Asia Pacific Resources Pty Ltd v Forestry Tasmania (No 2)
[1998] TASSC 50
•5 May 1998
50/1998
PARTIES: ASIA PACIFIC RESOURCES PTY LTD
v
FORESTRY TASMANIA (NO 2)
TITLE OF COURT: SUPREME COURT OF TASMANIA (FULL COURT)
JURISDICTION: APPELLATE
FILE NO/S: FCA 6/1997
DELIVERED: 5 May 1998
HEARING DATE/S: 5, 6, 7, 10 November 1997
JUDGMENT OF: Cox CJ, Underwood and Wright JJ
CATCHWORDS:
Contracts- Discharge, breach and defences to action for breach - Impossibility of performance - In what cases performance excused - General principles - Force majeure - Matters in existence at the time of the contract - Known to the party relying on force majeure.
Trade and Transport Inc v Iino Kaiun Kaisha Ltd, The Angelia [1973] 1 WLR 210; Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1961] 1 QB 42, applied.
Aust Dig Contracts [125]
Interpretation - Admissibility of extrinsic evidence in relation to instruments - When evidence is admissible - In relation to the operation of the instrument - In general - Matrix evidence not admissible as aid to interpretation when meaning of words read in context of document is plain.
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981 - 1982) 149 CLR 337; Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989; Burns Philp Hardware Ltd v Howard Chia Pty Ltd (1987) 8 NSWLR 642, applied.
Aust Dig Interpretation [17]
REPRESENTATION:
Counsel:
Appellant: P W Tree
Respondent: T J Williams and J R McDonald
Solicitors:
Appellant: C N Dockray
Respondent: Gunson Pickard & Hann
Court Computer Code:
Judgment ID Number: 50/1998
Number of pages: 24
Serial No 50/1998
File No FCA 6/1997
ASIA PACIFIC RESOURCES PTY LTD v
FORESTRY TASMANIA (NO 2)
REASONS FOR JUDGMENT FULL COURT
COX CJ
UNDERWOOD J
WRIGHT J
5 May 1998
Order of the Court
Appeal dismissed.
Serial No 50/1998
File No FCA 6/1997
ASIA PACIFIC RESOURCES PTY LTD v
FORESTRY TASMANIA (NO 2)
REASONS FOR JUDGMENT FULL COURT
COX CJ
5 May 1998
I have had the advantage of reading the Reasons for Judgment prepared by Underwood J. I agree with them. The appeal should be dismissed.
UNDERWOOD J
5 May 1998
Preliminary
This litigation arises out of an agreement embodied in a deed made between the parties and dated 24 October 1995. The deed was the outcome of protracted negotiations and a prior agreement between the appellant and the respondent. The appellant proposed to construct a sawmill at Bridgewater on land owned by Webster Ltd and Roberts Ltd. This land was part of a larger parcel of land and therefore as well as getting a licence for the operation of scheduled premises, the necessary approvals for subdivision had to be obtained. The deed recited the respondent's proposal to construct a flitch recovery mill and provided that the respondent would build this mill by the commencement date which was defined by the deed. The deed imposed an obligation upon the respondent to offer the appellant, within a specified time frame, an agreement to supply up to 90,000 tonnes per annum of flitch log material "meeting an agreed specification". The deed did not define a flitch log other than by describing it as being "a log which is not milling timber [defined by the deed] but which meets specifications agreed between the parties". Thus, the parties had to reach agreement with respect to the specifications of a flitch log before the respondent could offer the appellant a supply contract. Lying behind this whole proposal was the appellant's concept of using logs not suitable for milling and which hitherto had been pulped, by cutting from them flitches or slabs of timber suitable for milling. In this respect, the proposal was a novel one. The respondent was keen to promote it, for it made better use of the State's timber resources.
The deed provided a timetable which specified the dates by which certain steps to implement the project or "milestones" had to be achieved. The deed also provided for termination if the milestones were not achieved by the specified dates and after notice had been given. The agreement also contained a force majeure clause. It, and another clause, provided, in effect, that if a milestone was not achieved by reason of one or more of the events specified in the force majeure clause, the parties were obliged to "negotiate in good faith on practical steps which may be taken to overcome the event". I will shortly set out the whole of the relevant terms of the agreement, but for the moment, it suffices to say that the milestones were not met and the respondent purported to terminate the agreement. The appellant did not accept that the agreement had been validly terminated and commenced proceedings for a declaration that the agreement had not been terminated and for an injunction restraining the respondent from selling flitch logs, as well as other relief.
The learned trial judge dismissed the appellant's claim. He found that the appellant asked the respondent to extend the dates for the achievement of the milestones and this the respondent agreed to do, subject to the appellant accepting a certain condition. The learned trial judge found that the appellant refused to accept the condition, and the respondent then gave the appellant written notice in accordance with the provisions in the deed, that unless the milestones were achieved within twenty-eight days, the agreement was terminated. The milestones were not achieved within the specified twenty-eight days but the appellant claimed that the failure to do so was due to a force majeure event, viz, a "cause or causes beyond [the appellant's] reasonable control". Accordingly, the appellant's case at trial was that the respondent was obliged to negotiate in good faith with the appellant as provided in the deed "on practical steps which may be taken to overcome that event" and it did not do so. The appellant contended at trial that the respondent was therefore in breach of the deed and not entitled to invoke the termination provisions. For the respondent, the case at trial was (inter alia) that none of the failures to achieve the milestones was due to a cause beyond the appellant's reasonable control and accordingly, there was no obligation upon it to negotiate with the appellant.
In his reasons for judgment, the learned trial judge listed the causes that the appellant relied upon as the causes for the failure to achieve the milestones and held that none of them was causes beyond the appellant's "reasonable control" and accordingly, no contractual obligation fell upon the respondent to negotiate in good faith as provided by the deed. The learned trial judge held that the agreement came to an end either:
_ twenty-eight days after the respondent gave the appellant notice that the agreement would terminate unless the specified milestones were achieved within the twenty-eight day period; or
_ by 31 August 1996, for the deed, cl 8.6, provided that, notwithstanding any other provision, the deed terminated on that day. The milestones contemplated that by that date the construction of the mill would be complete and the contract for the supply of flitch logs entered into.
From the judgment at first instance this appeal is brought. It first came on for hearing on 26 August 1997 when senior counsel for the appellant sought to amend the notice of appeal by adding two new grounds. These grounds sought to allege error in that the learned trial judge failed to find that there was an implied term in the agreement to the effect that the parties were obliged to negotiate in good faith to overcome, not just delays referred to in the force majeure clause as being beyond the appellant's control, but any delays in the project development. The trouble with that application was that the statement of claim did not allege breach of an implied term. It relied only on breach of an express term which required negotiation in good faith only in the case of a delay within the terms of the force majeure clause, viz, one due to a cause or causes beyond the appellant's reasonable control. Thus, the issue of implied term was not raised at trial. The application to amend the notice of appeal to raise the implied term argument was rejected. See Asia Pacific Resources Pty Ltd v Forestry Tasmania 101/1997.
The hearing of the appeal resumed on 5 November 1997 and concluded on 10 November when the Court reserved its decision.
The Deed
The following are the relevant provisions of the deed made between the appellant and the respondent:
"DEFINITIONS AND INTERPRETATION
1
1.1In this agreement, unless the context or subject matter requires otherwise, the followings words shall have the meanings shown below. [Definitions irrelevant to these reasons for judgment are omitted]:
'area of supply' means State forests in Southern Tasmania to be nominated by Forestry Tasmania from time to time as being those forests from which timber may be supplied to the company;
'commencement date' means the milestone date specified in Schedule One for the Flitch Recovery Mill to commence production;
'Flitch' means a slab of timber cut from a Flitch Log;
'Flitch Log' means a log which is not Milling Timber but which meets specifications as agreed between the Parties;
'Flitch Recovery Mill' means a mill which processes Flitch Logs primarily to recover Flitches; and
'Milling Timber' means timber that, in the reasonable opinion of Forestry Tasmania, meets the specifications for Category 1, 2, 3 and 4 sawlogs or for veneer logs as defined in the Forestry Regulations 1993 or for logs suitable for the production of rotary veneer.
2SECURITY OFFERED BY THE COMPANY
2.1FORESTRY TASMANIA will not execute this Agreement until the Company has paid $10,000 to FORESTRY TASMANIA, and by executing this Agreement FORESTRY TASMANIA acknowledges receipt of that amount from the Company.
2.2Notwithstanding any other condition in this Agreement, this Agreement will cease and determine, and thereafter the Company shall not have any claim against FORESTRY TASMANIA with respect to any matter or thing arising out of, done or omitted to be done or performed under this Agreement:
2.2.1 on 1 December 1995 unless the Company has paid an additional $20 000 to FORESTRY TASMANIA by that date; or
2.2.2 on 1 April 1996 unless the Company has paid a further $20 000 to FORESTRY TASMANIA by that date.
2.3The amounts to be paid by the Company to FORESTRY TASMANIA pursuant to this Clause 2 will be refunded provided that the Company proceeds to establish and operate the Flitch Recovery Mill and it uses a quantity of Crown logs in the Flitch Recovery Mill with a royalty value in excess of that amount by 31 August 1996.
3UNDERTAKINGS BY THE PARTIES
3.1The company will construct a Flitch Recovery Mill and the mill will be capable of normal operation by the Commencement Date.
3.2The Company will be responsible for assessing the suitability and extent of resource for its project and for negotiating with third parties all agreements necessary for the successful implementation and operation of its project.
3.3Forestry Tasmania will provide the Company with whatever assistance and support is prudent and reasonable for the assessment of the Crown resource for the Flitch Recovery Mill.
....
3.6The Company warrants that it can successfully complete the development project in accordance with the timetable of Milestones set out in Schedule One.
....
3.8Forestry Tasmania will, upon request from the Company, offer the Company a contract of sale (hereinafter the 'Contract') for the supply of up to 90,000 tonnes per annum of flitch log material, meeting an agreed specification, from the Area of Supply. The Company shall make the request for the Contract during the month of January 1996, unless otherwise agreed, and Forestry Tasmania will provide a draft Contract for consideration by the Company within 3 months of such a request.
3.9The term of the Contract shall be from the Commencement Date until the June 30th. immediately succeeding the date five years after the Commencement Date.
3.10The terms and conditions of the Contract shall be in general accordance with those in contracts of sale held by other purchasers of Crown Forest Produce in Tasmania except as provided for explicitly in this Agreement. The Company hereby warrants that it has a copy of a generic form of such a contract as at the date of this Agreement. The Contract will provide for renewal subject to agreement by the Parties.
[then follow specific provisions to be incorporated in the Contract]
....
4ARBITRATION
4.1Disputes and other matters arising from this Agreement which require arbitration will be dealt with under the provisions of the Arbitration Act.
....
7FORCE MAJEURE
7.1Subject to Clauses 7.3 and 7.4, neither party shall be liable to the other, apart from any existing commitment to pay money, for any breach or failure to perform its obligations under this agreement where such breach or failure is caused by war, civil commotion, hostilities, strikes, lockouts, act of God or any other cause or causes beyond that party's reasonable control.
7.2Subject to Clauses 7.3 and 7.4, the Company shall not be held accountable for a failure to meet its obligations under this Agreement where, through no fault of the Company, such failure is the sole result of the Export Licence being withdrawn or made practically ineffective by the Commonwealth Government.
7.3If the occurrence of an event contemplated by either Clause 7.1 or 7.2 causes a delay of over 30 days in any obligation of either Forestry Tasmania or the Company then the parties will negotiate in good faith on practicable steps which may be taken to overcome that event PROVIDED THAT no such steps shall be taken other than by agreement by both parties in writing.
7.4If the occurrence of an event contemplated by either Clause 7.1 or 7.2 causes a delay of over 60 days in any obligation of either Forestry Tasmania or the Company then this agreement may be terminated by notice in writing by either party to the other party.
8TERMINATION
8.1Subject to Clause 8.7 this Agreement will terminate on the sooner of any of the occurrence contemplated by Clauses 8.2, 8.3, 8.4, 8.5 or 8.6.
8.2Should any Milestone listed in Schedule One not occur by its time scheduled therein, or such other time as may be agreed between the parties and any such failure or default continues for a period of twenty-eight (28) days after notice requiring compliance with the Schedule has been given by the party requiring compliance to the other.
8.3The event contemplated by Clause 7.4 occurs and either Party enforces its rights to terminate this Agreement.
8.4If either of the events contemplated by Clause 2.2 occur which provide for termination of this agreement.
8.5The execution by the parties of the Contract.
8.631 August 1996.
8.7If this Agreement is terminated pursuant to this Clause 8 then this Agreement will cease and determine, and thereafter the Company shall not have any claim against FORESTRY TASMANIA with respect to any matter or thing arising out of, done or omitted to be done or performed under this Agreement, nor will the Company have any claim against Forestry Tasmania for monies paid by the Company pursuant to Clause 2.
AGREEMENT
SCHEDULE ONEPROJECT MILESTONES
| ACTIVITY | COMPLETION DATE |
| Draft DP & EMP submitted | 8 November 1995 |
| End of statutory public comment period | 16 December 1995 |
| Submit supplementary draft | 6 January 1995 |
| Lodge final DP & EMP | 13 January 1995 |
| DELM to issue licence | 20 January 1995 |
| Conclude final agreement with chip exporters or processors for the sale of residuals from the flitch recovery mill | 20 January 1995 |
| Complete tendering process for construction works | 20 January 1995 |
| Commence log deliveries | 31 May 1996 |
| Complete construction of mill | 30 August 1996 |
| Commence production | 31 September 1996" |
It was common ground that the year attached to the January dates was an error and should have been 1996. DP and EMP are acronyms for Development Plan and Environmental Management Plan. DELM means the Department of Environment and Land Management.
The Grounds of Appeal
As finally amended, the grounds relied upon by the appellant were:
"1 That His Honour erred in law in holding that the Appellant could not avail itself of the force majeure provisions of the contract, and in particular in holding that the facts and circumstances concerning the delays in the subdivision of the land upon which the mill was to be constructed, and the delays in the administrative and consultative process of preparing and finalising the DP&EMP required by DELM, did not and could not in the circumstances constitute a 'cause or causes beyond the Plaintiffs reasonable control' within the meaning of paragraph 7.1 of the contract.
2 That His Honour erred in fact by finding, in relation to the cause or causes beyond the Appellant's reasonable control asserted to arise from delays in the administrative and consultative process of preparing and finalising the DP&EMP required by DELM that:
(a)The Appellant was fully aware that it had done little or nothing in relation to the preparation of the DP&EMP at the time it entered the agreement with the Respondent;
(b)That the Plaintiff was guilty of a number of delays;
(c)That the Plaintiff knew of the delays in the preparation of the draft DP&EMP when the milestone timetable was incorporated in the agreement;
(d)That the Plaintiff knew that at the time it entered the agreement that it could not meet the first and subsequent milestones.
3 That His Honour erred in law by failing to interpret the force majeure clause of the contract on the basis that the parties intended to essentially agree upon circumstances which would excuse performance in the event of delays beyond the reasonable control of either party including foreseeable delays, such as delays in obtaining a DP&EMP from DELM, and that thereby, whilst foreseeable, the delay in obtaining a DP&EMP from DELM ought to have been construed as constituting an excusable contingency within the terms of the bargain agreed upon.
4 That His Honour erred in fact in finding that the risk the Appellant took in preparing a draft DP&EMP prior to entering into a formal written contract for the purchase of the land at Bridgewater upon which the mill was to be constructed, was a risk of the same nature as the risk the Appellant ought to have undertaken by preparing a draft DP&EMP for proposed Bridgewater mill site prior to the issues of the proposed National Highway route and the subdivision of the land being resolved.
5 That his Honour erred in law by failing to hold that upon proper construction of the whole of the terms of the written contract the parties contractual intention with respect to the clauses establishing a right to terminate was that the milestones were not inflexible and in certain events, particularly the delay pleaded at paragraph 13(f) of the statement of claim, the milestone dates would be altered thereby disengaging the right to terminate.
6 That His Honour erred in law in falling to place any or any sufficient weight upon the letter from Gutteridge Haskins & Davey to the Respondent dated 8th June 1995 in interpreting the contract.
7 That His Honour erred in fact in finding, or alternatively it was not reasonably open for him to find, that a second telephone conversation between Mr J Creagh and Mr D Allen on 19th September 1995 did not take place.
8 That His Honour erred in fact and law in failing to determine whether the Appellant made a request for a supply contract on or about the 14th November 1995, and whether the Respondent accepted that request, and if so, what legal consequences flowed from that request in terms of the Respondent's right to subsequently terminate the contract pursuant to clause 8.2.
9 That his Honour erred in fact and in law in holding that the draft DP & EMP was submitted on 1 March 1996 when it was an admitted fact and the uncontradicted evidence, that it was submitted on 20 December 1995.
10 That his Honour erred in fact and in law in failing to find that the final DP & EMP had not been lodged by 28 February 1996 when it was an admitted fact that it was lodged on or about 28 February 1996."
The Appellant's Case on Appeal
On behalf of the appellant, Mr Tree accepted that in order to succeed, the appellant must establish that the respondent's purported termination of the agreement was invalid and, if so, the contract was still on foot or was terminated in circumstances giving rise to an entitlement to damages. It is convenient to deal with the grounds of appeal in the same order as they were argued by Mr Tree.
Grounds 5 and 6
Ground 5That his Honour erred in law by failing to hold that upon proper construction of the whole of the terms of the written contract the parties contractual intention with respect to the clauses establishing a right to terminate was that the milestones were not inflexible and in certain events, particularly the delay pleaded at paragraph 13(f) of the statement of claim, the milestone dates would be altered thereby disengaging the right to terminate.
At first, the submissions of counsel for the appellant in support of these two grounds sounded very much like the submissions he proposed to advance had the Court allowed an amendment to the grounds of appeal to permit an argument that there was an implied term and the respondent was in breach of it. However, the submissions on grounds 5 and 6 eventually distilled down to the following proposition.
Upon a proper construction of the whole of the terms of the written contract, the parties' agreed intention with respect to the clauses that govern the right to terminate, was that the milestones were not inflexible and in certain events, the milestone dates would be deferred, thereby disengaging the right to terminate.
This is a construction point. It is perhaps useful to set out the provisions that govern the right to terminate, eliminating therefrom immaterial parts:
"8.1... this agreement will terminate on the sooner of any of the occurrence contemplated by clauses 8.2, 8.3 ... or 8.6.
8.2Should any milestone listed in Schedule One not occur by its time scheduled therein, or such other time as may be agreed between the parties and any such failure or default continues for a period of twenty-eight (28) days after notice requiring compliance with the Schedule has been given by the party requiring compliance to the other.
8.3The event contemplated by clause 7.4 occurs and either party enforces its right to terminate this agreement.
...
8.631 August 1996."
The reference to cl 7.4 invokes the force majeure and the clause linked to it that calls for negotiation in good faith. Relevantly, these clauses are:
"7.1Subject to Clauses 7.3 and 7.4, neither party shall be liable to the other, apart from any existing commitment to pay money, for any breach or failure to perform its obligations under this agreement where such breach or failure is caused by war, civil commotion, hostilities, strikes, lockouts, act of God or any other cause or causes beyond that party's reasonable control.
7.2...
7.3If the occurrence of an event contemplated by either Clause 7.1 or 7.2 causes a delay of over 30 days in any obligation of either Forestry Tasmania or the Company then the parties will negotiate in good faith on practicable steps which may be taken to overcome that event PROVIDED THAT no such steps shall be taken other than by agreement by both parties in writing.
7.4If the occurrence of an event contemplated by either Clause 7.1 or 7.2 causes a delay of over 60 days in any obligation of either Forestry Tasmania or the Company then this agreement may be terminated by notice in writing by either party to the other party."
With respect to the construction of contracts, the law is quite clear. When the parties reduce their agreement to writing, their intention is to be spelled out from the written words they chose to put in their document. Parol evidence is not admissible to ascertain the parties' intention except in certain specified circumstances, such as latent or patent ambiguity, identification of the subject matter of the contract and so on. Mr Tree accepted that as a correct statement of the law, but submitted that parol evidence of the factual matrix in which the written words were set down was admissible and that in this case such evidence showed that upon a proper construction of those clauses which govern the right to terminate the deed, the parties' intention was that the milestones were not inflexible and in certain events, particularly the events pleaded in the statement of claim par13(f), the milestone dates would be deferred, thereby disengaging the right to terminate. The events pleaded in par13(f) are "Delays in the administrative and consultative process of preparing and finalising the DP & EMP".
The admissibility and use to which "matrix" evidence can be put was discussed by Lord Wilberforce in Prenn v Simmonds [1971] 1 WLR 1381. In that case the House of Lords held that evidence of the matrix in which the agreement was made was admissible to show the true meaning of the word "profits". His Lordship said at 1383 - 1384:
"In order for the agreement of July 6 1960, to be understood, it must be placed in its context. The time has long passed when agreements, even those under seal, were isolated from the matrix of the facts in which they were set and interpreted purely on internal linguistic considerations. There is no need to appeal here to any modern, anti-literal tendencies, for Lord Blackburn's well-known judgment in River Wear Commissioners v Adamson (1877) 2 App Cas 743, 763 provides ample warrant for a liberal approach. We must, as he said, inquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view."
Lord Wilberforce returned to the question of the use to which "matrix" evidence may be put in Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989. This case concerned the meaning of a term in a charterparty which referred to a ship called "Yard 34". His Lordship said at 995 - 996:
"No contracts are made in a vacuum: there is always a setting in which they have to be placed. The nature of what is legitimate to have regard to [in order to construe the meaning of a clause] is usually described as 'the surrounding circumstances' but this phrase is imprecise: it can be illustrated but hardly defined. In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating."
Lord Wilberforce's approach was referred to with approval in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981 - 1982) 149 CLR 337. This case concerned the implication of a term into a contract. Mason J (as he then was), with whose reasons Stephen and Wilson JJ expressed agreement, said at 345 - 346 that both in a case of an implied term and in a case concerned with the construction of an express term, the exercise is one of interpretation, but in the former case, construction in the sense of ascertaining the presumed intention of the parties had they turned their minds to the relevant matter. His Honour said at 347 that in general, the parol evidence rule excluded extrinsic evidence (except as to surrounding circumstances) which would subtract from, add to, vary or contradict the language of a written instrument. His Honour referred to Goss v Lord Nugent (1833) 5 B & Ad 58: 110 ER 713, surveyed a large number of cases and concluded with this passage at 352:
"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed. [Emphasis added]
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting."
In B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Associates Pty Ltd (1994) 35 NSWLR 227 Kirby P referred to Codelfa and other modern authority at 234 and re-affirmed that "if the written language of the agreement has a 'plain meaning', evidence will not be admissible to contradict that meaning." The Court applied Codelfa and held that where the meaning was not plain, objective evidence known to both parties will be admitted to aid construction and, further, that such evidence will also be admitted to show the existence of ambiguity. Codelfa was applied by the New South Wales Court of Appeal in Burns Philp Hardware Ltd v Howard Chia Pty Ltd (1987) 8 NSWLR 642. In that case, the Court refused to use "matrix" evidence for the purpose of giving meaning to the words in a lease, "the then current annual market rent of the premises". Mahoney JA, with whose judgment Glass JA agreed, referred to some of the instances where matrix evidence had been admitted as an aid to construction. His Honour referred to Prenn v Simmonds (supra) and with respect to that decision observed that the term "profits" is inherently ambiguous in the sense that its ordinary or accepted meaning may indicate one of several things and said at 646:
"But, I think, it remains to be finally determined whether, where a term ['profits'] which is inherently ambiguous in the sense to which I have referred and is not made unambiguous by its context or the surrounding circumstances, evidence may be admitted to show in which of the alternative ordinary meanings of the term it was used in the particular document and the kind of evidence which may be adduced for that purpose."[emphasis added]
His Honour went on to hold that although the words "the then current annual market rent of the premises" might be said to be inherently ambiguous standing alone, when read in the context of the lease document, there was no ambiguity at all and consequently the learned judge at first instance was correct in rejecting the extrinsic evidence sought to be tendered.
Mr Tree referred the Court to a large body of evidence commencing with a letter written by Mr Gordon of the respondent Commission (as the respondent was then entitled) to Mr Corbet, Managing Director of the appellant, more than two years before the deed was executed. Mr Tree submitted that this vast body of evidence was part of the factual matrix in which the written words were set down and from this evidence it could be seen that the parties' intention was that upon the happening of certain events, adherence to the time table was to be flexible. The evidence to which Mr Tree referred cannot be used to construe the termination clauses. There is neither latent nor patent ambiguity in the clauses giving rise to the right to terminate the agreement. The words have a plain meaning. It is not the meaning for which Mr Tree contended.
Codelfa is authority for the well established proposition that evidence, extrinsic to the written agreement, cannot be admitted where the written words are clear, unambiguous and not susceptible to more than one meaning. Mr Tree did not submit that any particular word or expression in the termination clauses such as "milestone" or "beyond that party's reasonable control" was inherently ambiguous in the sense that the word "profits" is inherently ambiguous. Had he done so, the answer to such a submission would be that when read in the context of the deed, the words in the termination clauses carry no inherent ambiguity. Mr Tree's submission, in effect, was that the words used in the termination clauses ought to be given a meaning quite different from their plain ordinary meaning. That proposition must be rejected. The provisions of the deed 8.1, 8.2, 8.3 and 8.6 are free from ambiguity. It is not possible to suggest that the expression "[s]hould any milestone listed in Schedule One not occur by its time scheduled therein, or such other time as may be agreed between the parties and any such failure or default continues for a period of twenty-eight (28) days after notice requiring compliance with the Schedule has been given by the party requiring compliance to the other" really means "should any milestone not occur by its time scheduled therein or some other time which is reasonable depending on the circumstances ...".
Ground 5 is not made out.
Ground 6That His Honour erred in law in failing to place any or any sufficient weight upon the letter from Gutteridge Haskins & Davey to the Respondent dated 8th June 1995 in interpreting the contract.
In his reasons for judgment, the learned trial judge referred to this letter from Gutteridge, Haskins & Davey Pty Ltd and set out the substance of it. The complaint in ground 6 is that he did not use it to interpret the termination clauses in the deed entered into almost five months later. Gutteridge, Haskins & Davey Pty Ltd, engineers, were engaged by the appellant to prepare a development proposal and environment management plan (DP & EMP) for the proposed sawmill to be built at Bridgewater. On 7 June 1995 the engineers wrote to Mr Gordon of the respondent advising of their appointment and setting out an envisaged program, namely:
| Application lodged with DELM | 16 May 1995 |
| Draft guidelines issued | 7 June 1995 |
| Final guidelines issued | 21 June 1995 |
| Draft DP&EMP submitted | 8 September 1995 |
| End of statutory public comment period | 16 October 1995 |
| Submit supplementary drafts | 6 November 1995 |
| Lodge final DP&EMP | 13 November 1995 |
| DELM to issue licence | 20 November 1995 |
With respect to the proposed program, the letter advised:
"This program is very approximate and will depend upon the responses of Government Departments, other authorities and the community to the DP&EMP."
The letter also advised that, as referred to in the proposed program, the application for a licence for the use of scheduled premises had been lodged with DELM on 16 May 1995. A comparison between the schedule to the deed and the letter shows that the milestone dates in the schedule were delayed by two months on the program proposed by the letter, but the point Mr Tree makes about this letter is that it states that the "program is very approximate and will depend upon the responses of Government Departments, other authorities and the community ...". Thus, Mr Tree submitted that this letter, in particular, is evidence that the words of the termination clauses mean that the milestone dates are flexible were not intended by the parties to be fixed and that a failure to meet them after notice has been given would not necessarily entitle the party giving notice to terminate the agreement. This ground is really a particular of ground 5. It fails for the reasons given with respect to ground 5, for the letter from the engineers is not admissible to provide an interpretation contrary to the plain, unambiguous words of the termination clauses.
Grounds 1 and 2
Ground 1That His Honour erred in law in holding that the Appellant could not avail itself of the force majeure provisions of the contract, and in particular in holding that the facts and circumstances concerning the delays in the subdivision of the land upon which the mill was to be constructed, and the delays in the administrative and consultative process of preparing and finalising the DP&EMP required by DELM, did not and could not in the circumstances constitute a 'cause or causes beyond the Plaintiffs reasonable control' within the meaning of paragraph 7.1 of the contract.
In his reasons for judgment at 18, the learned trial judge set out the following as being the delays upon which the appellant relied for not achieving the milestones set out in the schedule to the agreement.
"The causes specified by the plaintiff are the following:
1the failure of the defendant to provide a draft supply agreement, required by the plaintiff in conducting negotiations with financiers to enable the project to proceed;
2delays in the subdivision of the land upon which the mill was to be constructed;
3changes to the forestry policy of the government of the Commonwealth;
4the failure of the defendant to act reasonably and in good faith in agreeing a specification for flitch log material;
5the failure of the defendant to agree in good faith a specification for flitch log material; and
6delays in the administrative and consultative process of preparing and finalising the DP&EMP required by DELM.
This ground refers to delays 2 and 6 above.
Delays in the subdivision of the land upon which the mill was to be constructed
There was no contractual obligation on the appellant to build the flitch mill at Bridgewater, but this was the appellant's desired site. On 12 April 1994, eighteen months before the deed was executed, the appellant advised the respondent that a difficulty had arisen with respect to the purchase of the site, as there was a proposal to put a new highway through the land, but the precise location of this proposed highway was uncertain. There followed some meetings between the appellant or its agent and various authorities, but the highway proposal remained uncertain. On 8 November 1994, the owners of the land advised the appellant that they were prepared to sell the required portion of their land to the appellant for $250,000, subject to the local authority approving the subdivision plan on terms not too onerous to the vendor. Surveyors were engaged by the owners of the land and a proposed subdivision plan was lodged with the council on 17 January 1995. Notwithstanding the uncertainty surrounding the proposed new highway, the Brighton Council approved the proposal plan, subject to reasonable conditions, on 20 March 1995.
An engineer from Gutteridge, Haskins & Davey Pty Ltd had several meetings with officers from the Department of Transport and Works in an attempt to find out if the highway proposal was to proceed and, if yes, where the road was going to be built. The position was not clarified until 18 September 1995 (a little more than a month before the date of the deed) when the appellant was advised that the proposed highway would not cross the land the appellant wished to buy.
With respect to the claim that there were delays in the subdivision of the land upon which the mill was to be constructed and that these delays were beyond the reasonable control of the appellants, the learned trial judge said at 21:"This history makes it clear that there were no delays in the obtaining of the necessary approvals for subdivision of the land after the execution of the agreement. The plaintiff has not identified anything in relation to the subdivision which occurred after its execution which caused any relevant delay at all. Delays which occurred prior to its execution are entirely irrelevant. The plaintiff had an effective approval for the subdivision to proceed when it entered into the agreement. It has not pointed to, or relied upon, any matter which relevantly prevented it from acting on that approval."
There is no complaint about the finding of fact that there were no delays in obtaining the necessary approvals for the subdivision of the land after the deed was entered into. The gravamen of the appellant's complaint on this aspect of ground 1 is that the learned judge erred in holding that delays which occurred before the execution of the deed are irrelevant, that is to say, that such delays are incapable of being an event within the scope of the force majeure clause.
Delays in the administrative and consultative process of preparing and finalising the DP&EMP required by DELM
As I have said, Gutteridge, Haskins & Davey Pty Ltd lodged an application for the necessary licence to operate a scheduled premises on 16 May 1995. With respect to the steps that needed to be taken to obtain this licence, evidence was adduced from Mr Gosden of the engineering company, by way of proof of evidence. In it he said (inter alia):
"(5)The process of obtaining a DP & EMP from the Department of the Environment and Land Management (DELM) is generally as follows:
(a) Lodge an application to operate a scheduled premises;
(b) DELM issues draft guidelines for the preparation of the DP&EMP;
(c) Negotiations usually take place with DELM as to the guidelines for the DP&EMP;
(d) Prepare the draft DP&EMP;
(e) DELM review the draft DP&EMP;
(f) If DELM accept the draft DP & EMP they will advertise it. If not, further information may be sought requiring the draft to be revised and possibly further revised before advertising;
(g) The draft DP&EMP is advertised calling for objections within thirty days;
(h) Copies of the draft DP&EMP are usually forwarded to all interested agencies such as Councils, the Forestry Commission, Rivers and Water Supply Commission, Department of Transport etc.;
(i) The objections and comments from interested agencies are reviewed by DELM;
(j) The draft DP&EMP may require further revision;
(k) On acceptance of the DP & EMP by DELM a draft licence is issued;
(1) The proponent for the licence responds to the draft licence;
(m) Eventually the conditions attached to the licence are settled;
(n) The proponent pays the licence fee and the licence is issued.
(6)Generally speaking, the process takes at least six months and possibly longer. A minimum time period is around 4 months."
If the process of obtaining a DP & EMP from DELM had proceeded in accordance with Mr Gosden's anticipated schedule and the process taken six months, the first five milestones in the schedule to the deed would have been achieved. However, it appears that Mr Gosden did nothing to prepare the draft DP & EMP after receiving the final version for guidelines from DELM in June 1995 until shortly after 18 September 1995 when the position with respect to the proposed highway was clarified. Immediately after the resolution of the highway problem, Mr Gosden set about preparing the draft DP & EMP with great alacrity and he forwarded a first draft of the DP & EMP to the appellant for comment on 6 October 1995. At that stage the draft was incomplete as it was awaiting a report from a noise modelling expert who had been engaged for that purpose. The noise model report was not received until early December 1995 and a draft DP & EMP was not lodged with DELM until 20 December 1995. Not only was the first project milestone in the agreement not achieved, but, at the time the deed was executed, the appellant or its agents, the engineers, must have known that it could not be achieved. The proof of evidence of Mr Gosden goes on to detail the receipt of inquiries from DELM following lodgement of the first draft DP & EMP which were dealt with promptly, the lodgement of the draft DP & EMP, its advertisement and the resultant thirty day objection period. The proof of evidence details other comings and goings with respect to the issue of the licence with the result that the licence did not finally issue until 4 July 1996. The milestone in the agreement provided for its issue on 20 January 1996.
With respect to all this, the learned trial judge found at 25:
"The delay in lodging the DP & EMP occurred because, prior to entering into the agreement, the plaintiff had resolved to delay embarking on the steps required for its preparation and therefore it knew, when it entered into the agreement, that it was incapable of meeting the first milestone. Notwithstanding that, by par3.6, it warranted that it could successfully complete the project in accordance with the milestones. The evidence of Mr Corbet, which suggests that at the time of the execution of the agreement the plaintiff's expectation was that it would be able to achieve the milestones by the specified dates, must be rejected out of hand. His evidence that the DP & EMP process did not proceed as predicted by GHD, entirely overlooked the considered decision of the plaintiff to delay commencing that process until such time as the question of the road re-alignment had been resolved. That difficulty was well known to Mr Corbet at the time that the plaintiff entered into the agreement. In his evidence-in-chief, Mr Corbet sought to convey the impression that the difficulties concerning the road arose after the plaintiff entered into that agreement. That was grossly misleading."
Although it has been said that a party cannot invoke a force majeure clause in relation to circumstances which, to the knowledge of the party seeking to rely upon the clause, were in existence at the time the contract was made (Safadi v Western Assurance Company (1933) 46 Ll L Rep 140 at 143) more recent authority is to the effect that circumstances existing at the time the agreement is made may be relied upon to bring a party within the scope of a force majeure clause; it all depends on the proper construction of the clause in each case. See Navrom v Callitsis Ship Management SA (The "Radauti") [1988] 2 Lloyd's Rep 416 at 420. The expression used in the deed, 7.1 "... cause or causes beyond that party's reasonable control", or words to the like effect, are common to most force majeure clauses. In Steamship "Induna" Co Ld v British Phosphate Commissioners [1949] 2 KB 430, Sellers LJ held that a circumstance existing before the charterparty was entered into could be relied upon as a force majeure event where that circumstance was unknown to either party at the time of contracting. However, his Lordship went on to add at 437, "If both parties, or one of the parties, knew at the time of making the contract of existing circumstances which would or might occasion delay other considerations would arise ...". Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1962] 1 QB 42 confirmed the proposition that there is no settled rule of construction that prevents a party to a force majeure clause from relying on events in existence at the time the contract is entered into as events beyond that party's control. Reardon Smith was a case concerning a strike that was in existence at the time the parties contracted and there are statements in the judgments (Sellers LJ at 80; Willmer LJ at 111) to the effect that a strike is a peculiarly unpredictable event; a strike that exists when the contract is signed is quite likely to be at an end when performance is required and it cannot be said that a contract is doomed because a strike is in progress when the contract is signed. In Trade and Transport Inc v Iino Kaiun Kaisha Ltd, The Angelia [1973] 1 WLR 210, Kerr J held at 225 et seq that it is always a question of the proper interpretation in each case, but at 225, referred to Reardon Smith at 107, 108 and then said at 227 that ordinarily a party would be debarred from relying upon a pre-existing cause as an excepted peril:
"(a) if the pre-existing cause was inevitably doomed to operate on the adventure and,
(b) if the existence of facts which show that the excepted cause is bound to operate is known to the parties at the time of contract, or at least to the party who seeks to rely on the exception"
His Honour then added as an alternative to (b):
"[c] or if the existence of such facts should reasonably have been known to the party seeking to rely upon them and would have been expected by the other party to the contract to be so known."
With respect to the delay concerning the DP & EMP, the learned trial judge found:
"However the plaintiff cannot avail itself of [the force majeure clause] in relation to its delay in submitting the draft DP&EMP. That delay was entirely of its own making. The plaintiff knew when it entered into the agreement that it had long delayed embarking on the preparation of the draft DP&EMP. By reason of that delay, the plaintiff must have known that it could not satisfy the first milestone, and consequentially subsequent milestones, yet it gave a contractual warranty that it could."
The delays with respect to the preparation of the DP & EMP are not delays within the scope of the force majeure clause by reason of the matters set forth in pars(a) and (b) or (c) taken from the judgment of Kerr J in The Angelia and set out above. In the construction of the force majeure clause, the learned trial judge correctly directed himself in accordance with those paragraphs and correctly applied the facts, as he found them, to the law in this passage of his reasons for judgment at 26:
"Counsel for the plaintiff, relying on Trade and Transport Inc v Iino Kaiun Kaisha Ltd [1973] 1 WLR 210 at 225-227, submitted that the plaintiff was able to rely on circumstances existing at the time that the agreement was entered into as constituting a cause for delay beyond its reasonable control for the purposes of par7. That case is not authority for that very wide proposition. The question is one of the proper construction of par7.1, but the authority cited by counsel is authority (at 224) for the proposition that that paragraph should be construed as not applying in the case where the 'cause' is a state of affairs already existing at the time that the agreement was entered into and which was then known to the plaintiff or could and should earlier have been ascertained by it. That is the construction which I adopt. It is supported by observations made by Willmer LJ in Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1961] 1 QB 42 at 107-108."
As a matter of construction, the "cause or causes" in the force majeure clause include those that were in existence at the time the deed was entered into, provided they did not fall within the terms of pars(a) and (b) or (c) (supra) and provided they were beyond the reasonable control of the party seeking to rely on them as a force majeure event. Causes for delay that had ceased to exist at the time the force majeure took effect are incapable of coming within the scope of the clause. With respect to the subdivision of the land, the appellant had effective approval to enter into a contract for its purchase before the deed was executed. There was nothing that prevented it doing so. Even if there had been a delay due to uncertainty about the location of the proposed highway, such delay was over before the deed was entered into. It was not an existing cause of delay, whether beyond the appellant's control or not, at the time the deed was entered into and therefore the learned trial judge was quite correct to categorise any alleged delay with respect to the purchase of the land as irrelevant. The same can be said with respect to the delay in the preparation of the DP & EMP while there was uncertainty about the highway proposal. The cause of that delay was over by the time the parties entered into the deed containing the force majeure clause.
Ground 2That His Honour erred in fact by finding, in relation to the cause or causes beyond the Appellant's reasonable control asserted to arise from delays in the administrative and consultative process of preparing and finalising the DP&EMP required by DELM that:
(a)The appellant was fully aware that it had done little or nothing in relation to the preparation of the DP & EMP at the time it entered the agreement with the Respondent;
(b)That the [appellant] was guilty of a number of delays;
(c)That the [appellant] knew of the delays in the preparation of the draft DP&EMP when the milestone timetable was incorporated in the agreement;
(d)That the [appellant] knew that at the time it entered the agreement that it could not meet the first and subsequent milestones.
(a) It is a little difficult to understand this complaint. The appellant alone was responsible for the preparation of the DP & EMP. The respondent had no part to play in this process. The appellant engaged engineers to act as its agent and to prepare the DP & EMP. In his proof of evidence Mr Gosden said "[t]he issue of the proposed national highway delayed the process of preparing the draft DP & EMP because it was pointless proceeding any further until the issue concerning the highway was resolved. Once the issue concerning the proposed national highway route was resolved [18 September 1995] I set about preparing the draft DP & EMP." Mr Gosden goes on to state that in the tentative timetable set out in his letter dated 8 June 1995 (supra) he had allowed ten weeks for the preparation of the draft document, but he in fact completed his part of it and forwarded it to the appellant on 6 October 1995. The deed is dated 24 October 1995 but there is a letter from the appellant dated 10 October 1995 to the respondent which encloses "signed but undated contracts together with a deposit of $10,000." (See the deed cl 2.1.) This letter is dated four days after the appellant received from its engineers the incomplete draft DP & EMP for its consideration. According to the proof of evidence of Mr Gosden, by that stage he had put in 167½ hours work on the draft plans. The following had to be done before the first milestone could be achieved. It was due to be achieved within a month of the day the appellant sent the signed deed to the respondent:
_ the appellant had to consider the draft and make comment on it to its engineers;
_ a noise modelling expert had to be engaged and his draft report received, considered and incorporated into the draft DP & EMP;
_ the appellant or its engineers had to lodge a first draft with DELM for its consideration which, if not acceptable to the department would be sent back for revision;
_ on receipt of settled draft DP & EMP, DELM had to advertise it and call for objections within the thirty day period prescribed by statute.
In order to achieve the other milestones the following had to be done:
_ objections and comments from State Agencies and other comment considered by DELM;
_ any necessary revisions to the draft made by the appellant;
_ a draft licence with conditions issued;
_ the appellant to respond to the proposed conditions;
_ the licence fee paid on settlement of the conditions;
_ the licence issued.
The foregoing demonstrates that there was a delay between July and 18 September 1995, before the deed was signed, and that this delay was initiated by the appellant because of indecision about the site of the highway. While it may be overstating the matter somewhat to say that the appellant had done "nothing" in relation to the draft DP & EMP, it certainly had done very little by the time it entered into the agreement and therefore it must have known when it did so that it was incapable of meeting the first milestone.
(b)I will return to this because it is out of chronological order.
(c) This finding is fully justified on the evidence. The appellant or its agent were solely responsible for the preparation and lodgement of the draft DP & EMP and the former knew precisely what stage the preparation had reached when the agreement was executed by it.
(d) Having regard to the matters that remained to be done before the settled draft could be lodged with DELM, no other finding was reasonably open on the evidence other than the one under attack by this part of ground 2.
(b) This part of ground 2 refers to delays after the lodgement of the settled draft DP & EMP which did not occur until 1 March 1996. With respect to this, the learned trial judge found:
"The plaintiff had been guilty of a number of delays. The submission of the draft DP&EMP, which the schedule required occur by 8 November 1995, did not occur until 1 March 1996 when the settled draft was lodged by GHD with DELM. It follows that the submission of the draft was delayed by some three months and twenty-two days. Some one month and five days elapsed from the time that the plaintiff was asked to pay the licence fee until it made payment. It follows that the plaintiff's delays in submitting the draft and in paying the licence fee resulted in the licence issuing almost five months after it might have had the plaintiff not been guilty of those delays. Those delays, and other short delays in taking steps relevant to the DP&EMP process, cannot be described as causes beyond the plaintiff's reasonable control."
The evidence shows that the following events occurred on the following dates:
| DATE | EVENT |
| 5 July 1995 | Appellant approved guidelines DELM advised of approval Decision made to suspend work on DP & EMP until highway issue resolved |
| 18 Sept 1995 | Confirmation received that highway not a problem |
| 6 October 1995 | Incomplete preliminary draft DP & EMP forwarded to appellant |
| 11 October 1995 | GHD engaged noise modelling expert |
| Early Dec 1995 | GHD received noise modelling report |
| 20 Dec 1995 | "Preliminary draft" DP & EMP sent to DELM |
| 29 Jan 1996 | Preliminary DP & EMP draft returned with queries |
| 5 Feb 1996 | GHD wrote to the appellant with respect to the queries |
| 1 March 1996 | GHD lodged revised draft DP & EMP |
| 2 March 1996 | DP & EMP advertised |
| 1 April 1996 | End statutory comment period |
| 19 April 1996 | GHD lodged supplemental DP & EMP |
| 14 May 1996 | Appellant received draft licence |
| 15 May 1996 | Appellant requested change of conditions |
| 29 May 1996 | GHD requested cheque from appellant |
| 4 July 1996 | Cheque received from appellant |
| 9 July 1996 | Licence issued |
The foregoing shows that there was a delay of two months and thirteen days while there was indecision about the site of the proposed highway. This resulted in the preliminary draft not being lodged until five days before Christmas. It was inevitable that little would be done by DELM over the Christmas holiday break with the result that the preliminary draft was not returned until 29 January. Had there been no delay over the proposed highway and had the noise modelling expert been engaged promptly, it is reasonable to assume that DELM would have commented on and returned the first draft in November and thus the milestone would have been met. Even if the delay caused by indecision over the location of the proposed highway was capable of coming within the scope of the force majeure clause, it clearly was not a cause of delay beyond the appellant's reasonable control, for it could have proceeded with some work on the DP & EMP even though there was indecision over the proposed highway. Almost a month elapsed while the appellant considered DELM's comments so that the draft DP & EMP was not lodged until 1 March 1996. Further, there was a period of delay between 29 May 1996, when the appellant was asked to send a cheque for its licence, and 4 July when the cheque was forthcoming. The learned trial judge's finding, "Those delays, and other short delays in taking steps relevant to the DP&EMP process, cannot be described as causes beyond the plaintiff's reasonable control" was the only proper one to make on the evidence. This leads directly to ground 4 which was argued next and, in effect, is a further complaint about the finding that the delays referred to in ground 2 were not due to causes beyond the appellant's reasonable control as provided in the force majeure clause.
Ground 4That His Honour erred in fact in finding that the risk the Appellant took in preparing a draft DP&EMP prior to entering into a formal written contract for the purchase of the land at Bridgewater upon which the mill was to be constructed, was a risk of the same nature as the risk the Appellant ought to have undertaken by preparing a draft DP&EMP for proposed Bridgewater mill site prior to the issues of the proposed National Highway route and the subdivision of the land being resolved.
This is what the learned trial judge said about this matter:
"There had been no impediment to the preparation of the draft DP&EMP, whilst there was the possibility that the flitch mill would not be able to be constructed on the intended site. The plaintiff could have proceeded to have prepared it, with the concurrence of the owners of the land, taking the risk that its expenditure would prove to be of no value. That was the very risk which ultimately it did take when it embarked on the preparation of the draft DP&EMP before the owners of the land had contractually bound themselves to sell it to the plaintiff. It was not until 22 November 1995 that the plaintiff entered into a conditional agreement to purchase the land."
Success on this ground, in the sense that the appellant persuades this Court that the risk it took in preparing the DP & EMP before the execution of an agreement to buy the land, was not the same kind of risk as preparing the DP & EMP while there was uncertainty about the proposed highway would not necessarily mean that the appellant succeeded on the appeal. This finding by the learned trial judge is no more than a passing observation. The issue is not whether the two risks are about the same, but whether the indecision over the site of the proposed highway caused a delay in achieving the milestones and, if yes, whether that delay was one beyond the reasonable control of the appellant within the meaning of the force majeure clause. The short answer to this ground is that any delay in the preparation of the DP & EMP caused by indecision over the location of the proposed highway was over before the deed was executed. Even if it was not over but in existence at the time the deed was executed, the appellant cannot rely upon it because it was a cause that fell within the scope of the matters enumerated in pars(a) and (b) or (c) set out by Kerr J in The Angelia (supra) at 225.
Grounds 7 and 8 That His Honour erred in fact in finding, or alternatively it was not reasonably open for him to find, that a second telephone conversation between Mr J Creagh and Mr D Allen on 19th September 1995 did not take place.
That His Honour erred in fact and law in failing to determine whether the Appellant made a request for a supply contract on or about the 14th November 1995, and whether the Respondent accepted that request, and if so, what legal consequences flowed from that request in terms of the Respondent's right to subsequently terminate the contract pursuant to clause 8.2.
The deed, cl 3.8 provided that the respondent would offer the appellant a supply contract for the supply of up to 90,000 tonnes of flitch log material "meeting an agreed specification". It also provided that "unless otherwise agreed", the appellant would make a request for this contract during January 1996 and the respondent would supply a draft for consideration within three months of the request being made. Agreement on the specifications of a flitch log was a critical matter. The appellant's case was that one of the causes of the failure to meet the milestones which was beyond its reasonable control was the respondent's failure to provide a draft contract for the sale of the raw material. The appellant's case at trial (statement of claim, par13) was that it needed this agreement before it could raise the finance required for the project. The appellant claimed that this agreement was requested as early as 19 September 1995 and that the respondent agreed to produce it within six weeks of that date but failed to do so. On this basis the appellant argued that within the terms of the deed, cl 3.8, the time for production of the supply contract had been otherwise agreed and the respondent was in breach of the clause by failing to produce it within six weeks of 19 September 1995.
The evidence at trial was that the finance was to be provided by Building Supplies Limited (BSL), an unlisted public company with interests in the timber industry. A Mr Creagh, solicitor of Queensland, was a director of this company. He and Mr Corbet of the appellant company were introduced to one another and there followed discussions about BSL providing the finance for the flitch mill project. It is necessary to interpolate here that the deed which is the subject matter of this litigation was not the first agreement between the parties with respect to the proposed flitch mill project. Initial discussions between the Forestry Commission of Tasmania and Mr Corbet about this project took place as far back as 1983. There followed lengthy exchanges about the whole idea, and on 24 January 1994, the parties entered into an agreement, many of the provisions of which are similar to those in the deed dated 24 October 1995. By August 1994 the appellant was not making progress in accordance with the target dates set down in the first agreement and there followed discussions about resolving the difficulties. The agreement provided that the project should be operational by 3 January 1995, but in February 1995 it was still well behind schedule. It was against this background that the appellant and BSL entered into an agreement on 22 May 1995 whereby BSL agreed to provide certain capital and raise finance not exceeding $3m and, in return, the appellant agreed to issue shares so that BSL would hold half the appellant's issued share capital. This agreement was subject to a number of conditions precedent which were not fulfilled. Although the 24 January 1994 agreement was never formally terminated, the parties agreed to bring it to an end by negotiating and executing the deed dated 24 October 1995.
At the trial, Mr Creagh stated in his written evidence that on 19 September 1995 he spoke on the telephone to a Mr Allen, an officer of the respondent. Mr Creagh stated that he raised the question of preparing a contract for the sale of the logs earlier than the time agreed, this being the time later provided for in the deed, as it was necessary to have such a contract before a proper feasibility study could be conducted. Mr Creagh stated that Mr Allen telephoned him back and said that he had made enquiries of a Mr Stringer (also an officer of the respondent) who had told him that there was no reason why a draft contract could not be produced within six weeks of request. Mr Creagh put into evidence a diary note that he claimed confirmed his written evidence.
In his written evidence, Mr Allen stated that he recalled Mr Creagh asking him if the supply contract could be produced earlier than planned, perhaps within six weeks, but stated that his only response was to say that he would refer it to Mr Stringer. Mr Allen's evidence was that he had no authority to do more than refer it to Mr Stringer who said, "in very strong language", that the agreement would not be drawn up earlier upon a request in January (as agreed) and not within a time frame of six weeks. Mr Allen said that he did not telephone Mr Creagh back about the matter. Mr Stringer's evidence was to the effect that he had no specific recollection of being asked by Mr Allen if the contract could be produced earlier, but he does recall that suggestions were made to that effect by someone at some stage. He added that he would not have agreed to produce a draft supply agreement other than in accordance with the agreed time frame which was later reduced to writing in the deed, cl 3.8.
The trial judge had to resolve this direct conflict of fact. Mr Creagh's diary note records:
"[Incoming call from Mr Allen]
Spoken to Stringer. Could produce drafts within six weeks of (sic) workload. No other reason. If want it they will do it."
The learned trial judge preferred the evidence of Mr Allen to that of Mr Creagh in this respect. There were good reasons for him to do so. The evidence shows that the day after the telephone conversation between Mr Creagh and Mr Allen, Mr Creagh wrote to Mr Gordon, the respondent's general manager (commercial) with respect to the terms of the then proposed deed. The letters states that certain proposed amendments were acceptable and then proceeds:
"As I foreshadowed yesterday, Asia Pacific is anxious to advance the execution of the formal contract and to that end I would like to request one further amendment to give the company that flexibility.
The amendment sought would enable the company to make a request for the contract earlier than January 1996 and a suggestion is as follows:
3.8Delete the word 'during' and substitute the words 'at any time prior to the end of'.
It is Asia Pacific's present intention to request the contract to be prepared as soon as the agreement is signed and in this respect it would be most anxious to receive a draft as soon as possible and within 6 weeks of the request as we discussed."
That letter, written the day after the conversation with Mr Allen, is totally inconsistent with Mr Creagh's evidence that agreement had been reached that the draft supply agreement would be produced within six weeks of 19 September 1995. That letter is consistent with the evidence of Mr Allen that a request was made as outlined by Mr Creagh and that no response had been received. Mr Creagh sent a copy of this letter to Mr Corbet. The latter's signature as a director of the appellant in the execution of the deed containing a clause contrary to that which Mr Creagh said had been agreed is also inconsistent with Mr Creagh's claim that any agreement had been reached on the telephone on 19 September 1995. Re-read in the light of the foregoing, Mr Creagh's note of this telephone conversation is, as the learned trial judge observed, "open to many interpretations other than as recording a representation in the terms alleged by the [appellant]". The learned trial judge's finding of fact is fully justified and there is no basis for disturbing it. Ground 7 fails.
With respect to ground 8, the evidence does not support the proposition that the appellant requested a supply contract on 14 November 1995. In his written evidence, Mr Creagh stated that on 14 November he spoke to Mr Allen about some other matter in connection with the project and "enquired as to progress with the contract." He went on to state that Mr Allen appeared to express no surprise about the "request". Mr Creagh's diary note in this respect reads, "Also asked how contract of sale is going. He will talk to Darrel Stringer and let me know." It is hardly surprising that the learned trial judge did not deal with this matter. This evidence does not amount to evidence of an agreement to vary the date provided in the deed cl 3.8 for the delivery of the supply contract. Ground 8 is not made out.
Ground 3That His Honour erred in law by failing to interpret the force majeure clause of the contract on the basis that the parties intended to essentially agree upon circumstances which would excuse performance in the event of delays beyond the reasonable control of either party including foreseeable delays, such as delays in obtaining a DP&EMP from DELM, and that thereby, whilst foreseeable, the delay in obtaining a DP&EMP from DELM ought to have been construed as constituting an excusable contingency within the terms of the bargain agreed upon.
The words of the force majeure clause are plain. For the reasons expressed with respect to ground 1, this ground also fails.
Ground 9That his Honour erred in fact and in law in holding that the draft DP & EMP was submitted on 1 March 1996 when it was an admitted fact and the uncontradicted evidence, that it was submitted on 20 December 1995.
Ground 10That his Honour erred in fact and in law in failing to find that the final DP & EMP had not been lodged by 28 February 1996 when it was an admitted fact that it was lodged on or about 28 February 1996."
By its statement of claim, par13, the appellant pleaded that it submitted the draft DP & EMP on or about 20 December 1995, the "supplementary draft DP & EMP" on 23 February 1996 and the "final DP & EMP" on 20 April 1996. By its defence the respondent admitted those facts.
The Environmental Management and Pollution Control Act 1994, ss39 and 40, which came into operation on 1 January 1995 (Statutory Rule 218/1994), required the appellant to submit a "draft environmental improvement programme" and on its receipt the Board of Environmental Management and Pollution Control "must advertise the receipt of the program by notice published in a daily newspaper ...". Within thirty days of such publication any person may make representations to the Board about the program. The thirty day period for objections may be extended by the Board for a further period of up to fourteen days (s40(3)). The milestones in the deed refer to submission of the "Draft DP & EMP" on 8 November 1995 and next, "End of statutory public comment period" on 16 December 1995, a period of thirty-eight days. It seems clear to me that the reference in the deed to submission of "Draft DP & EMP" is a reference to the submission of the "final" draft that the Act requires the Board to advertise. According to the written evidence of Mr Gosden, this did not occur until 1 March 1996. He stated that he lodged a draft with DELM on 20 December 1995, but on 29 January 1996 he received five pages of queries from that department. With respect to the receipt of these queries, Mr Gosden said that it was a "step not contemplated by me in my letter to Forestry Tasmania of 8.6.95". The draft was advertised on the day after its receipt, 2 March 1996.
The learned trial judge found that the draft was lodged on 1 March 1996. That finding was in accordance with the evidence I have set out but, of course, contrary to the admitted plea in the statement of claim, par13, set out above. Grounds 9 and 10 were added to the grounds of appeal by way of amendment made during the hearing of the appeal. In response to the amendment, counsel for the respondent sought leave to amend its defence to admit that on 20 December 1995 a draft DP & EMP was submitted. Leave was granted, for it was clear that the admission originally pleaded was due to the respondent understanding par13 to be a reference to the "preliminary draft" not the draft plan or program referred to in the milestones and the Act. As the amendment was granted, his Honour's finding of fact is not contrary to the admitted fact and, for the reasons just exposed, consistent with the evidence. Ground 9 fails.
Ground 10 also relates to the statement of claim, par13, which pleads that the appellant lodged a supplementary draft DP & EMP on or about 23 February 1996 (not 28 February as stated in ground 10). This is admitted by the defence. However, the uncontradicted evidence was that between 29 January 1996 and 1 March 1996 the appellant and its engineers were engaged in dealing with the queries that had been raised by DELM and nothing was lodged until 1 March 1996. After the end of the period for statutory comment, the appellant gave consideration to several matters that had arisen and lodged a supplementary DP & EMP which dealt with those matters on 19 April 1996. This Court gave the respondent leave to amend its plea to this part of the statement of claim to admit that on 19 April 1996 the appellant lodged a supplementary draft DP & EMP.
Grounds 9 and 10 are entirely without merit. Delay in the preparation of the DP & EMP was not pleaded or relied upon as a cause of delay beyond the control of the appellants and therefore a force majeure event until the start of the trial when an amendment to this effect was allowed. Prior to that amendment, the dates in the statement of claim, par13, which are the focus of grounds 9 and 10, bore no special significance. Had the matter been adverted to when delay in the preparation of the DP & EMP was added as a claimed force majeure event, no doubt the amendments that this Court allowed would have been allowed by the learned trial judge. Further, the appellant did not rely on the admissions at trial, nor even consider them, until counsel for the appellant noted the discrepancy between the admissions and the findings (and the evidence) as he was taking the Court through the material in the appeal books at some length.
I would dismiss the appeal.
WRIGHT J
5 May 1998
I agree with the Reasons for Judgment of Underwood J. In my opinion, the appeal should be dismissed.
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