrete Pty Ltd (Direct Mix) and/or Southern Quarries Pty Ltd (Southern Quarries).
The CSA
The most favoured customer term of the CSA operates on what is described as the comparison price, which is defined by the CSA as follows:
“Comparison Price” means, in respect of a delivery of Product to the Buyer under this Agreement:
(a) (where that Product has been delivered to the Buyer for use on a Project and the Buyer has provided prior written notice of the Project to the Seller) – the lowest net price per tonne charged by the Seller for that type of Product supplied by the Seller to Customers in South Australia for use on that Project;
(b) (in all other cases) – the lowest net price per tonne charged by the Seller for that type of Product supplied by the Seller to Customers in South Australia that was delivered during the same month in which that delivery of Product was made to the Buyer under this Agreement.
Customer is defined to mean a customer, other than Hallett, who purchases product from ABCL for use in the manufacture of pre‑mix concrete. As I earlier observed, ABCL contends that ‘customer’ does not include batching plant entities which procure large quantities of cement for use on large construction projects, such as mine sites and major roadwork constructions. I will refer to the mining or infrastructure company which uses a site, or project, specific batching plant as “the principal”. Concrete for such mining or infrastructure projects may be manufactured in an on‑site batching plant operated by the principal or by a subcontractor. In the former case, the principal will necessarily purchase the ingredients, including the cementitious product, itself. In the latter case, the principal may leave procurement of the ingredients to the subcontractor, or may also purchase the ingredients or some of them itself, engaging the services of the subcontractor to mix the concrete. On-site batching plants may deliver concrete to where it is needed through shutes or dump trucks, but may also use mixer-trucks.
In contrast to the large project specific batching plants, independent batching plant operators, as defined in the proposed statement of cross-claim, deliver concrete to a range of smaller or one-off construction sites from their own batching plants by using concrete mixer trucks. A concrete mixer truck has a large mixing barrel mounted on it. It is loaded with cement and other ingredients for the production of concrete. The concrete is then mixed en-route to the site.
The precise delineation between batching plant operators and independent batching plant operators may not be easy to draw. Much might turn on the meaning of the term ‘pre‑mix concrete’ and any accepted industry usage that term might have. The distinction may turn on the identification of a project and the way in which contracts for the supply of cement or concrete are tied to that project. It should be observed in that context that paragraph (a) of the definition of comparison price contemplates that the CSA will apply to at least some project specific users because it provides that Hallett must be charged the lowest net price charged to anyone who has supplied the project, for the life of that project. Subparagraph (b) on the other hand, fixes the lowest net price by reference to the lowest price charged to any other customer for use in the manufacture of pre‑mix concrete in a monthly period.
Clause [4.1] applies the CSA to product ordered by Hallett ‘for its own use and consumption’.
Clause [5] imposes the exclusive dealing obligation on Hallett:
5.1 Purchase Obligations
5.1.1 Subject to clauses 5.1.2 and 5.2 below, the Buyer must purchase exclusively from the Seller all of the Buyer’s requirements for product for use and consumption under and in accordance with the terms and conditions of this Agreement.
5.1.2 The Buyer may only purchase a Product from a cement supplier other than the Seller to the extent that:
(a)the Seller is unable to supply the quantities of that Product properly nominated by the Buyer under this Agreement; or
(b)a circumstance referred to in clause 5.3 occurs in respect of that Product and the Seller elects to not supply a replacement cement product of similar quality under that clause.
5.2Last Right of Refusal
Where during the Term of this Agreement the Buyer receives a bona fide competitive offer from another supplier for the supply of the Ground Granulated Iron Blast Furnace Slag which is similar to the Ground Granulated Iron Blast Furnace Slag being supplied under this Agreement and which offer is arms length from the Buyer, then:
5.2.1 The Buyer must present to the Seller documentary proof of all terms and conditions of the competitive offer made to the Buyer with a request to match it;
5.2.2 Within 20 business days of the receipt of a request by the Buyer under clause 5.2.1 above (Notice Period), the Seller must notify the Buyer of whether it will match the competitive offer;
5.2.3 Where the Seller notifies the Buyer within the Notice Period that it will match the competitive offer, the Seller will adjust the net Price with effect from the date of such notification;
5.2.4 Where the Seller advises that it will not match the competitive offer, or does not respond within the Notice Period, the Buyer will be at liberty to purchase Ground Granulated Iron Blast Furnace Slag from the other supplier. [Emphasis in original]
The most favoured customer term is found in clause [9] and in particular in clause [9.2], which ties the Net Price to the Comparison Price:
9.1 Applicable Net Price
9.1.1 The Buyer must pay the applicable Net Price for each tonne of the Product delivered to the Buyer under this Agreement.
9.1.2 Subject to clause 9.2 the “Net Price” means, in respect of a Product, the net price which the Seller notifies to the Buyer from time to time as the price per tonne then payable for that Product, being at the Amendment Date for the Products referred to in Schedule 1) the price nominated as such in Schedule 1.
9.2 Most favoured customer
If, in respect of a delivery of Product under this Agreement, the Net Price notified under clause 9.1 is higher than the Comparison Price applicable to that delivery of Product, the “Net Price” for that delivery of Product will be deemed to be the Comparison Price for that delivery of Product. [Emphasis in original]
Clause [9.5] provides for an independent audit to ensure that the most favourable terms clause has been complied with. Hallett sought such a review in 2019 but ABCL objected to the accounting firm which Hallett had proposed to conduct the review on the ground that it was not independent. No audit was undertaken.
However, it came to light through an accounting report prepared for the approval of a Deed of Company Arrangement for one of ABCL’s customers, Concrete Supply Pty Ltd (Concrete Supply), that a fraud had been committed on ABCL by one of its employees such that the contract sums payable by Concrete Supply for cement purchased from ABCL were not fully recovered. There was a shortfall of about $12 million to the financial advantage of Concrete Supply.
Schedule 1 of the CSA sets a default price for the following cementitious product:
·Bulk Type GP Cement;
·Bulk Type GB Cement;
·Bulk Type HE Cement;
·Bulk Brightonlite Cement Type HE;
·Bulk Sulfate Resisting Cement;
·Bulk Fine Grade Fly Ash;
·Ground Granulated Blast Furnace Slag;
·Bulk Fine Grade Ash.
Overview of ABCL’s complaint
Before turning to the criticisms made by ABCL of particular paragraphs of Hallett’s proposed cross-claim, it is convenient to make some general observations about their common foundation.

The proposed cross-claim for breach of the most favoured customer term requires proof of the prices ABCL charged Hallett and the prices it charged its other customers within the applicable comparison period. Hallett is not privy to the contractual arrangements made between ABCL and its other customers and, for that reason, cannot allege, with the usual particularity, the date on which and the price at which ABCL supplied cementitious products covered by the CSA to other manufacturers of concrete in breach of the most favoured customer term. Hallett might have pleaded bare breaches of the most favourable customer term in sales to the other users and manufacturers of concrete referred to in its proposed cross-claim. Had it done so ABCL could quite properly have sought greater particularity of the date of supply, the cementitious products supplied and the price charged, but Hallett could not provide those particulars before party-party and/or third-party discovery. It is for that reason that by its proposed cross-claim Hallett pleads the facts on which it founds a circumstantial case that the most favoured customer term was breached. That circumstantial case is two-fold. First, stripped of detail, Hallett pleads that it lost competitive tenders for the supply of pre-mixed concrete even though it was an industry leader in the cost-efficient manufacture of quality concrete. Hallett’s case is that proof of those intermediate facts supports an inference that ABCL supplied cementitious product to Hallett’s successful competitors at a cheaper price than it supplied the same product to Hallett.
Secondly, Hallett pleads that arrangements were made between ABCL and interstate manufacturers and suppliers of cementitious products which resulted in those manufacturers purchasing cement from ABCL, for the use of independent batching operators in South Australia with whom they were commercially associated, instead of importing cement manufactured by them into South Australia. Hallett pleads that if those interstate manufacturers had imported cement into South Australia the cost to them would have been much less than the price ABCL charged Hallett. Hallett’s case is that those intermediate facts support an inference that ABCL breached the most favoured customer term in its supply of cement to the independent batching plant operators associated with the interstate manufacturers of cement.
In its written submissions, ABCL contends that leave to replead should be refused because ‘no inference can be drawn from [the pleaded] allegation[s]’, and because the ‘vague and unparticularised … [pleas do] not support the inference[s] sought to be drawn’. ABCL’s ultimate submission is that the pleadings are ‘mere speculation’. At the hearing, counsel for ABCL submitted that the impugned paragraphs of the proposed cross‑claim ‘are so remote, so spare, so speculative and depend upon inference upon inference that they shouldn’t be allowed to stand.’
I acknowledge that even if the intermediate facts pleaded by Hallett are proved, there are other possible explanations for Hallett’s loss of the tenders. A competitor may have won the tender because of the better quality of its concrete, its special relationship with the entity which called for tenders, or a number of other reasons. Alternatively, Hallett’s input costs might not have been as competitive as Hallett pleads to be the case. Similarly, there may be a commercial explanation for the interstate cement producers purchasing product from ABCL at a higher price in South Australia than they could import their own product from interstate. However, they are all matters for trial. ABCL might adduce evidence of those, or other, alternative explanations, for the circumstances which Hallett has, by its pleading, committed itself to prove. However, if ABCL fails to adduce evidence supporting an alternative hypothesis, the case outlined by Hallett in its proposed cross-claim is not, for the reasons which follow, so lacking in foundation that leave to replead should be refused. The proposed cross-claim is coherent and has substance. It is not merely speculative. It would not be an abuse of process to allow it to proceed.
The purpose of the proposed cross-claim, like all pleadings, is to put ABCL on notice of the case against it so that it can prepare its defence and gather the evidence it will call. The purpose of the pleading is also to define the scope of party-party and third-party discovery obligations. It is not a valid criticism of a pleading that the factual disputes it defines are complex, or that the evidence that must be marshalled is substantial, or that the burden of discovery is onerous. In general terms, if Hallett’s case proceeds as a circumstantial one, then plainly enough the marshalling of evidentiary material and discovery will be complex, substantial and onerous. Without being exhaustive, Hallett will be required to discover its tenders and to disclose its manufacturing costs. Hallett will need to seek third‑party discovery of the manufacturing costs of its competitors. Expert evidence will be required to ensure a proper and fair comparison of those costs. If that cost accounting exercise shows that Hallett’s bid would have been the cheapest tender if ABCL was supplying its cementitious product in accordance with the most favoured customer term, an inference may be drawn that ABCL had breached the most favoured customer term. That inference, of course, might be rebutted by evidence which ABCL might adduce about any special term or collateral benefit or other reason peculiar to the successful tenderer which explains why it was preferred.
The paradox here is that if the pleading is adequate to identify the circumstantial case I have adumbrated, the next step in the proceedings will be discovery. Other than in the most improbable eventuality that ABCL was supplying cementitious products without keeping any records of the time, price and quantity of that supply, the particulars ABCL seeks will be supplied by its own discovery. In that event, the case is unlikely to proceed as a circumstantial one. The price at which ABCL supplied cementitious product to Hallett’s competitors will be disclosed and the factual controversy will be a simpler one. If ABCL did not supply the other concrete manufacturer referred to in the proposed cross-claim at a cheaper price than that which it charged Hallett, then Hallett’s cross-claim will be dismissed. If ABCL did charge Hallett more than it charged other concrete manufacturers, then the outcome of the proposed cross-claim may depend on whether they fall within the definition of customer in the CSA.
The impugned paragraphs
It is convenient next to consider the criticisms made of particular paragraphs of the statement of cross-claim out of numerical order because a number of the impugned paragraphs rely on, or refer to, facts pleaded in paragraph [37] of the statement of cross‑claim which exemplifies the form of pleading of which ABCL complains.
Paragraph [37] is the first pleaded claim for breach of the most favoured customer term in the supply to independent batching operators. By paragraph [37] Hallett claims a breach of the most favoured customer term in the supply of cementitious product to Holcim (Australia) Pty Ltd and its related entities (Holcim), and to Cement Australia Holdings Pty Ltd and its related entities (Cement Australia). Cement Australia is a joint venture between Holcim and another firm, Hanson Australia Pty Ltd (Hanson). The plea in paragraphs [37.2] and [37.3] is that the cementitious product was provided for use by Holcim in the manufacture of pre-mixed concrete, by supplying it to Holcim, either directly or indirectly, through Cement Australia. Paragraph [37.4] pleads that Cement Australia produced its cementitious products in facilities in the Eastern States, and, at an earlier time, in South Australia at ABCL’s Birkenhead facility.
Paragraph [37.4.4] pleads that Cement Australia and ABCL were parties to swap arrangements whereby, when called upon to do so, each of them would supply their cementitious products to the customers of the other at the price at which that customer ordinarily purchased those products. It also pleads that the net effect of the swap arrangement was that ABCL supplied cementitious products to manufacturers of premixed concrete, at prices which were lower than those charged by ABCL to Hallett.
Paragraph [37.5] pleads that Cement Australia supplied cementitious product to Holcim and Hanson for no, or only a nominal, mark-up. That arrangement, which in other circumstances would be commercially disadvantageous to Cement Australia, was mutually beneficial because Cement Australia was the joint venture vehicle of Holcim and Hanson. Hallett relies on the inference arising from that arrangement that in order for ABCL to supply Holcim and Hanson at the same advantageous price charged by Cement Australia, assuming that Cement Australia had at least a similar cost structure to Cement Australia, ABCL charged only a nominal mark‑up thereby breaching the most favoured customer term. The drawing of that inference relies on ABCL, consistent with sound commercial practices, charging Hallett, which is not a related entity of ABCL, more than a nominal mark-up.
Paragraphs [37.6] and [37.7] plead some facts about the historical usage of a bulk terminal at Osborne (the Osborne Terminal) over which Australian Cement Holdings Pty Ltd (ACH) took a lease in about 1991. The Osborne Terminal was the only port facility that could be used to import bulk cementitious product into South Australia in competition with ABCL. The Osborne Terminal was subleased by ACH to ABCL in July 1996. Paragraph [37.7.1] pleads that by entering into the lease ABCL gained market power in the cementitious product market in South Australia. At that time ABCL was 51 percent owned by Adelaide Brighton Limited (ABL) and 49 percent by ACH. In mid-1999, ABL acquired ACH’s 49 percent interest in ABCL wherein ABCL became a wholly owned subsidiary of ABL.
ACH’s shareholders were CSR Ltd which, following a merger, led to the constitution of Holcim, and Pioneer Concrete, which later became Hanson.
Paragraph [37.8] alleges that in 1999 ABL made agreements with ACH and its shareholders to supply them with cementitious products for their concrete manufacturing and supply businesses in South Australia. Hallett pleads by paragraph [37.9] that the agreements were structured to allow ACH, CSR and Pioneer to exert price pressure on ABCL, if necessary, by the threat of importing cheaper cement products into South Australia.
Hallett pleads that in 2003 Cement Australia acquired the business of ACH following certain corporate restructures.
Hallett pleads in paragraph [37.7.3] that between mid-1999 and early 2015, neither ABCL nor, later, Cement Australia, utilised the Osborne Terminal to import cementitious material. It alleges that, instead, Cement Australia relied on its supply agreements with ABCL to secure cementitious products for the use of Holcim and Hanson in South Australia. Paragraph [37.7.4] pleads Hallett’s reliance on an inference arising out of those pleaded facts, that in the collateral arrangements made around the subleasing of the Osborne Terminal, Cement Australia protected ‘its commercial interest in having long-term supply of bulk cementitious materials from ABCL on terms which were on or about parity with the price at which Cement Australia could have imported cement into Adelaide using the Osborne Terminal.’
By paragraph [37.10], Hallett alleges that from 1 January 2009, ABCL has continued to supply Holcim and Hanson, either directly or indirectly, through Cement Australia. Hallett pleads that between January 2009 and the end of 2014 ABCL entered into three consecutive supply agreements with Holcim and Hanson. By paragraph [37.10.2] Hallett pleads that in January 2015 ABCL agreed to supply Cement Australia, Holcim and Hanson with about 25 percent of their requirements for product in South Australia. Hallett alleges that from that date ABCL’s monopoly on the production of cementitious product in South Australia was broken, but the 2015 agreement secured for ABCL a minimum purchase obligation.
Paragraph [37.11] pleads an inference that the supply arrangements referred to in [37.10] were on similar terms to the agreement referred to in paragraph [37.8], allowing Cement Australia, Holcim, and/or Hanson to use the threat of importation of cheaper cementitious products from interstate to exert price pressure on ABCL.
Paragraph [37.12] alleges that ABCL supplied Holcim and Hanson pursuant to those agreements between 2007 and early 2015, that is, for a period which includes the first year of the relevant period.
In summary, Hallett’s plea is that ACH operated as a joint venture vehicle for CSR and Pioneer, and that following corporate restructures by which the businesses of CSR and Pioneer were transferred to Holcim and Hanson respectively, their joint venture vehicle, Cement Australia, assumed the business of ACH. Hallett pleads that the external arrangements of those entities with ABL and ABCL for the supply of cementitious product at advantageous prices were maintained.
Paragraph [37.13] pleads that with the use of the Osborne facility Cement Australia, Holcim and Hanson could have landed cementitious product in Adelaide from Tasmania or Queensland at around $140 per tonne for type GP cement, which was significantly cheaper than the prices charged to Hallett by ABCL during the relevant period. In that event, of course, Holcim and Hanson would have had relatively cheaper cementitious product available to them or alternatively Cement Australia made a profit on the supply of that product to them, ultimately again to their benefit. Paragraph [37.14] pleads that having regard to the volumes of product used by Holcim and Hanson, if they had been charged the same prices as charged to Hallett during the relevant period up to early 2015, the cost over and above the cost to them of importing the product was in the range of $7,000,000 to $10,000,000 per annum greater than the cost at which they could have imported the product into Adelaide.
Paragraph [37.15] pleads that Hallett’s case relies on the inference from those facts that Hanson did not import product into South Australia through Cement Australia because ABCL agreed to supply them with product on more advantageous terms than those offered to Hallett, and thereby breached the most favoured customer term.
Paragraph [37.17] pleads subsequent facts on which Hallett’s case relies to prove the cheaper supply of product by ABCL in the relevant period after January 2015. By paragraph [37.17] Hallett pleads that Cement Australia resumed occupation of the Osborne Terminal in early 2015 and imported cementitious product from Tasmania and Queensland but continued to purchase approximately 25 percent of its requirements from ABCL. From that time, Cement Australia sold cementitious product at $170 per tonne.
Paragraph [37.18] pleads Hallett’s reliance on those facts to support a conclusion that, at all material times after early 2015, ABCL did not charge Holcim and/or Cement Australia more than about $140 per tonne which was the cost at which they were importing the bulk of their needs of cementitious product.
In summary, paragraph [37] of the proposed cross-claim pleads a case in which Hallett undertakes to prove that Cement Australia, Holcim and Hanson could import cementitious products into South Australia for less than the price ABCL charged Hallett but nonetheless procured all of their cementitious product from ABCL until 2015, and thereafter imported no more than 75 percent of their requirements. The evidence which must be marshalled to prove, or defend, that factual pleading can reasonably be ascertained and the scope of discovery is reasonably delineated. If proved, and in the absence of evidence providing an alternative explanation for Cement Australia, Holcim and Hanson purchasing product from ABCL instead of importing it more cheaply, an inference can be drawn that ABCL was supplying Cement Australia, Holcim and Hanson at a cheaper price than it supplied Hallett.
I return to the remaining impugned paragraphs in numerical order.
Paragraph [30] of the proposed cross-claim is the first pleading of a specified breach of the most favoured customer term in the supply of a batching plant operator. It refers to the supply of cementitious product to make concrete for BHP’s Olympic Dam operations. Hallett pleads that between 1 July 2014 and mid-April 2018, concrete for those operations was supplied by Exact Contracting Services Pty Ltd, and Exact Mining Services and/or Exact Mix Pty Ltd or their related entities, who are referred to collectively in the proposed cross-claim as Exact Mix. Hallett pleads that in 2007, BHP went to public tender for the supply of concrete for its Olympic Dam operations (the 2007 BHP tender) for the stated purpose of minimising its costs. Exact Mix won the 2007 BHP tender against other concrete suppliers included Hallett. Paragraph [30] alleges that given its industry best cost structure, the only explanation for its loss of the 2007 BHP tender was that ABCL breached the most favoured customer term because cement is the most significant input cost in the manufacture of concrete. Hallett further alleges that it tendered for the supply of concrete to Olympic Dam through another joint venture vehicle between August 2017 and June 2018 but once again lost out to Exact Mix. Hallett again alleges that the only explanation for its loss was a breach by ABCL of the most favoured customer terms.
In further support of that inference, Hallett alleges that Holcim was also a competitor in the 2007 BHP tender. Hallett alleges that by reason of the matters pleaded in paragraph [37], Holcim was securing cementitious product on terms and conditions more favourable than those on which it was supplied to Hallett. Holcim continued to supply some pre‑mix concrete after Exact Mix won the tender but only for what is described as ‘overflow work’.
By paragraph [31], Hallett pleads that ABCL breached the most favoured customer term with respect to Holcim in the supply of product for the use of BHP, relying on the pleading of intermediate facts which formed part of its particularisation of the case against Exact Mix. In essence, the pleading against ABCL with respect to Exact Mix and Holcim proceeds as follows:
a)Hallett was a very efficient, if not the most efficient, producer of pre‑mix concrete;
b)Cementitious product is the single most significant input cost in the manufacture of concrete;
c)Hallett’s input costs per unit of pre‑mix concrete, other than with respect to cementitious products, were as low, if not lower, than all other manufacturers of pre‑mix concrete;
d)Cost was BHP’s paramount consideration in its tenders;
e)BHP selected Holcim and then Exact Mix to supply it with pre‑mixed concrete because they tendered at a lower unit price than Hallett;
f)Hallett’s tender was made on the basis of the lowest reasonably economically sustainable margin;
g)It followed that Exact Mix and Holcim could only have bid at a lesser price than Hallett if ABCL breached the most favoured customer term in the supply of cementitious product to Exact Mix and Holcim.
Hallett pleads that BHP commenced to purchase GP cement from ABCL directly from mid‑April 2018.
Paragraph [34] pleads a breach of the most favoured customer term in the supply of pre‑mix concrete to another batching plant operator, Lendlease and/or its subsidiaries or related entities, for the manufacture of pre-mix concrete for the construction of the Northern Connector Project. The cementitious product purchased by Lendlease included SL cement, slag and GP cement. The contract between Lendlease and ABCL for the supply of cementitious products was entered into on or about 15 November 2017. Hallett pleads that ABCL’s related entities, Southern Quarries or Direct Mix, participated in the supply of concrete to the Northern Connector Project. ABCL, Direct Mix and Southern Quarries tendered in competition with Hallett for the supply of concrete to the Northern Connector Project. By paragraph [34.7], Hallett pleads:
34.7Hallett provided a tender to Lendlease for the supply of premix concrete for the Northern Connector Project. Hallett was unable to tender for the supply of premix concrete manufactured using SL cement for the Northern Connector Project because, in breach of the All Products Term, ABCL did not offer to sell SL cement to Hallett. Hallett’s tender in respect of other Products was unsuccessful notwithstanding that:
34.7.1Hallett was at least as competitive as Direct Mix, or alternatively Southern Quarries with respect (sic) non-cementitious material input costs assessed on an arms-length commercial basis;
34.7.2Hallett’s tender was based on a profit margin that was very low and estimated by Hallett to be unlikely to be able to be matched by ABCL and/or Direct Mix and/or Southern Quarries assuming that ABCL supplied Product to Hallett at a Net Price calculated in accordance with the Most Favoured Customer Term; and
34.7.3the most significant input cost for Hallett was Product to be purchased from ABCL, in respect of which the Most Favoured Customer Term meant that Hallett should not have been at a disadvantage to ABCL and/or ABCL’s related entities selling premix concrete or producing premix concrete pursuant to toll mixing arrangements, namely Direct Mix and/or Southern Quarries, in respect of its input costs. [Emphasis added]

The underlined clause of paragraph [34.7] is inelegantly pleaded. It is not clear whether it complains that Hallett was not able to obtain SL cement at a competitive price from ABCL or that Hallett was unsuccessful because it was charged more for substitutes to SL cement or other cementitious products generally. It is best understood as a plea that Hallett lost the tender, using other products, because ABCL, Direct Mix and/or Southern Quarries supplied cementitious product at a price below that which was charged to Hallett. In any event, that complaint is best dealt with by way of particulars.
Paragraph [38] pleads a breach of the most favoured customer term by selling cementitious product to the independent batching plant operator, Hanson, or to Cement Australia for use in the manufacture of pre‑mix concrete by Hanson. ABCL relies on the inferential reasoning from paragraphs [37.10] and [37.11] to support a conclusion that from 2007 to early 2015, ABCL supplied product which was used by Hanson pursuant to terms including, as to rebates and discounts, that were negotiated and paid directly as between ABCL and Hanson. It relies on the fact that Holcim and Hanson were competitors, but nonetheless the shareholders of their joint venture vehicle, Cement Australia, to support an inference that ABCL would not have dealt with Hanson any differently from the manner in which it treated Holcim because of the relationship between them. Both were supplied by ABCL directly or through Cement Australia. Accordingly, by paragraph [38.9], Hallett pleads that its case relies on an inference that when ABCL, Cement Australia, Holcim and Hanson entered into contractual arrangements between 2009 and 2014 which breached the most favoured customer term. Hallett alleges that they agreed that ABCL would supply cementitious product to all of them in South Australia on advantageous terms, such that they did not pay ABCL more for cementitious product than the cost to them of importing it into South Australia through the Osborne terminal of around $140 per tonne, but in any event, less than the prices which ABCL charged Hallett.
Paragraph [39] pleads that ABCL breached the most favoured customer term by charging Hallett a higher net price for product than it charged Boral Limited and or its related entities (Boral). It pleads that Boral and ABCL had entered into an agreement in which ABCL had promised Boral terms akin to the most favoured customer terms.
Paragraph [39.7] pleads that Boral could import cementitious materials into South Australia from its manufacturing operations in New South Wales and Victoria, at a significantly lower cost than the prices charged by ABCL to Hallett. It pleads its case in proof of an agreement between ABCL and Boral in breach of the most favoured customer term by reference to the following intermediate facts:
·Boral and ABCL were parties to a joint venture for the supply of cementitious products in Queensland and northern New South Wales;
·There was a swap arrangement between Boral and ABCL pursuant to which Boral would, from time-to-time, supply cementitious products to customers of ABCL on ABCL’s behalf at prices charged which were less than the price charged by ABCL to Hallett.
·The taking of steps by Boral to keep the arrangements it had made with ABCL from its South Australian employees.
Paragraph [39.6] sets out the ultimate inference on which Hallett’s case relies:
39.6Further, it is to be inferred that ABCL either charged Hallett a higher price for Product than it charged Boral and/or provided Boral with rebates and/or discounted transport costs and/or collateral benefits and/or swaps of cementitious products on favourable terms to significantly reduce the price paid by Boral for the supply of Product, because of the matters pleaded in paragraphs 39.7 to 39.20 below.
By paragraphs [39.9] to [39.13], Hallett alleges that Boral decided not to build a facility at the Islington Rail Yards through which it might have imported cementitious product into South Australia. It pleads its reliance as part of its case on an inference arising therefrom that Boral and ABCL had agreed that ABCL would supply Boral with cementitious product at a cost which was no more than the cost Boral would have incurred in importing cementitious product into South Australia.
By paragraph [39.16], Hallett pleads that, nonetheless, Boral did later import cementitious product into South Australia for use in its batching plants at Murray Bridge and Littlehampton between August 2016 to August 2017, at a cost to it of $40 to $50 per tonne less than the prices charged by ABCL to Hallett at that time. Hallett alleges also that Boral imported cementitious product by rail from New South Wales in May and June 2017 at a cost of $70 to $80 per tonne less than the prices charged to Hallett by ABCL. By paragraph [39.17] however, Hallett alleges that Boral did not import all of the cementitious product it needed, even though if it had done so it would have saved $3.8 million per annum on the cost that ABCL charged Hallett. In paragraph [39.18], Hallett pleads its reliance as part of its case on an inference to be drawn from the intermediate facts alleged in paragraphs [39.17] and [39.18] that during the relevant period, ABCL supplied to Boral cementitious product at a price no more than the cost to Boral of bringing the product into South Australia, and therefore at a price which breached the most favourable customer term.
Hallett concludes by pleading in paragraph [39.20]:
39.20As a result of the arrangements between ABCL and Boral during the Relevant Period, Boral undercut the market price for the supply of premix concrete to its benefit and the detriment of Hallett, in relation to at least the following projects:
39.20.1the supply of approximately 10,000m3 of premix concrete to Sundrop Farms for McMahons Services Australia on around 6 December 2015, which would have required the use of approximately 2,400 tonnes of type GB cement;
39.20.2the supply of approximately 50,000m3 of premix concrete to T2T Alliance for the roadworks upgrade of South Road, from Torrens Road through to the River Torrens (Torrens to Torrens upgrade) from late 2015;
39.20.3the supply of approximately 5,000m3 to McMahons Services Australia in respect of the construction of the St Andrew’s Hospital in 2017, which would have involved the use of approximately 1,200 tonnes of type GB cement;
39.20.4the supply of approximately 10,000m3 of premix concrete to Saccardo Constructions (SA) Pty Ltd (“Saccardo”) for the construction of the Uniting Church Apartments in Flinders Street in 2017, which would have involved the use of approximately 2,400 tonnes of type GB cement; and
39.20.5the supply of approximately 12,000m3 of pre-mix concrete to Saccardo for the redevelopment project in North Brighton by Minda Inc, which would have involved the use of approximately 2,880 tonnes of type GB cement.
Paragraph [40] of the proposed cross-claim pleads a breach of the most favoured customer term in the sale by ABCL of cementitious product to independent batching plants in the southeast region of South Australia. Hallett pleads that Boral imported cementitious products from Geelong into the South-East of South Australia and sold it to independent batching plant operators at prices less than ABCL charged Hallett. Hallett pleads that, in response, ABCL breached the most favoured customer term by supplying cement to independent batching plant in the South-East, namely Lucindale Concrete, Clark Bros, Dickers Robe, Southern Contracting and Bleasby for less than it charged Hallett. Paragraph [40.6] pleads:
40.6It is to be inferred from ABCL supplying volumes of Products as set out in paragraphs 40.4 and 40.5 that ABCL charged prices for those Products that were competitive with cement from Boral and Cement Australia/Holcim/Hanson in Victoria, and therefore at a delivered price of as low as about $185/t for bulk GP or GB cement, which would equate to an ex Birkenhead price of as low as approximately $135/t for bulk GP or GB cement when ABCL was charging Hallett between $188/t and $235/t for bulk GP or GB cement.
Paragraph [42] pleads a breach of the most favoured customer term in the sale of cementitious product to ABCL’s subsidiaries Direct Mix or Southern Quarries. It relies on the intermediate fact that Direct Mix and Southern Quarries have undercut the price that Hallett can manufacture and sell pre‑mix concrete in relation to Lendlease, McConnell Dowell Constructors (Australia) Pty Ltd on the O-Bahn upgrade, Romaldi Constructions Pty Ltd in the construction of the On The Run service station at Tailem Bend and Maranello Constructions Pty Ltd in the upgrade facilities at the Ingham factory.
The nature and structure of each of the claims made in the impugned paragraphs is similar. The intermediate facts which Hallett alleges are sufficiently articulated to give notice to ABCL of the factual case against it and to control party-party and third-party discovery. The references to the inferences on which Hallett’s case relies adequately define Hallett’s case by:
(1)giving notice of the metes and bounds on which its case relies; and
(2)providing an opportunity to ABCL to collect evidence, over and above evidence bearing on the intermediate facts alleged, which deny the inferences alleged or from which alternative inference might be drawn.
In that way, the pleading of the inferences also serves to define the issues for trial and to control discovery.
Conclusion
I give Hallett permission to replead consistently with the proposed cross-claim. I will hear the parties as to any consequential orders and further directions to progress the proceedings.

[2021] SASC 56

19/05/2021