Aurizon Network Pty Ltd v Glencore Coal Queensland Pty Ltd - [2019] QSC 163

SUPREME COURT OF QUEENSLAND

CITATION:

Aurizon Network Pty Ltd v Glencore Coal Queensland Pty Ltd & Ors [2019] QSC 163

PARTIES:

AURIZON NETWORK PTY LTD ACN 132 181 116

(Plaintiff)

v
GLENCORE COAL QUEENSLAND PTY LIMITED ACN 098 156 702

(First Defendant)

AND

CALEDON COAL PTY LIMITED ACN 120 967 839 (IN LIQ)
(Second Defendant)

AND

YARRABEE COAL COMPANY PTY LTD ACN 010 849 402
(Third Defendant)

AND

WESFARMERS CURRAGH PTY LTD ACN 009 362 565
(Fourth Defendant)

AND

WASHPOOL COAL PTY LTD ACN 139 976 819
(Fifth Defendant)

AND

COLTON COAL PTY LTD ACN 140 768 636
(Sixth Defendant)

FILE NO/S:

BS No 2880 of 2016

DIVISION:

Trial Division

PROCEEDING:

Trial - Claim

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

27 June 2019

DELIVERED AT:

Brisbane

HEARING DATE:

10, 11, 12, 13, 14, 17, 18 and 19 September 2018

JUDGE:

Jackson J

ORDER:

The order of the court is that:

1.   It is declared that each of the notices given by the defendants under clause 6.1(c) of the contracts made between the plaintiff and the defendants styled the “Wiggins Island Project Deed (2011)” is invalid and of no operative contractual effect.

2.   The defendants’ counterclaims are dismissed.

3.   The parties are directed to provide submissions in writing on the question of costs within 21 days.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – CUSTOM AND USAGE – INCORPORATION INTO CONTRACT – CONSISTENCY WITH EXPRESS TERMS – where ordinary meaning of text is clear - where defendants submit that legal meaning of text cannot be affected by extrinsic facts - whether the ambiguity requirement is a gateway that must be passed through before admission of evidence of extrinsic facts in every dispute relating to the construction of a contractual term in a formal written contract – whether ambiguity gateway does not apply where something has clearly gone wrong with the text on its ordinary meaning.

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – CUSTOM AND USAGE – INCORPORATION INTO CONTRACT – CONSISTENCY WITH EXPRESS TERMS – where ordinary meaning of text is clear - where defendants submit that legal meaning of text cannot be affected by surprising operation or commercial inconvenience or disadvantage to the plaintiff - whether the operation of the text on its ordinary meaning amounts to a commercial absurdity – whether the court may depart from ordinary meaning in order to avoid a commercial absurdity – whether the construction contended for is sufficiently clear

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – GENERALLY – where ordinary meaning of text is clear - where defendants submit that term cannot be implied because of failure to satisfy requirements for implication of a term implied in fact – whether the implied term contended for is sufficiently clear

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – GENERALLY – where each defendant notified the plaintiff and each Other Customer under cl 6.1(c) of the WIRP Deed that every relevant Customer’s Segment for the defendant was to cease being a Customer’s Segment – where notice had effect of reducing each defendants’ liability to pay the WIRP Fee to nil – where notice had effect of shifting the burden of the WIRP Fee for the Customer’s Proportion for the Segment onto any remaining Segment Customer for the Segment – whether there is an implied term in the WIRP Deed that a Customer is obliged to act in good faith towards and deal fairly with the plaintiff in respect of giving notice under cl 6.1(c).

The Queensland Competition Authority Act 1997 (Qld), s 84, s 100, s 101, s 133, s 136, s 158, s 250.

Adams v Lambert (2006) 228 CLR 409, cited

Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570, cited

Air New Zealand Ltd v Nippon Credit Bank Ltd [1997] 1 NZLR 218, cited

Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349, cited

Allgood v Blake (1873) 8 Ex 160, cited
Amcor Ltd v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241, cited

AMP v 400 St Kilda Rd [1991] 2 VR 417, cited

Apple and Pear Australia Ltd v Pink Lady America LLC (2016) 343 ALR 112, cited

Australian Broadcasting Corporation v Australasian Performing Rights Association Ltd (1973) 129 CLR 99, cited
Bank of New Zealand v Simpson [1900] A.C. 18, cited

Bartlett v Australia & New Zealand Banking Group Ltd (2016) 92 NSWLR 639, cited

Bayside Council v Corp Constructions Pty Ltd [2017] NSWCA 120, cited
Boyes v Cook (1880) 14 ChD 53, cited

Burger King Corporation v Hungry Jack’s Pty Ltd (2001) 69 NSWLR 558, cited

Burns Philp Hardware Ltd v Howard Chia Pty Ltd (1987) 8 NSWLR 642, cited

Byrnes v Kendle (2008) 243 CLR 253, cited

Cherry v Steele-Park (2017) 96 NSWLR 548, cited

Coast Corp Pacific Pty Ltd v Stockland Development Pty Ltd [2018] QSC 305, cited

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, cited

Commonwealth Bank of Australia v Barker (2014) 253 CLR 169, cited

Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297, cited

Cushman & Wakefield(NSW) Pty Ltd v Farrell [2017] NSWCA 24, cited

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2016) 261 CLR 544, cited

Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640, cited

Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228, cited

Farrelly v Phillips (2017) 128 SASR 502, cited
Fitzgerald v Masters (1956) 95 CLR 420, cited

Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603, cited

Gemmell Power Farming Co Ltd v Nies (1935) 35 SR (NSW), 469,

Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529, cited

Goss v Lord Nugent (1833) 5 B & D 57; 110 ER 713, cited
Grant v Grant (1861) 5 CP 727, cited
Grey v Pearson (1859) 6 HLC 61, 106; 10 ER 1216, cited

Hart v MacDonald (1910) 10 CLR 417, cited

Helicopter Sales (Aust) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1, cited

Horsfall v Braye (1908)7 CLR 629, cited

Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151, cited

Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church (Archdiocese of Sydney) (1993) 31 NSWLR 91, cited

Inglis v John Buttery & Co (1878) 3 App Cas 552, cited
International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151, cited

Jackson Nominees Pty Ltd v Hanson Building Products Pty Ltd [2006] QCA 126, cited

Jackson v Swift Australian Company Pty Ltd [1968] 1 Qd R 1, cited

Jireh International Pty Ltd v Western Exports Services Inc [2011] NSWCA 137, cited

John v Price Waterhouse [2002] EWCA Civ 899, cited

LG Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235, cited

Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633, cited

Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd (2015) 237 FCR 534, cited

McGrath v Sturesteps (2011) 81 NSWLR 690, cited

McVeigh v National Australia Bank Ltd (2000) 278 ALR 429, cited

Meehan v Jones (1982) 149 CLR 571, cited

Mills v Mills (1938) 60 CLR 150, cited

Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297, cited

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd & Anor (2015) 256 CLR 104, cited

Netglory Pty Ltd v Caratti [2013] WASC 364, cited
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, cited

Paciocco v ANZ Banking Group Ltd (2015) 236 FCR 199, cited

Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, cited

Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64, cited

Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575, cited

Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429, cited

Platinum United II Pty Ltd v Secured Mortgage Management Ltd (in liq) [2011] QCA 162, cited

PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301, cited

Prenn v Simmonds [1971] 1 WLR 1381, cited
Purves v Smith [1944] ALR 269, cited

Queensland Power Co Ltd v Downer Edi Mining Pty Ltd [2010] 1 Qd R 180, cited

Reardon Smith v Hansen-Tangen [1976] 1 WLR 989, cited

Reliance Rail Pty Ltd v Permanent Custodians Ltd (2017) 122 ACSR 317, cited

Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, cited

Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd (2012) 37 VR 486, cited

Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45, cited

Schwartz v Hadid [2013] NSWCA 89, cited

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, cited

Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84, cited

Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2019] NSWCA 11, cited

Specialist Diagnostic Services Pty Ltd v Healthscope Ltd (2012) 41 VR 1, cited

Stratton Finance Pty Ltd v Webb (2014) 314 ALR 166, cited

Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd (2014) 48 WAR 261, cited

The Eastern Extension Australasia and China Telegraph Co Ltd v Commonwealth (1908) 6 CLR 647, cited
The River Wear Commissioners v Adamson (1877) 2 App Cas 743, cited
Toll (FGCT)Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, cited

Tredegar v Harwood [1929] AC 72, cited

Trump International Golf Club Scotland Ltd v Scottish Ministers [2015] UKSC 74, cited

United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618, cited

COUNSEL:

D Clothier QC, M Lyons and E Doyle-Markwick for the Plaintiff

J McKenna QC, S Cooper and S Hooper for the First Defendant
D Turner for the Second Defendant
D O’Sullivan QC, J O’Regan and A Stumer for the Third to Sixth Defendants

SOLICITORS:

Quinn Emanuel Urquhart & Sullivan for the Plaintiff

Holding Redlich for the First Defendant
Clayton Utz for the Second Defendant
Norton Rose Fulbright for the Third to Sixth Defendants

JACKSON J:

The questions in dispute in this proceeding concern the operation of six contracts made between the plaintiff on the one part and one of the defendants on the other part, each styled the “Wiggins Island Rail Project Deed (2011)” (“WIRP Deed”). In total, there were eight such contracts, all based on a standard form, although it will be necessary to explain some differences among the rights and obligations as between the plaintiff and individual defendants. The other two WIRP Deeds were entered into between the plaintiff on the one part and Cockatoo Coal Pty Ltd (“Cockatoo”) and Springsure Creek Coal Pty Ltd (“Springsure”). Under each of the WIRP Deeds, the plaintiff is styled “QR Network” and the other party is styled “Customer”.
The plaintiff seeks to establish the liability of each defendant for amounts payable under the WIRP Deed month by month for what is termed the “WIRP Fee”. The dispute arises because each defendant gave notice to the plaintiff under a provision of their WIRP Deed that, if valid, would have the effect of reducing that defendant’s liability to pay the WIRP Fee to nil. The plaintiff contends that none of the defendants was entitled to give the notice.
The underlying subject matter of the WIRP Deeds was the funding and construction by the plaintiff of works to upgrade the capacity of the plaintiff’s rail infrastructure network for the transport of coal from the mines of the defendants to a new coal ship loading terminal, named the Wiggins Island Coal Export Terminal (“WICET”). For practical purposes, “capacity” of the rail network is measured by reference to a number of train services for a standard coal train of 8,210 tonnes of coal for a designated route over a designated time period.
Overall, it was intended to increase that capacity to provide for an increase in train services to carry 27 million tonnes of coal per annum from the Customers’ mines to WICET. The anticipated expenditure for the necessary works was estimated at $905M. The expected timeframe for completion of the works was approximately four years. However, each Customer’s use of the increase in capacity was not expected to be equal, for two reasons.
First, not all Customers would access or use all parts of the required works for the overall upgrade, termed the “Extension”. That access or use depended, to varying extents, on the location of the Customer’s mine or proposed mine. Two examples will illustrate the point. All of the Customers intended to ship coal through WICET. Every shipper through WICET must have access to and use the railway loop for unloading coal from trains at WICET. The railway loop was termed “Segment #1 – Balloon Loop” under each of the WIRP Deeds. On the other hand, only the first defendant and Springsure proposed to have access to and to use the upgrade proposed for the Bauhinia Branch Line termed “Segment #5-Bauhinia North”.
Under each of the WIRP Deeds, the scope of the works to be funded and constructed by the plaintiff was identified in Schedule 3, by reference to particular sections of railway track, that were termed Segments #1, #2, #3, #5 and #8. Each Customer was identified as a Customer in respect of each Segment it proposed to access or use for the additional capacity. Each such Segment was termed a “Customer’s Segment” for that Customer. Where another Customer also intended to access or use the same Segment, that Customer was termed an “Intended Other Customer” for the (common) Segment.
Second, the WIRP Deeds distinguished among the Customers by reference to the quantity of the capacity to be allocated to each Customer, termed the “Customer’s Capacity” and also calculated as a percentage, termed a “Customer’s Proportion”, for each relevant Segment. With one exception, each Customer’s Capacity is measured in the number of train services per annum for the Segment, based on the standard sized coal train. The Customer’s Proportion is the percentage proportion of the total increase in capacity for all Customers for the Segment.
So, for the Segment #1 – Balloon Loop, that was intended to be accessed or used by all Customers, the first defendant’s Customer Proportion was 39.8 percent, whereas for Segment #5 – Bauhinia North, that was intended to be accessed or used only by the first defendant and Springsure, the first defendant’s Customer Proportion was 67.8 percent.
It will be necessary to deal with the provisions of the WIRP Deeds in further detail later. However, enough of the background has been stated to identify the three questions that will determine the outcome of the proceeding.
Clause 6 of each WIRP Deed provides for variations to the scope of the works to be carried out for a Segment. If there is a variation to the scope of the works and it is also proposed to change the Segment Customers for a Segment, cl 6.1(b) applies. But if it is proposed to change the Segment Customers without any variation to the scope of works for a Segment, cl 6.1(c) provides as follows:
“Prior to the First Milestone Target Date, the Customer may notify QR Network and each Other Customer that a Segment is to cease being a Customer’s Segment provided that:
(i)       the Customer is not the only Segment Customer for the Customer’s Segment at the time such notice is given; and
(ii)      after the Segment would, but for this clause 6.1(c)(ii), cease being a Customer’s Segment in accordance with this clause 6.1(c), there is at least one remaining Segment Customer for the Segment,
in which case, as at the date such notice is given to QR Network:
(i)       item 1 of schedule 2 will be taken to be varied to specify that the Segment is not a Customer's Segment;
(ii)      for the avoidance of doubt:
(A)the Segment will cease being a Customer's Segment;
(B)the Customer will cease being a Segment Customer for the Segment; and
(C)the Customer will cease having a Customer' s Proportion for the Segment; and
(iii)     this Deed will not otherwise be varied.”
It can be seen that there are two express restrictions on the Customer’s right or power under cl 6.1(c) to notify the plaintiff and each Other Customer that a Segment is to cease being a Customer’s Segment. First, the power is limited to the period prior to the First Milestone Target Date. Second, at least one Segment Customer for the relevant Customer’s Segment must remain. It is not in contest that if a Customer gives a valid notice under cl 6.1(c), the effect is to throw that Customer’s Proportion for the Segment onto any remaining Segment Customers for that Segment.
Collectively, the defendants’ case is that, prior to the First Milestone Target Date, each defendant notified the plaintiff and each Other Customer that every relevant Customer’s Segment for that defendant was to cease being a Customer’s Segment, with the effect of throwing the burden of the WIRP Fee for the Customer’s Proportion for the Segment onto any remaining Segment Customers for the Segment. The collective effect was to throw the whole of the burden onto Springsure, as the remaining Customer for all the Customer Segments (except Segment #3 - Moura East and Segment #8 – Moura West where Cockatoo was always the only Customer), in a superficially bizarre game of musical chairs. The defendants’ case is that each of them was entitled to do so under cl 6.1(c), irrespective of the fact that they were accessing and using or intended in future to access and use every one of the Segments that was a Customer Segment for that defendant before giving the notice.
The plaintiff contends that the notices were invalid on three grounds. First, on the proper construction of cl 6.1(c), a notice may not be given for a Customer Segment that is necessary to enable the plaintiff to provide what are termed the “Aggregate Access Rights” for the relevant defendant, or there is an implied term of the WIRP Deed to the same effect. Second, there is an implied term of the WIRP Deed that the Customer has a duty to act in good faith towards and deal fairly with the plaintiff in respect of giving notice under cl 6.1(c) that was breached. Third, the “Port Facilities (Initial) Available Date”, as defined in the WIRP Deeds, and thereby the First Milestone Target Date in cl 6.1(c), occurred by 30 September 2015, ending any entitlement to give notice under cl 6.1(c) before the notices were given.
For the reasons that follow, I have reached the conclusion that the plaintiff’s case must succeed on the second ground, because the defendants breached an implied term of the contracts to act in good faith towards and deal fairly with the plaintiff in respect of giving notice under cl 6.1(c). Accordingly, it is unnecessary to decide either the construction or implied term alternative arguments of the first ground or whether the Port Facilities (Initial) Available Date occurred prior to 30 September 2015. However, against the possibility of error on the implied term of good faith and fair dealing ground, I will also make the necessary findings to resolve the other two grounds.
Central Queensland Coal Network
The plaintiff is a subsidiary of Aurizon Holdings Limited, a listed company that is Australia’s largest rail freight operator. The plaintiff is the lessee of the land for the rail corridor and operator of the network and associated rail infrastructure known as the Central Queensland Coal Network (“the Network”), which is Australia’s largest export coal rail network. The Network is used to transport coal to a number of shipping terminals located on the Queensland coast. It is conveniently described as “below rail” or “track” infrastructure, reflecting that the plaintiff does not operate trains or provide train services itself, although another Aurizon group company does. Other train operators also operate on the Network to transport coal from a mine to a shipping terminal. Although there are some privately owned railway lines or spurs that connect to the Network, in substance, it operates as a monopoly of necessary rail infrastructure to transport coal from a mine to a shipping terminal in central Queensland.

The overall Network services approximately 40 coal mines in central Queensland that are producers of either metallurgical or thermal coal. Coal is transported over the Network from various mines to five shipping terminals at three ports. From north to south, the terminals now are Abbot Point Coal Terminal, Dalrymple Bay Coal Terminal, Hay Point Coal Terminal, WICET and RG Tanna Coal Terminal. Set out below is a map of the relevant area, showing the location of the mines and the Network.
Another map showing the Network, identifying sections of track as different segments, appears below:
It is not necessary to describe all of the features of the second map. However, two points should be noticed. The reference to “Track Segments” on this map does not correspond to the Segments that were agreed for the upgrade of relevant parts of the Network under the WIRP Deeds. The latter will be further identified and described below. Second, the Network can be broken down into a number of systems. Each system is a section of track that services one or more of the shipping terminals. The different systems are treated separately for regulatory purposes. A connecting system is a section of track that joins one system to another. There are four major systems and one connecting system. They are:
(a)Newlands – the Newlands system links mines to the Port of Abbot Point;
(b)Goonyella – the Goonyella system links mines to the Dalrymple Bay Coal Terminal and the Hay Point Coal Terminal at the Port of Hay Point;
(c)Blackwater – the Blackwater system links mines to Stanwell Power Station, Gladstone Power Station and the coal terminals at the Port of Gladstone;
(d)Moura – the Moura system links mines to the RG Tanna Coal Terminal at Gladstone;
(e)GAP – this is the connecting system that connects the Goonyella system to the Newlands system.
The users of the Network are coal producers with mines in the Central Queensland Coal region (until now mines in the Bowen Basin coal reserves) and railway operators who service those producers. At the time of the execution of the WIRP Deeds, all defendants, except the fifth and sixth defendants, had existing access arrangements with the plaintiff, so as to use the Network to transport coal from their existing mines to shipping terminals. However, those arrangements did not include the increased capacity for the Network that was proposed under the WIRP Deeds. Further, Springsure was not party to any existing access arrangement with the plaintiff before the WIRP Deeds were executed, but Cockatoo was.
A third map set out below depicts the relevant region of the Network for what became the Wiggins Island Rail Project, abbreviated to “WIRP” in many of the documents, more closely, showing the location of the Segments and the mines:
That map shows the approximate locations of:
(a)the Rolleston Mine operated by the first defendant, which has a loading facility at Rolleston on the Bauhinia branch line on the Blackwater system;
(b)the proposed Springsure/Arcturus Mine, being developed by Springsure, proposed to have a loading facility connection to the Bauhinia Branch Line of the Blackwater system;
(c)the proposed Washpool Mine being developed by the fifth defendant, proposed to have a loading facility connection to the Blackwater system near Blackwater;
(d)the Curragh Mine, operated by the fourth defendant, with a loading facility at Curragh on a northern branch of the Blackwater system;
(e)the Yarrabee Mine operated by the third defendant, with a loading facility on the Blackwater system at Boonal;
(f)the Cook and Minyango Mines operated by the second defendant, with a loading facility on a southern spur line of the Blackwater system at Koorilgah;
(g)the Baralaba Mine operated by Cockatoo Coal Pty Ltd, with a loading facility on the Moura system near Moura; and
(h)the proposed Colton Mine, being developed by the sixth defendant, proposed to have a loading facility connection near the North Coast line, near Maryborough.
Queensland Competition Authority Act and the Access Undertaking
It is not in dispute that the statutory context is relevant to any question of construction of the WIRP Deeds.[1]
[1]Compare Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 247 CLR 129, [36]; Amcor Ltd v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241, 255 [41] and 261 [64].
The Queensland Competition Authority Act 1997 (Qld) (“the Act”) makes provision for the declaration by the Minister for the Act of a service.[2] The Network is a “declared service” because it is a “coal system”.[3]
[2] The Queensland Competition Authority Act 1997 (Qld), s 84.
[3] The Queensland Competition Authority Act 1997 (Qld), s 250.
For a declared service, Divisions 4 and 5 of Part 5 of the Act impose obligations upon an access provider to negotiate in good faith with an access seeker to provide appropriate access to the declared service.[4] Reasonable efforts must also be made to satisfy the reasonable requirements of the access seeker.[5] Division 7 of Part 5 provides for an access undertaking to be given by an access provider for a declared service, either voluntarily[6] or if so required by the Queensland Competition Authority (“QCA”).[7]
[4]         The Queensland Competition Authority Act 1997 (Qld), s 100(1).
[5]         The Queensland Competition Authority Act 1997 (Qld), s 101(1).
[6]         The Queensland Competition Authority Act 1997 (Qld), s 136.
[7]         The Queensland Competition Authority Act 1997 (Qld), s 133.
Once an access undertaking is approved by the QCA, an order may be made directing the responsible person to comply with a term of the access undertaking that has been breached and to compensate anyone who has suffered loss or damage because of the breach.[8] Those powers follow from the obligation of the owner or operator of the declared service to comply with the access undertaking.[9]
[8] The Queensland Competition Authority Act 1997 (Qld), s 158A.
[9] The Queensland Competition Authority Act 1997 (Qld), s 150A.
It is also not in dispute that the WIRP Deeds refer to an “Access Undertaking” made by the plaintiff and that the Access Undertaking is relevant to any question of construction of the WIRP Deeds, as a document referred to in them.[10]
[10] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116 [46].
On 1 October 2010, the QCA approved an Access Undertaking for the Network styled “QR Networks 2010 Access Undertaking”, otherwise referred to in the evidence as “UT3” so as to distinguish it from access undertakings that operated in time before or after UT3. For simplicity, in these reasons, I will refer to it as the “Access Undertaking” and to its relevant provisions in the present tense even though it is now superseded.
The Access Undertaking creates a standard access regime for the plaintiff to provide access to users of the Network. “Access” means the non-exclusive utilisation of a specified section of rail infrastructure for the purposes of operating train services.
It is not necessary to detail fully the provisions of the Access Undertaking that regulate the plaintiff’s entitlement to obtain revenue from the operation of the Network.
Inter alia, Part 5 provides for access agreements as follows:
(a)a grant of access will be underpinned by an access agreement that will be developed and finalised as part of the negotiation process;[11]
(b)unless otherwise agreed between the plaintiff and an access seeker, the access agreement must be consistent with the terms of a standard access agreement if the train services are of the same type specified in that standard access agreement;[12]
(c)standard pricing principles are to be used to develop access charges to be included in an access agreement.[13]
[11]       Clause 5.1(a).
[12]       Clause 5.1(d)(i).
[13]       Clause 6.1.1, clause 6.5.1 and Part 12.
The standard pricing principles are divided into different categories or sections and are to be applied in an order of precedence from highest to lowest.[14] The plaintiff is not to differentiate access charges between access seekers within a relevant market except as provided for. The access charges are to be determined in accordance with the reference tariff and may only vary from the reference tariff in limited circumstances.[15] The standard pricing principles are to be consistent with Part 5 of the Act and the principles set out in s 168A that the price should:
“… generate expected revenue for the service that is at least enough to meet the efficient costs of providing access to the service and include a return on investment commensurate with the regulatory and commercial risks involved…”
[14] Clause 6.1.1.
[15] Clause 6.1.2(b).
The calculation of the reference tariffs to be used to determine access charges under the Access Undertaking follows a methodology that begins with the determination of the maximum allowable revenue (“MAR”),[16] that is intended to achieve full recovery of the efficient costs of the service, including a rate of return on the value of assets commensurate with the regulatory and commercial risks involved.[17] Within that context, the MAR is intended to operate as a revenue cap and is the product of underlying factors. One of those factors is termed the regulatory asset base (“RAB”), defined to mean the asset value for the Central Queensland Coal region, accepted by the QCA for the purpose of developing reference tariffs for coal carrying train services.[18] The RAB is provided for in Schedule A of the Access Undertaking and is to be maintained for the purposes of cl 6.2.4(c) which provides that it is the value of the assets to be used in cl 6.2.4(a) to determine the MAR.
[16]       Clause 6.2.4.
[17]       Clause 6.3.2.
[18]       Part 12, definition “Regulatory Asset Base”.
“[P]rudent capital expenditure… accepted by the QCA in accordance with clause 2 [of Schedule A]” is to be included in the RAB.[19] Clause 2.2 requires the QCA to assess prudency of capital expenditure by reference to its prudency in scope, standard of works and cost in accordance with cl 3. A factor in assessing “prudency” is whether the expenditure is reasonably required to comply with the access agreements.[20]
[19] Clause 1.2(d) of Schedule A.
[20] Clause 3.3.2(c)(ii) of Schedule A.
As foreshadowed above, the Access Undertaking provides for the plaintiff to obtain revenue by way of access charges[21] payable under an access agreement[22] for access, meaning, inter alia, the non-exclusive use of a specified section of rail infrastructure for the purposes of operating train services.[23]   Those access charges (and some other items) represent a regulated return of and return on invested capital and operating expenditure. The regulated return is set by reference to a weighted average cost of capital (“WACC”) determined by the QCA as part of the approval process of the Access Undertaking.[24] The return of capital is effected by allowing revenue, within the MAR, which matches the approved depreciation of the RAB. The return on capital is effected by applying an appropriate WACC, representing the percentage assessed as the average rate of return which those investing capital in an enterprise of this kind would reasonably require having regard to its relative risks.
[21]       Part 12, definition “Access Charge”.
[22]       Part 12, definition “Access Agreement”.
[23]       Part 12, definition “Access”.
[24]       Part 12, definitions “Approved WACC” and “Varied WACC”.
The MAR is used as a base from which, by distributing the required revenue across the projected usage of train services for the year, a reference tariff for each train service can be calculated. The reference tariffs are then used as the basis for setting the access charges payable under an access agreement. The aim of the approach is to produce an annual revenue for the plaintiff that provides the intended regulated return, as the MAR is fixed prospectively for any year. As well, there is a mechanism for the retrospective review of the level of actual revenue received. If those revenues are below the MAR, an adjustment is effected in the following year to rectify the position and vice versa. The plaintiff is permitted to require 100 percent take or pay arrangements under access agreements.
The Access Undertaking also sets out a negotiation framework by which an access seeker can apply for access and have it considered by the plaintiff. To an extent, the parties are free to negotiate the terms of an access agreement. However, unless otherwise agreed, an access agreement must be consistent with the terms of the standard access agreement for the relevant train services at the same time.[25]
[25] Clause 5.1(d).
There are two approved forms of standard access agreement: one for access holders; another for train operators for access holders.
Part 7 of the Access Undertaking deals with capacity management. It provides for the plaintiff to schedule and provide capacity related information in accordance with network management principles and for the plaintiff to make system rules.[26] Scheduling is to be done having regard to specified scheduling constraints to manage traffic.[27] An allocation of capacity, having regard to the network management principles and service specification and train scheduling by the allocation of access rights, is to be given to the first access seeker[28] and competing applications or requests for mutually exclusive access rights are to be dealt with by creating a queue based on the time when the plaintiff receives each access application.[29] These provisions recognise the finite capacity of the Network and the possibility or likelihood of competition between access seekers to obtain a share or greater share of the available capacity.
[26]       Clause 7.1.
[27]       Clause 7.2.
[28]       Clause 7.3.1.
[29]       Clause 7.3.4.
The Access Undertaking also provides for increases in the available capacity by the plaintiff making an extension of all or part of the Network. An extension is defined to be an enhancement, expansion, augmentation, duplication or replacement of all or part of the network.[30] It is a general principle that extensions undertaken by the plaintiff must be designed to create sufficient capacity to accommodate provision of all access rights being sought by access seekers that submit an expression of interest under the relevant process.[31] Another general principle is that, where an extension produces available capacity, negotiation for access rights in respect of that capacity will occur in accordance with the other provisions of the Access Undertaking, including the negotiation framework and queueing mechanisms.[32] Where the plaintiff believes an extension is reasonably required to meet demand for access rights within a coal supply chain, it is to make a request for proposals.[33] It is provided that an extension might either be funded by the plaintiff or be user funded.[34] Subject to certain limits, the plaintiff is to undertake and fund all extensions.[35] One limit is engaged if the extension is a significant investment,[36] a term defined to mean investment in a major expansion projected to cost in excess of $300M.[37] A major expansion is defined to mean an expansion for the purpose of creating or providing additional capacity substantially as a result of or in connection with a single major external development[38] and a major external development is defined to include a development into a new loading or unloading facility, which increases or facilitates an increase in the demand for access for coal carrying services.[39]
[30]       Part 12, definition “Extension”.
[31]       Clause 7.5.1(a).
[32]       Clause 7.5.1(c).
[33]       Clause 7.5.2(a)(i).
[34]       Clause 7.5.2.
[35]       Clause 7.5.4(a).
[36]       Clause 7.5.4(a)(iv)(B).
[37]       Part 12, definition “Significant Investment”.
[38]       Part 12, definition “Major Expansion”.
[39]       Part 12, definition “Major External Development”.
It follows that WICET constituted a major external development and the proposal to expand the Network for the purposes of creating or providing additional capacity to meet the demand for access for coal carrying train services for WICET was a major expansion and a significant investment.
The WIRP was not, therefore, an expansion that the plaintiff was required to fund or undertake under the Access Undertaking.
In addition to providing for access charges and reference tariffs within the pricing limits under an access agreement[40] as previously mentioned,[41] the Access Undertaking provides for the plaintiff to require an access seeker to agree to additional terms before being granted access rights, called “access conditions”, to the extent that is reasonably required in order to mitigate the plaintiff’s exposure to the financial risks associated with providing access for the access seeker’s proposed train services.[42]
[40]       Clauses 6.1, 6.2, 6.3 and 6.4.
[41]       Clause 6.5.1.
[42]       Clause 6.5.2(a).
A number of circumstances are identified as those where access conditions are deemed to be reasonably required,[43] including where the plaintiff demonstrates that it cannot provide the access sought unless it invests in a significant investment and the QCA approves the access conditions through the specified process.[44] An access condition that would result in the plaintiff earning revenue in addition to the ongoing access charges is required to be negotiated by a separate agreement.[45] The process of approval of access conditions requires the plaintiff to issue a report to all relevant access seeker customers and the QCA which details the access conditions the plaintiff is seeking,[46] the additional risks the plaintiff is exposed to which it is seeking to mitigate through the access conditions, how the access conditions mitigate those risks[47] and other matters.
[43]       Clause 6.5.2(b).
[44]       Clause 6.5.2(b)(iii).
[45]       Clause 6.5.2(d)(2).
[46]       Clause 6.5.4(a)(iii).
[47]       Clause 6.5.4(a)(iv).
After the plaintiff provides an access conditions report, the plaintiff and the access seekers are permitted to negotiate on the terms of the access conditions for a limited period.[48] If the plaintiff and all access seekers agree to the terms of the access conditions it is provided that the QCA will approve the access conditions unless it is satisfied that it would be contrary to the public interest, including the public interest in having competition in markets, or is reasonably expected to disadvantage future access seekers or others, or that the plaintiff has failed to provide access seekers with the report, or that it would contravene a provision of the Access Undertaking or the Act.[49]
[48] Clause 6.5.4(c).
[49] Clause 6.5.4(e).
As will subsequently appear, the terms of the WIRP Deeds constituted access conditions for the purposes of the Access Undertaking and under them it is provided that each of the defendants and the Other Customers is to become an access holder under an access agreement on standard terms in relation to the additional access rights to be allocated to them as access seekers by reasons of the enhancement constituting the significant investment to create the additional capacity required for WICET.
In simple terms, the WIRP Deed for each defendant and Other Customer is intended to regulate the plaintiff’s agreement to fund and construct the Expansion in order to create the proposed additional capacity and access rights in consideration for which the relevant defendant agrees to pay both access charges and the WIRP Fee and any Optimisation Fee. Absent the WIRP Deeds, there was no obligation for the plaintiff to fund, construct or meet any particular dates for the proposed additional capacity and access rights to meet the demand upon the Network created by WICET. The structure of the WIRP Deeds, prima facie, conformed to the structure of an access agreement and access conditions that were permissible under the terms of the Access Undertaking.
Proposed extension

In or about 2008, companies including most of the defendants, or related corporations, developed a proposal to establish the new coal export terminal that has become WICET. The terminal was intended to increase the volume of coal which could be shipped through the Port of Gladstone. The developer was a corporate group ultimately held by the defendants and other Customers under the WIRP Deeds or related corporations. Various extensions and enhancements to the existing rail infrastructure comprising the Network were required, in accordance with the railway paths between the locations of relevant mines or prospective mines and WICET. The regional map set out above shows those locations.
On 16 April 2010, the plaintiff issued a Request for Proposals in accordance with the Access Undertaking, requesting potential access seekers for WICET to express their interest in obtaining further rail capacity and to identify the extent of the capacity sought.
On 7 July 2010, a group of coal producers that included the defendants applied to the ACCC for authority to negotiate rights of access collectively with the plaintiff. At that time, the first, second, third and fourth defendants had established mines and existing access agreements with the plaintiff for the transport of coal from those mines using the Network. In contrast, neither the fifth defendant, sixth defendant nor Springsure had an existing mine or access agreement.
On 19 July 2010, the plaintiff advised the prospective Customers that they had been shortlisted for participation in Stage 1 of the proposed WIRP expansion of the Network.
On 19 August 2010, Mr Freeman introduced himself to the plaintiff as a representative of the coal producers for the purpose of the negotiations.
In December 2010, the ACCC approved the application to collectively negotiate with the plaintiff. Thereafter, the negotiations proceeded mostly on that basis.
On 11 or 12 May 2011, the plaintiff issued an Access Conditions Report to the QCA and prospective Customers under the Access Undertaking in respect of the proposed Access Conditions relating to the proposed WIRP extension.
The report identified that the proposed WIRP extension was a significant investment as defined in Part 12 of the Access Undertaking, involving the construction of infrastructure and anticipated costs of approximately $900M, a Customer group of eight users, a term of 20 years for the Access Conditions agreements proposed, a significant and directorial role for the Customer group in the design, construction, procurement procedures, cost determination and delivery of the infrastructure, and consequential additional risks for the plaintiff, termed the construction risk, market volume risk, stranding risk, optimisation risk, financing risk, site remediation risk and performance risk.
The report stated that it was made to address the requirements of the Access Undertaking and set out an overview of the proposed contractual arrangements and Access Conditions. They included that a Customer would make payments to the plaintiff in addition to the access revenue to be received through the standard reference tariffs and access terms and conditions, that the payments were to mitigate the significant additional risks to the plaintiff associated with the costs, duration and magnitude of the WIRP Project and that the payments proposed would be incentive based and linked to the plaintiff’s performance in relation to the timing, cost and delivery of the relevant additional capacity.[50]
[50] Clause 2.2.
Between 9 June 2011 and 10 August 2011, negotiation of the WIRP Deeds continued. It will be necessary to deal with limited parts of those negotiations later in the reasons.
On 10 August 2011, negotiations between the plaintiff and Springsure that did not include the defendants or Cockatoo were carried on in relation to a separate contract styled the Springsure Side Deed. On 5 September 2011, the plaintiff and Springsure executed the Springsure Side Deed.
On 5 September 2011, the WIRP Deeds were entered into.
Admissibility of evidence of extrinsic facts
None of the parties challenges the accepted principles of construction of written commercial contracts that the court of construction is to determine the meaning of the terms objectively, by what a reasonable business person in the position of the parties would have understood them to mean, having regard to the relevant and admissible surrounding circumstances, object and purpose of the transaction.[51]
[51]Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544, 551, [16]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116-117 [46]-[50], 131-132 [108] and 134 [119]; Electricity Generation Corporation Woodside Energy Ltd (2014) 251 CLR 640, 656-657 [35]; Byrnes v Kendle (2008) 243 CLR 253, 284 [98]; International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151, 160 [8], 174 [53]; Toll (FGCT)Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40]; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 461-462 [22].
There is, however, a significant dispute as to the admissibility of extrinsic facts in aid of the construction of the WIRP Deeds. Argument focussed on three points. First, the defendants generally object to the admissibility of any evidence of the negotiations. Second, the defendants object to the admissibility of evidence of the pleaded fact that at the time of entry into the WIRP Deeds, the Customers were of materially varying experience in mining and exporting coals and varying financial means.[52] Third, the defendants object to the admissibility of evidence of the pleaded fact that at the time of entry into the WIRP Deeds, there was a prospect that a Customer’s Segment under a WIRP Deed may cease to be necessary to enable the plaintiff to provide the Aggregate Access Rights under the WIRP Deed for the Customer.[53]
[52] Third Further Amended Statement of Claim, paragraph 10A.
[53] Third Further Amended Statement of Claim, paragraph 10C.
The defendants advance a number of bases for their objections. Summarising, the first defendant submits that ambiguity is a prerequisite to admissibility of extrinsic evidence and cl 6.1(c) is not ambiguous. Second, it submits that the scope of the admissible facts that may be considered by way of extrinsic evidence, in order to resolve a relevant ambiguity, does not include any fact constituted by the pre-contractual exchanges or negotiations between the parties. Third, it submits that an unsatisfied condition of admissibility of evidence of any otherwise relevant extrinsic fact is that the fact was known to all relevant parties at the time of making the contract. Fourth, it submits that the admissibility of evidence of any relevant extrinsic fact is subject to contractual exclusion.
Some of these questions engage difficulties that are familiar to contract lawyers. Two of them are whether an ambiguity in the meaning of a contractual term to be construed must be ascertained before any extrinsic evidence is admissible and whether extrinsic evidence is admissible to raise the ambiguity. Another lies in drawing the line between admissible evidence of extrinsic facts that are raised in negotiations and inadmissible evidence of prior negotiations that would tend to reveal or prove the parties’ subjective intentions.
The existence and scope of the ambiguity requirement is still a matter of judicial controversy and, on one view, remains to be resolved by the High Court in an appropriate case. However, an important assumption that underlay the defendants’ submissions in the present case is that the ambiguity requirement is a gateway that must be passed through in every case of disputed construction of a contractual term, including the present case. Against that assumed requirement, the defendants submit that if the ordinary meaning of the text of the term is clear, there can be no question that the legal meaning of the term is affected by extrinsic facts.
In my view, the assumption does not apply to a case where the ordinary meaning would lead to some absurdity. That is, the construction of a commercial contract does not involve a gateway of ambiguity in the ordinary meaning of the text of the term to be construed in every case before the construing court can proceed further. A patent textual ambiguity in the term itself, or appearing from the other terms of the contract, is not required in every case, despite the language of some important statements of principle.
It is not necessary to explore all of the relevant history in order to decide this case. The occasions for a trial Judge to expound upon contractual hermeneutics are thankfully few. But it is useful to make some points relevant to this case by reference to case law that antedates by 100 years or more the rigorous application of the requirement of ambiguity relied upon by the defendants, as not historically accurate, before dealing with more modern case law.
Extrinsic evidence – unresolved disputes
I will term the question whether an ambiguity or susceptibility to more than one meaning must be identified before extrinsic evidence of surrounding circumstances is admissible, the “ambiguity gateway”.[54] Some, who I will, for convenience and at the risk of inaccuracy, term “traditionalists”, hold that extrinsic evidence is not admissible unless, first, an ambiguity or susceptibility to more than one meaning can be identified in the text of the contract to be construed. Others, who I will for convenience term “modernists”, say that “ambiguity” itself is ambiguous and deny that there is any ambiguity gateway. A common context for the debate is a dispute about the extent of what out of the negotiation process can or cannot be used in aid of construction.[55]
[54]The term was first used in Martin K, “Contractual construction: Surrounding circumstances and the ambiguity gateway” (2013) 37 Australian Bar Review 118, that was judicially referred to before publication in Netglory Pty Ltd v Caratti [2013] WASC 364, [216] . It was first directly used in a judgment in Cherry v Steele-Park (2017) 96 NSWLR 548, 565 [71].
[55]As discussed by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352.
Who is right? My tentative answer is that there are weaknesses in both positions. Some of the traditionalists tend to overstate the rigidity of the ambiguity gateway, as if it extends to surrounding circumstances, in general, in all or almost all cases. Some of the modernists may be mistaken in thinking that their views about admissibility of evidence of extrinsic facts are a recent development.
Although there are recent statements at high levels in Australia about the existence or role of the ambiguity gateway, the differences of opinion at intermediate appellate court level are not yet directly answered by the High Court. It is appropriate, therefore, to approach the disputed questions as to the ambiguity gateway, as it relates to this case, as a matter of principle by reference to three questions.
First, should the disputed question be answered by reference only to the modern contract cases, or should attention be paid to the principles of interpretation of instruments more broadly, as was done in former times? Second, do the older cases support the argument that the rule excluding extrinsic evidence where the meaning of the contract is clear on its face operated rigidly to confine construction to the text only? Third, if the modern law is not settled, what might be some of the advantages and disadvantages of the ambiguity gateway?
I take as my starting point that as a matter of precedent, all below the High Court must adhere to the binding statement of principle in Codelfa Constructions Pty Ltd v State Rail Authority,[56] including the often analysed passage, sometimes called “Mason J’s true rule”, as follows:
“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 .”[57]
[56] (1982) 149 CLR 337.
[57] (1982) 149 CLR 337, 352.
First question: should there be a broad approach?
In 2015, the UK Supreme Court said the following:
“There is a modern tendency in the law to break down divisions in the rules on the interpretation of different kinds of document, both private and public, and to look for more general rules on how to ascertain the meaning of words. In particular, there has been a harmonisation of the interpretation of contracts, unilateral notices, patents and also testamentary documents.”[58]
[58] Trump International Golf Club Scotland Ltd v Scottish Ministers [2015] UKSC 74, [33].
The court went on to describe the process of how a planning consent is to be interpreted. They said it is:
“…what a reasonable reader would understand the words to mean when reading the condition in the context of the other conditions and of the consent as a whole. This is an objective exercise in which the court will have regard to the natural and ordinary meaning of the relevant words, the overall purpose of the consent, any other conditions which cast light on the purpose of the relevant words, and common sense.”[59]
[59] [2015] UKSC 74, [34].
This is consistent with the orthodox approach to construing a contract. The difference, if there is one, was suggested to be in the extent of the admissible extrinsic evidence. On that score, the court said:
“Differences in the nature of documents will influence the extent to which the court may look at the factual background to assist interpretation. Thus third parties may have an interest in a public document, such as a planning permission or a consent under section 36 of the 1989 Act, in contrast with many contracts. As a result, the shared knowledge of the applicant for permission and the drafter of the condition does not have the relevance to the process of interpretation that the shared knowledge of parties to a contract, in which there may be no third party interest, has. There is only limited scope for the use of extrinsic material in the interpretation of a public document, such as a planning permission or a section 36 consent.”[60]
[60] [2015] UKSC 74, [33].
Second question: how rigid was the ambiguity gateway under the older cases?
Let me start with a typical statement. This is how Professor John Carter refers to the older cases in his 2013 book, The Construction of Commercial Contracts:
“Throughout the 19^th century and, indeed, for a good part of the 20^th century, literalism held sway. Considerations of certainty, a profound commitment to the virtues of the ‘plain’ meaning of contracts and a belief that the function of the court in construction is simply to ‘read the document’ dominated the approach to all contracts. The literal approach to construction was policed by a much more rigid application of the parol evidence rule than is present today. The canons of construction were applied with alacrity, particularly in the Chancery cases.”[61]
[61]J W Carter, The Construction of Commercial Contracts, Hart Publishing, Oxford, 2013, [1-25]. There are no cases cited for this passage. However, in an article published in 2014 entitled “Context and Literalism. in Construction” Professor Carter detailed what I suspect are some of the cases for that view: see (2014) 31 JCL 100, fn 4-11
In 1833, in Goss v Lord Nugent,[62] Lord Denman CJ stated the extrinsic evidence rule thus:
“By the general rules of the common law, if there be a contract which has been reduced into writing, verbal evidence is not allowed to be given of what passed between the parties, either before the written instrument was made, or during the time that it was in a state of preparation, so as to add to or subtract from, or in any manner to vary or qualify the written contract.”[63]
[62] (1833) 5 B & D 57; 110 ER 713.
[63] (1833) 5 B & D 57, 65; 110 ER 713.
That case was not concerned with the limits of or any exceptions to the extrinsic evidence rule.[64] Nevertheless, it is a strong statement of principle. Even so, in my view, Professor Carter overstates the way in which the extrinsic evidence rule worked in former times. I will mention four cases.
[64]It was about the enforceability of a variation of the terms of a contract of sale of land required to be in writing under the Statute of Frauds.
First, in 1859 in Grey v Pearson,[65] Lord Wensleydale said this:
“I have been long and deeply impressed with the wisdom of the rule, now, I believe, universally adopted, at least in the Courts of Law in Westminster Hall, that in construing wills and indeed statutes, and all written instruments, the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity, or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no farther.” [66]
[65] (1859) 6 HLC 61; 10 ER 1216.
[66] (1859) 6 HLC 61, 106; 10 ER 1216.
That passage is a famous statement of the “golden rule” of statutory interpretation, although it was expressed to apply to all written instruments. As set out above, the UK Supreme Court may be turning back towards the broader approach to the principles affecting the construction of instruments embodied in Lord Wensleydale’s statement.[67]
[67] Justice Kirby was a well-known advocate of similar views: (2003) 24 Stat LR 95.
That statement had a long lasting effect in the interpretation of statutes – one felt in this country at least until the change in direction in 1980 represented by Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation.[68] However, although Grey v Pearson has been referred to in the High Court in two cases on questions of contractual construction,[69] it has never taken centre stage. In England, it was overtaken soon afterwards by other statements of principle as to the construction of contracts,[70] made in particular by Lord Blackburn, to which I will come in a moment.
[68] (1981) 147 CLR 297.
[69]The Eastern Extension Australasia and China Telegraph Co Ltd v Commonwealth (1908) 6 CLR 647; Purves v Smith [1944] ALR 269.
[70]See, for example, the reference to Lord Wensleydale’s speech in Waterpark v Fennell (1859) 7 HLC 650, 684 (a deed of grant case) by Isaacs J in Horsfall v Braye (1908) 7 CLR 629, 657.
There is a second passage in Grey v Pearson, which concerned the admissibility of extrinsic evidence. It is as follows:
“…the only question is, what is the meaning of the words used in that writing. To ascertain which every part of it must be considered with the help of those surrounding circumstances, which are admissible in evidence to explain the words, and put the Court as nearly as possible in the situation of the writer of the instrument, according to the principle laid down in the excellent work of Sir James Wigram on that subject.”[71]
[71] Grey v Pearson (1859) 6 HLC 61, 106; 10 ER 1216.
That passage is reasonably described as a statement of the “armchair principle”, prominent in the case law relating to the interpretation of wills, that is also associated with Lord Blackburn,[72] although it may have been James LJ who first raised the metaphor of the testator’s armchair.[73] It underscores the truth that extrinsic evidence of surrounding circumstances has always been admissible to some extent. I note the reference to Sir James Wigram’s text, on the admissibility and use of extrinsic evidence,[74] which was influential both then and later.
[72]Allgood v Blake (1873) 8 Ex 160, 162. See, for example, Farrelly v Phillips (2017) 128 SASR 502, 509 [27] and Theobald on Wills, 18 ed, 2016, Sweet and Maxwell, [12-029].
[73] Boyes v Cook (1880) 14 ChD 53, 56.
[74]Wigram, An Examination of the Law Respecting the Admission of Extrinsic Evidence in aid of the Interpretation of Wills, Maxwell Stevens & Norton, London, 3^rd ed, 1984.

There are two of Lord Blackburn’s judgments to mention. The first was in 1870, when his Lordship was still Blackburn J, in Grant v Grant,[75] a will case. The relevant passages are too lengthy to set out in full. Two bits will have to do. The first quoted Sir James Wigram’s work as follows:
“The question in expounding a will, he says, is, not what the testator meant, as distinguished from what his words express, but simply what is the meaning of his words. And extrinsic evidence in aid of the exposition of his will must be admissible or inadmissible with reference to its bearing upon the issue which this question raises.”[76]
[75] (1861) 5 CP 727.
[76] (1861) 5 CP 727, 734.
The second related to contracts:
“The general rule seems to be, that all facts are admissible which tend to shew the sense the words bear with reference to the surrounding circumstances of and concerning which the words were used, but that such facts as only tend to shew that the writer intended to use words bearing a particular sense are to be rejected.”[77]
[77] (1861) 5 CP 727, 728.
There are a few reasons to refer to this statement. Lord Blackburn was one of the great Judges of the common law. Second, it was influential in later cases about contractual construction, even though it was a case about a will. Third, the report identifies the two texts that were available at the time that dealt with the subject of extrinsic evidence. One was Sir James Wigram’s work. The other was Blackburn J’s own work on the subject,[78] which was raised during the course of argument.
[78] Blackburn, “A Treatise on the Effect of the Contract of Sale”, Philadelphia, 1847 at 35.
The second judgment of Lord Blackburn was in 1877 in River Wear Commissioners v Adamson,[79] as follows:
“In all cases the object is to see what is the intention expressed by the words used. But, from the imperfection of language, it is impossible to know what that intention is without inquiring farther, and seeing what the circumstances were with reference to which the words were used, and what was the object, appearing from those circumstances, which the person using them had in view; for the meaning of words varies according to the circumstances with respect to which they were used.”[80]
[79]It should not be overlooked that River Wear was a case about statutory construction. However, Inglis v John Buttery & Co (1878) 3 App Cas 552, 558, 572 and 577 could be substituted here, as a case where the negotiations were sought to be relied on to show the actual intentions.
[80] The River Wear Commissioners v Adamson (1877) 2 App Cas 743, 763.
That statement might have been made in any of the modern cases. It is often cited.
The advice of the Privy Council in 1900 in Bank of New Zealand v Simpson rounds out these early case references. The Board said:
“Extrinsic evidence is always admissible, not to contradict or vary the contract, but to apply it to the facts which the parties had in their minds and were negotiating about.
The rule is thus stated in Taylor on Evidence, 8th ed. vol. ii. s. 1194 : " It may be laid down as a broad and distinct rule that extrinsic evidence of every material fact which will enable the Court to ascertain the nature and qualities of the subject-matter of the instrument, or, in other words to identify the persons and things to which the instrument refers must of necessity be received."
In Grant v. Grant (1) Blackburn J. quoted judicially the following passage from his valuable work on Contract of Sale (p. 49):
‘The general rule seems to be that all facts are admissible which tend to shew the sense the words bear with reference to the surrounding circumstances of and concerning which the words were used, but that such facts as only tend to shew that the writer intended to use words bearing a particular sense are to be rejected.’”[81]
[81][1900] A.C. 182, 187-188.
There are a number of reasons to mention Simpson. Obviously, it applied Lord Blackburn’s views. Second, it was an appeal from New South Wales. Third, it was otherwise influential in the 20^th century in British cases. Fourth, it was referred to and relied upon by Mason J in Codelfa.[82]
[82](1982) 149 CLR 337, 349-350.
These cases are only a hand-picked four cases, chosen to illustrate the scope of the extrinsic evidence that was admissible in former times.
Third question: what are some advantages and disadvantages of the ambiguity threshold?
The modernists say that the ambiguity gateway contained in Mason J’s true rule in Codelfa[83] is a flawed concept. They make the clearly correct argument that there are cases where the existence of an ambiguity can only be ascertained by extrinsic evidence[84] so that it must be illogical to say that ambiguity is to be ascertained on the face of the instrument in all cases. But this point is not new.[85]
[83](1982) 149 CLR 337, 352.
[84]Grant v Grant (1861) 5 CP 727 was such a case.
[85]Sir James Wigram analysed it thoroughly: Wigram, “An Examination of the Law Respecting the Admission of Extrinsic Evidence in aid of the Interpretation of Wills”, Maxwell Stevens & Norton, London, 3^rd ed, 1840 at 170-182.
An allied point made by the modernists, that language, in general, does not have an objective meaning for the purposes of the law is less strong, in my view. The answer to it was made clearly by Professor Robert Stevens in a paper entitled “The Meaning of Words and the Intentions of Persons”, given at a conference at the University of New South Wales in 2015, as follows:
“That words have objective meanings and that the meaning is not determined by our intentions is reflected in the law in many contexts outside of contract law… The objective approach to meaning is followed in the context of wills, trust deeds, statutes and court orders. The law is not departing from our approach in everyday life, but applying it.”
Once it is accepted that the task of construction is to ascertain what the words that the parties agree contain their contract mean, not what the parties subjectively intended them to mean, it is difficult to understand the reason for any rush to look outside the ordinary meaning of those words.
Against that background, modern developments are often seen as starting with three speeches by Lord Wilberforce in the 1970s: first in Prenn v Simmonds,[86] followed by LG Schuler AG v Wickman Machine Tool Sales Ltd[87] and then Reardon Smith v Hansen-Tangen.[88]
[86][1971] 1 WLR 1381, 1383-1385.
[87][1974] AC 235, 261.
[88][1976] 1 WLR 989, 995.
In Prenn v Simmonds, Lord Wilberforce coined the term “matrix of facts” which became a new catch-cry. But despite those who later read more into it, his discussion of the case law that led to the use of that phrase was orthodox. Significantly, Prenn v Simmonds did not involve the admission of controversial extrinsic evidence.
The modernists do not have an answer for the fact that if the ambiguity gateway is dropped altogether, questions of the meaning of a contract in writing will routinely attract or require proof and, if necessary, a trial of any disputed facts about the many extrinsic facts one or other of the parties may wish to rely upon. This is contrary to the experience of those who remember summary court procedures to decide the meaning of an instrument, be it a contract, conveyance or will. With all respect to the modernists, my view is that before the law throws away the ambiguity threshold as a gateway to the general admission of extrinsic evidence to inform the meaning of a written contract, extending at least some way into the negotiations, it is at least a good question to ask why the law would add to the range of available disputes about the meaning of a written contract? There is an unstated premise that the admission of extrinsic evidence of this kind will reveal the objective agreement. Professor Carter said this in his 2014 article, “Context and Literalism in Construction”, as follows:
“Every restriction placed on the evidential material which may be used in construction impedes the task of arriving at the meaning intended by the parties.”[89]
[89](2014) 31 JCL 100, 118.
I remain unconvinced. Often enough, in my view, negotiations do not reveal objective agreement. They reveal the positions of the parties around a point that was not expressly raised or upon which they did not agree expressly. Another criticism of the modernists view is that it devalues the significance of the fact that the parties reduced the extent of what they agreed to writing and agreed that the writing would take effect as the repository of their bargain – not what went before it.
On the other hand, traditionalists do not have an answer to the lack of a robust dividing line between a case where the “plain meaning” of the contract is so clear that no extrinsic evidence will be admitted and one where it is not. This is an undeniable weakness of plain meaning as a gateway to admissibility of all extrinsic evidence.
In recent times, in my view, there is a discernible practical change in the extent to which extrinsic evidence is admitted. In this, I agree with Professor Carter. But that, too, gives rise to practical problems. I raise two examples. First, how do those who would admit negotiations as objective facts deal with the circumstance that there may be many reasons for the gap between what was said in the negotiations and what is provided in the contract? There is no rule or principle of law I know of to resolve that problem. It is not answered by saying that the negotiations are not received to prove the actual subjective intentions of a party.
Second, unless it is a matter that would catch the other side by surprise, there is no rule of court that particularly requires a party to plead any extrinsic fact relied upon as admissible to affect the construction of the contract. In my view, there should be. Recent cases support that proposition.
Ambiguity is not a gateway where something has clearly gone wrong with the text on its ordinary meaning
As previously stated, it is accepted as a binding statement of principle that where the meaning of a contractual provision is susceptible of only one meaning, a court will not admit extrinsic evidence contrary to that meaning. The point was summarised in 2015 by a plurality in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd & Anor:
“Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning”.[90] (footnote omitted)
[90](2015) 256 CLR 104, 116 [48].
The “process of construction” referred to was identified as follows:
“In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.”[91] (footnotes omitted)
[91](2015) 256 CLR 104, 116 [47].
Two points may be made about those statements. First, neither “the circumstances addressed by the contract” nor “the commercial purpose of objects to be secured by the contract” will necessarily be fully articulated by its express terms. Nor does it necessarily follow, in every contract, that they can be inferred from the terms of the contract alone. Second, at least one of the reasons to question whether the expression in a contract is unambiguous or susceptible of only one meaning, before evidence of surrounding circumstances is admissible, is to avoid unnecessary consideration of circumstances which cannot affect that one meaning.
Many disputes about contractual construction emerge from the application of the term or terms to circumstances that were unforeseen by some or all of the contracting parties. That alone is not enough to alter the operation of the contractual text of the term or terms. However, where that operation, according to the ordinary meaning of the text, leads to a result that would be considered to be commercially absurd by the hypothetical reasonable businessperson, legal principle as to the proper construction of a contract or other instrument may require a meaning other than the ordinary meaning of the text.
Although Lord Wensleydale’s statement in Grey v Pearson[92] is regarded as the articulation of the “golden rule” of construction of statutes,[93] as previously mentioned, it was made in relation to the proper construction of a will and as a statement applicable to all written instruments, including contracts.
[92](1857) 10 ER 1216, 1234.
[93]See, for example, Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297, 320.
There is no shortage of cases where a statute is construed to avoid an absurdity but no farther.[94] In the contractual context, the cognate nature of the principle of statutory construction is recognised.[95] Generally, the principle will apply in contract law where the court is able to ascertain that something has gone wrong with the words or there is a mistake in drafting. In such a case:
“Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency.”[96]
[94]Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 is a leading example.
[95]Adams v Lambert (2006) 228 CLR 409, 417 [21], referring to Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297.
[96]Fitzgerald v Masters (1956) 95 CLR 420, 426-427.
But there are limits to the scope of this principle at both the beginning and end of its application. At the beginning, if the words are unambiguous, it is not enough that it may be guessed or suspected that the parties intended something different, because the court has no power to remake or amend the contract for the purpose of avoiding a result which is considered to be inconvenient or unjust.[97] Accordingly:
“If after considering the contract as a whole and the background circumstances known to both parties, a court concludes that language of a contract is unambiguous, the court must give effect to that language unless to do so would give the contract an absurd operation. In the case of absurdity, a court is able to conclude that the parties must have made a mistake in the language that they used and to correct that mistake. A court is not justified in disregarding unambiguous language simply because the contract would have a more commercial and businesslike operation if an interpretation different to that dictated by the language were adopted.”[98]
[97]Australian Broadcasting Corporation v Australasian Performing Rights Association Ltd (1973) 129 CLR 99, 109.
[98]Jireh International Pty Ltd v Western Exports Services Inc [2011] NSWCA 137, [55].
In principle, a case where something has clearly gone wrong with the language is one that operates outside the area where an otherwise clear and ordinary meaning of the text of the term to be construed takes precedence. The point was made in this way in one case:
“Whilst it is correct in my opinion that context and the surrounding circumstances known to both parties can be taken into account… even in cases where there is an absence of apparent ambiguity… that does not permit the Court to depart from the ordinary meaning of the words used by the parties merely because it regards the result as inconvenient or unjust… This does not mean that there are not exceptional cases where… something has clearly gone wrong with the language so as to interpret it in accordance with the ordinary rules of syntax makes no commercial sense… In such a case… a Court is entitled to depart from the ordinary meaning to give effect to what objectively speaking the parties intended.”[99]
[99]McGrath v Sturesteps (2011) 81 NSWLR 690, 697 [17]-[18].
In another case, the concept was considered as follows:
“…it is helpful to identify the concept of ‘absurdity’ as a basis for construing a document otherwise than according to its literal meaning. Although the case was run both in this Court and below on the issue of absurdity, it should not be forgotten that this is but one aspect of broader principles as to the construction of commercial contracts. While in common parlance, the word ‘absurd’ may have a range of connotations, in this context it is used to mean something opposed to reason, or irrational. It can form a basis for resolving internal inconsistencies in a contract or giving commercial sense to language which is otherwise in a practical sense meaningless.”[100]
[100]Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297, [13].
Another way of putting it is that there is a difference between a case where something has clearly gone wrong with the words, in the nature of a mistake, and an ambiguity which may result in giving the text or words of the provision a meaning they can “naturally” bear. The point was considered by Neuberger LJ, in distinguishing between interpretation (at common law) and rectification (in equity) as follows:
“Further, as Hoffmann LJ also made clear … there is a difference between cases of ambiguity, which may result in giving the words a meaning they can naturally bear, even if it is not their prima facie most natural meaning, and cases of mistake, which may result from concluding that the parties made a mistake and used the wrong words or syntax. However, he emphasised the court does ‘not readily accept that people have made mistakes in formal documents’… [H]e also pointed out… that, as the court, and therefore the notional reasonable person, cannot take into account the antecedent negotiations, the fact that the natural meaning of the words appears to produce ‘a bad bargain’ for one of the parties or an ‘unduly favourable’ result for another, is not enough to justify the conclusion that something has gone wrong. One is normally looking for an outcome which is ‘arbitrary’ or ‘irrational’ before a mistake argument will run.
Accordingly, before the court can be satisfied that something has gone wrong, the court has to be satisfied both that there has been ‘a clear mistake’ and that it is clear ‘what correction ought to be made’…”[101]
[101]Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429, [20]-[21].
The distinction between absurdity and something which is merely a more commercial and business-like operation is regularly reiterated and applied.[102]
[102]Schwartz v Hadid [2013] NSWCA 89, [31]-[32]; Bayside Council v Corp Constructions Pty Ltd [2017] NSWCA 120, [70]; Cushman & Wakefield(NSW) Pty Ltd v Farrell [2017] NSWCA 24, [71].
The point was recently considered in obiter dicta by Leeming JA as follows:
“Sometimes it is clear on the face of a written contract that something has gone wrong with the language. In such cases, two quite different approaches may, in principle, be available as a matter of Australia law. It is vital to distinguish between the doctrines at common law and in equity.
At common law, if the error is clear, and it is also clear what a reasonable person would have understood the parties to have meant, then the mistake may be corrected as a matter of construction. This is old law…
Two conditions are necessary in order to correct the contractual language in this manner:
(a) that the literal meaning of the contractual words is an absurdity; and
(b) that it is self-evident what the objective intention is to be taken to have been.”[103] (citations omitted)
[103]Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2019] NSWCA 11, [5]-[8].

During the ramp up period, WICET planned to increase the operation of a number of systems, including those operations for loading of vessels with coal. The planned activities included optimisation works, system testing (such as bias testing of the sample station which occurred during September 2015), assessing and inspecting work areas, completing ongoing construction work, providing contractors with access to rectify defects and finalising outstanding items.
At the end of the ramp up period, in May 2016, WICET planned to carry out testing intending to satisfy the requirements of the “completion test” under the Senior Syndicated Facilities Agreement for the WICET project, in order to achieve the “completion date”.[222] The proposed testing included ship loading of coal at an annualised rate equivalent to at least 90 percent of 27 million tonnes per annum over a continuous period of 30 days.
[222] Appendix 4 to the Monthly Report to Senior Agent for September 2015, p 19.
During the ramp up period until 30 September 2015, WICET produced reports that assessed its own performance on a month by month basis. They included board reports for the months of August 2015, September 2015 and October 2015. By way of example, Section 2 of the Monthly Board Report recorded the capacity made available in relation to the planned (ramp up) nominal capacity and a shipping plan made in May 2015 for the financial year ending 30 June 2016 for both unloading and loading of coal streams, on both a monthly and a period to date bases.
For September 2015, the loading of coal stream was as follows:

Period Actual FY2016 Plan Nominal Capacity Made Available

September 2015 648,038 482,000 675,000 975,505

Period to date 1,206,279 1,441,000 1,687,500 2,309,493

The “Actual” column refers to the tonnes of coal loaded in the month. The “FY2016” column refers to a shipping forecast made in May 2015. The “Nominal Capacity” column is the month’s capacity in tonnes of coal calculated in accordance with the month’s ramp up profile percentage of one twelfth of the annual nominal capacity of 27 million tonnes per annum. The “Made Available” column is calculated as the sum of the capacity or capacities made available in another series of documents identified as the “Weekly Plan”. That was described as WICET’s view of what was made available at the terminal for a particular week, based on the days that the terminal was available or planned to be available in that week.
WICET also kept a database of tonnes and times for the berthing, loading of coal and departure of vessels, described as “WICET’s SCM Database”. For September 2015, the relevant vessels were as follows:

Vessel Official Tonnes Berth Time Commence First Coal Last Coal Berth Time Complete Gross Load time Loan Time

10 105,390 31/08/2015
5:18 31/08/2015
9:05 01/09/2015
22:48 02/09/2015
7:46 37.72 50.47

11 165,042 03/09/2015
20:15 03/09/2015
22:09 05/09/2015
11:02 06/09/2015
13:28 36.88 65.22

12 164,614 12/09/2015
16:18 12/09/2015
18:52 16/09/2015
1:08 16/09.2015
20:04 78.27 99.77

13 159,776 18/09/2015
10:37 18/09/2015
12:38 20/09/2015
3:07 20/09/2015
10:42 34.48 48.08

14 82,500 22/09/2015
12:58 22/09/2015
14:28 23/09/2015
14:50 24/09/2015
2:24 24.37 37.43

Total 677,322 211.72 300.97

In accordance with the previously described operations and activities, WICET planned and experienced shutdowns for repair or maintenance operations. During September 2015, there were three items of that kind that were the subject of particular analysis in the evidence.
First, on 5 September 2015 at 14:00PM, a shutdown commenced that continued for 136 hours until 11 September 2015 at 6:00AM. The shutdown is evidenced by a number of documents, including the “WICET Planned Constraints – Four Week Summary” dated 4 September 2015, “WICET’s Data Vessel Billboard”, which is a tab in the spreadsheet comprising the “WICET Weekly Operations Summary” dated 6 September 2015, the “Weekly Report” tab from the same spreadsheet and the “Monthly Report to the Senior Agent for September 2015”, although the latter does not identify the dates or period.
As to the work completed in the shutdown, the WICET Monthly Board Report for September 2015 identified five items, being completing the server and adjusting the ship loader boom, conveyer/pulleys and idlers; completing shimming of gravity take up carriages; installing tapered shims on shuttle idlers of the ship loader, installing two inverted “V”s idler frames on the ship loader boom conveyer; and working on the lag rollers on steering frames for the ship loader boom conveyer. Whether they were all items of work carried out during the 136 hour shutdown is not established.
Between 29 May 2015 and 7 September 2015, WICET and the contractor, Monadelphous Muhibbah Marine Joint Venture (“MMM”), corresponded in relation to painting rectification work for the long travel drives, including when the work could be carried out. It appears that WICET initially required the work to be carried out over a four day period, that MMM proposed ultimately to carry out the work in the period 8 September 2015 to 19 September 2015 and that the work was done, in part at least, during the 136 hour shutdown period.
In the period between 6 September 2015 and 13 September 2015, work was done in relation to the surge bin-magnet lift and dump contacter, the surge bin kicker relocation and the surge bin conveyor magnet.
In the period between 13 September 2015 and 4 October 2015, work was done by way of installing tapered shims on Jetty Conveyor 1.
A WICET document described as the “AMPLA Delay Data Loading Stream” recorded down time in ship loading for testing or commissioning, described as Sample Plant Bias Testing, starting on 14 September 2015 at 16:19PM whilst the vessel “Frontier Unity” (Vessel 12 in the SCM Database) was at berth. The delays were not continuous but ended on 15 September 2015 at 18:06PM for a series of durations that totalled 19 hours and 40 minutes.
As at 30 September 2015, WICET planned further shutdowns in October, November and December 2015:
(a)from 12 to 16 October 2015 a planned optimisation shutdown of 96 hours;
(b)from 25 to 28 November 2015, a planned optimisation shutdown of 72 hours; and
(c)from 3 to 6 December 2015, a planned optimisation shutdown of 84 hours.
Plaintiff’s case as to capability
The plaintiff submits that WICET was capable of the loading of vessels with coal at 70 percent of the rate of 27 million tonnes per annum. That was the conclusion of Bruce Martin, an expert witness called by the plaintiff. Mr Martin produced three reports dated 24 July 2017, 22 June 2018 and 4 September 2018, and was an author of part of the joint report as to capacity dated 2 August 2018. His methodology is expressed in the following equation:
Average annualised loading throughput capacity = gross loading rate (tonnes per hour) x hours per calendar year x utilised hour percentage/1,000,000
The inputs to the equation adopted by Mr Martin were as follows:
Average annualised loading throughput capacity = 2,686 tonnes per hour x 8760 hours x 80%/1,000,000 = 18.82MT/pa
The first input was the gross loading rate. Mr Martin calculated the hourly gross loading rate from the data for the vessels that berthed, loaded and sailed in September 2015, not including vessels 10 and 12, by calculating the average for each vessel and then the average of the average rates, which resulted in 2,686 tonnes per hour.
The second input was Mr Martin’s 80 percent utilised hours percentage. He adopted that rate as being consistent with his “extensive experience with other comparable coal terminals operating under similar conditions”. As to that, he referred to his direct experience working in operations for “two of the world’s biggest coal terminals” and “one of the world’s biggest integrated iron ore supply chains”. The coal terminals were Abbot Point Coal Terminal and Dalrymple Bay Coal Terminal. From February 1999, he held positions at Dalrymple Bay Coal Terminal, focussed on coordination, planning and scheduling of coal movement from mine to site to port and shipping parcels. That additionally involved the coordination of ship berthing, loading and sailing, including the development of simulation models. From January 2005, he was employed by British Maritime Technology Maritime Consultants and assisted in the development of a ship queue management system for Dalrymple Bay Coal Terminal and the Port of Hay Point.
However, in cross-examination it emerged that Mr Martin relied on data from Dalrymple Coal Terminal for the 1998 year, before he was employed there. None of that data was disclosed or included in his report. Dalrymple Bay Coal Terminal had two berths in 1998 as opposed to the single berth configuration at WICET. Similarly, none of the data he relied on for Hay Point was disclosed or included in his reports.
As support for his utilised hours percentage, Mr Martin relied on a WICET document described as the “WICET Terminal Parameters” which stated a berth occupancy of 79 percent. However, that document appears to have been derived from the SMS Simulation Model which stated a berth occupancy of 79.3 percent. That model was based on the predicted operations of WICET without taking in to account any ramp up period and assuming that the Clinton Bypass channel was available for departing and arriving vessels to pass whilst leaving and entering port. In the joint report, Mr Martin also referred to the WICET board papers for February 2016, which referred to the 30 day test proposed for May 2016 as intending to achieve an availability of 95 percent over the 30 day period. However, that test was scheduled for a time after the ramp up period would have been completed and some evidence given by Andrew Wells, a senior manager at WICET in this period, suggested that the 95 percent was directed to the availability of equipment to move coal from the stockpile to the ship loader.
Mr Martin referred to two other WICET documents in support of his opinion as to the utilised hours percentage. First, the “Monthly Report to Senior Agent for October 2015” referred to equipment availability rates of 98.7 percent and 98.3 percent. However, those percentages were of the amount of time equipment was available out of the time it was scheduled to be available, not the amount of time equipment was available for the whole of the month. Second, Mr Martin referred to the “Asset Life Cycle Management Plan – Offshore Assets” that stated that the majority of maintenance could be performed while the terminal was operational, as going to whether shutdowns in September 2015 were opportunistic, meaning carried out because no vessels were available. However, that document referred to the “Offshore Assets”, being the wharf structure, jetty structure and mooring system. There was a separate Asset Life Cycle Management Plan for the ship loading conveyers and surge bin facility which did not contain the same statement.
It follows from the methodology adopted by Mr Martin, that his opinion rests critically on the utilisation hours percentage that he estimated at 80 percent. Given the facts surrounding the WICET facility as at 30 September 2015 as set out above, and the absence of any underlying data or reasoning or calculation to support the 80 percent estimate, I do not find as a fact that WICET would have been able to load vessels with coal for 80 percent of the total available hours at 30 September 2015 looking forward on the basis of Mr Martin’s estimate. It follows that I do not accept the conclusion that it was capable of loading vessels with coal at 70 percent of the rate of 27 million tonnes per annum at and from that date, based on Mr Martin’s methodology or evidence.
The other input to Mr Martin’s equation and opinion was his assessed gross loading rate of 2,686 tonnes per hour. As previously stated, Mr Martin derived that rate by first averaging, for each vessel in September 2015, the gross capacity per hour of berth time, by dividing the tonnes loaded on the vessel by the vessel berth time. From there, he averaged the individual vessel average loading rates for all vessels that berthed, loaded and departed in September 2015, with the exclusion of vessel 10 and vessel 12. Vessel 10 was excluded because its loading hours were affected by belt alignment works. Vessel 12 was excluded because its loading hours were affected by bias testing. In Mr Martin’s opinion, those vessels should be excluded from the assessment or calculation of WICET’s gross loading rate as not representative of normal loading times. It will be necessary to return to this question.
Defendants’ case as to capability
The defendants submit that, subject to three assumptions that they submit were made too favourably to WICET’s capability, in September 2015 WICET was capable of loading 1,161,079 tonnes of coal on vessels, to be compared to the full design capacity for the month of 2,219,178 tonnes, so that WICET was capable of handling coal at 52.3 percent of the full design capacity.
The defendants rely on the evidence of Martin Oldfield, an expert called by the defendants other than the first and second defendant in support of that conclusion. Mr Oldfield made four reports dated 20 May 2017, 11 May 2018, 21 August 2018 and 11 September 2018 and also was a part author of the joint report as to capacity dated 2 August 2018. Mr Oldfield’s methodology involved six steps:
(a)Step 1: assess the actual number of hours spent at berth in September 2015, being the hours spent loading plus the periods for lines on to first coal and last coal to lines off;
(b)Step 2: calculate the average actual berth time for the five vessels that berthed at WICET in September 2015;
(c)Step 3: assess the actual number of hours WICET was unavailable for loading coal in September 2015 due to maintenance and optimisation shutdowns to the loading stream;
(d)Step 4: calculate how many vessels could have been loaded at WICET in September 2015 had there been more than five vessels to load (by dividing the total hours available for the month after subtraction of the hours for shutdowns and actual vessels by the sum of average berth time and inter-vessel arrival time);
(e)Step 5: calculate the gross loading rate as the average actual tonnes loaded per vessel during September 2015;
(f)Step 6: calculate the total tonnes that WICET was capable of loading during September 2015 by multiplying the average actual tonnes loaded per vessel by the number of vessels that could have been loaded.
Below is a spreadsheet that shows Mr Oldfield’s preferred calculation based on his six step methodology:

As to Step 1, an immediate difference between Mr Oldfield’s approach and that of Mr Martin is that Mr Oldfield did not exclude vessel 10 or vessel 12 in September 2015. Mr Oldfield’s reason for not excluding vessel 10 is that the belt alignment problems that affected loading of that vessel typically arise during a start-up phase and were representative of the performance of WICET for September 2015. That may be so, but it does not necessarily represent the likelihood that similar delays will continue as at 30 September 2015 and into the future. As to vessel 12, Mr Oldfield made an adjustment for vessel 12 by deducting 19.66 hours from its loading time, but included the same time as additional shutdown hours of WICET’s unavailability for the month of September.
As to the calculation of post loading times (from last coal to lines off) for the five vessels loaded in September 2015, another expert witness called by the plaintiff, Bruce Anderson, expressed the opinion that those times were inflated because there was no ship queue in September 2015, pointing to the difference between the 20.3 hour average and the 1.8 hour assumption in the SMS Simulation Model. The defendants submit that other reasons might explain the delay, relying on general evidence of the harbour master for the Port of Gladstone, John Fallon, that it was unsafe to leave loaded vessels at berth. However, the defendants offered no real evidence as to what the causes of post loading delays might have been.
As to Step 3 of Mr Oldfield’s methodology, namely the calculation of the hours of maintenance and optimisation shutdowns for September 2015, Mr Oldfield ultimately assessed 191.7 hours as follows:

Dates

Cause of unavailability

Hours

5-11 September 2015 Planned shutdown for optimisation and rectification work 136

14 September 2015 Bias testing during loading of Vessel 12 19.66

17 September 2015 Installation of tapered shims on jetty conveyors
12

27 and 28 September 2015 Installation of tapered shims on jetty conveyors 24

Total

191.7

Mr Oldfield’s methodology proceeded on the basis that those hours of shutdowns were not available for loading of vessels with coal.
The plaintiff challenges each of the components of Mr Oldfield’s estimate of unavailable time for maintenance and optimisation shutdowns in September 2015. First, assuming the 136 hour shutdown started on 5 September 2014 at 14:00 hours, it commenced while vessel 11 was at berth but had completed loading. Vessel 11 remained at berth until about 13:30 hours on 6 September 2015, that is about 23.5 hours after the commencement of the shutdown. By subtracting both the time that vessel 11 remained at berth and those hours as part of the optimisation and maintenance shutdown from the total hours for the month, Mr Oldfield has subtracted the same period twice, in calculating the hours available to load additional vessels.
In addition, as Mr Anderson discussed in his evidence, immediately prior to the 136 hour shutdown, it was estimated to occur for 96 hours, but then increased to 140 hours. It appears that the change to increase the hours coincided with a lack of loading activity. The plaintiff submits that 96 hours should be adopted for the planned optimisation and maintenance shutdown.
Second, the plaintiff submits that the 19.66 hours allowed by Mr Oldfield for bias testing of the sampling plant was a one-off event that would not recur after 30 September 2015. Accordingly, the plaintiff submits those hours should not be included as at 30 September 2015 in the unavailable hours to calculate WICET’s capability.
Third, the plaintiff submits that the 36 hours, in total, allowed by Mr Oldfield to install tapered shims on the jetty conveyor does not represent any actual recording of time or assessment of time within Mr Oldfield’s expertise. Mr Oldfield’s allocation was based upon a John Holland estimate of three days for the work, and assumptions about the work consisting of three shifts of 12 hours, with those shifts occurring outside the scheduled shutdown and that the works required isolation. The plaintiff submits that the documents do not support those conclusions or assumptions.
Accordingly, the plaintiff submits that Mr Oldfield’s assessment or adoption of 191.7 hours of unavailable time in September 2015 is not reliable as to the capability of WICET to load vessels with coal as at 30 September 2015 and thereafter. The plaintiff submits that I should find that there were fewer than approximately 114 hours of berth unavailability for the month, looking forward, that should be taken into account. It submits that conclusion is supported by Mr Anderson’s evidence that the works to be carried out could have been performed in parallel and during a 36 hour window if necessary. The plaintiff also submits that on Mr Oldfield’s methodology otherwise, there were 170.4 hours of combined post loading and inter-vessel arrival time in which there would be opportunity to perform the work.

In my view, there is substance in a number of these submissions. If the plaintiff’s reduction of Mr Oldfield’s assessment of berth unavailability to 114 hours were accepted, Mr Oldfield’s calculation of WICET’s capability of loading coal expressed as a percentage of WICET’s full design capacity for September 2015, otherwise, would rise to 60 percent.
In my view, the plaintiff’s challenge to the bias testing hours should be accepted. Also, in my view, Mr Oldfield’s evidence did not establish that the installation of the tapered shims on the jetty conveyor was either an activity that would not have been able to occur concurrently with periods when the ship loader would not have been operating, in any event. Third, in my view, it is likely that the planned shutdown could have been carried out in fewer than 136 hours, if vessels had been available for loading between 5 and 11 September 2015.
On the other hand, I note that acceptance of the plaintiff’s submission that the period of unavailable hours should be reduced to 114 hours would increase the utilised hour percentage for September 2015, to 84.2 percent, using Mr Oldfield’s inputs otherwise. That percentage rate is higher than Mr Martin’s opinion of the appropriate rate at 80 percent. On the other hand, 114 hours compares reasonably to WICET’s planned shutdowns for October 2015 of 96 hours, November 2015 of 72 hours and December 2015 of 84 hours.
In the result, I accept that there should be a reduction of at least 50 hours in Mr Oldfield’s assessment of the planned closures for routine maintenance and shutdowns, to a total of no greater than 141.7 hours.
As to step 5 of Mr Oldfield’s methodology, being the calculation of the average gross loading rate per hour, I have already observed that Mr Oldfield’s approach directly applied the average actual tonnes for September 2015, with an adjustment for vessel 12. It is necessary to consider the use of gross loading rates for vessels 10 and 12 a little more closely.
Vessel 10 was the “UNTA”. It berthed on 31 August 2015 at 5:18AM, commenced loading coal at 9:05AM, completed loading coal on 1 September 2015 at 10:48PM and departed the berth on 2 September 2015 at 7:46AM.
The document described as the “Report to Senior Agent 30 September 2015” stated that the loading of vessel 10 was adversely affected by belt alignment works on the ship loader and that the consequence of the belt alignment works was that significant progress had been made with belt tracking. As previously stated, Mr Martin excluded vessel 10 because of the delay, whereas Mr Oldfield included it on the basis that such issues are typical of the facility undergoing commissioning during its ramp up phase. That is, Mr Oldfield treated the delay as representative of WICET’s actual capability during the relevant period. In a sense, this point illustrates Mr Oldfield’s focus on the performance during September 2015 as a measure of the capability of WICET to load ships with coal as at 30 September 2015 looking forward.
The plaintiff submits that, in adopting that approach, Mr Oldfield nullified the significant progress that had been made with belt tracking. But there was no detailed evidence one way or the other whether the belt tracking issues were significantly slowing what the gross loading rate might otherwise have been, or as to the offset of the improvements as at 30 September 2015.
As well, the plaintiff submits that by including vessel 10 which berthed and commenced loading on the morning of 31 August 2015, Mr Oldfield increased the total hours of the relevant month in a way which decreased his capacity assessment inappropriately. I do not consider that materially affects the overall conclusions to be drawn.
Vessel 12 was the “Frontier Unity”. It berthed on 12 September 2015 and commenced loading coal at 6:52PM. It completed loading coal on 16 September 2015 at 1:08AM. It departed the berth. Its gross loading rate from lines on to lines off was 2,103 tonnes per hour, which was less than half the rate of the vessel before and about half the vessel after it.
During that period, WICET carried out bias testing of the sample plant. The Report to Senior Agent dated 30 September 2015 recorded that as having an adverse impact on the gross loading rate. Mr Anderson explained that bias testing is a process where bulk samples are taken from a stationary conveyor belt to analyse and check the results from the sample plant. He said that such testing is extremely disruptive and, assuming the test is successful, only happens once.
As previously stated, Mr Martin excluded vessel 12 from his analysis of the average gross loading rate. Mr Oldfield sought to excise the time during which the bias testing was being carried out, but otherwise retained vessel 12 in his calculations. The plaintiff challenges that approach on the ground that even if the time during which the testing was carried out could be accurately isolated, there is an assumption that the performance of the loading was otherwise unaffected. The plaintiff submits that was inconsistent with Mr Anderson’s evidence that such testing is extremely disruptive and not just during the period of the test.
In any event, the plaintiff submits that Mr Oldfield’s attempt to isolate the testing time is not reliable. It was a desktop documentary analysis that did not call upon any experience or expertise held by Mr Oldfield.
The plaintiff submits that if vessel 12 is removed from Mr Oldfield’s calculations, the appropriate adjustments are to reduce the number of hours loading by 99.77 hours, to reduce the number of vessels from five to four and to reduce the total tonnes loaded by 164,614 tonnes. The plaintiff submits that the result of Mr Oldfield’s assessment of capability of loading coal expressed as a percentage of WICET’s full design capacity for September 2015 otherwise would rise to 56.8 percent.
The defendants submit that if vessel 12 is removed from Mr Oldfield’s calculations, the appropriate adjustments are to reduce the hours for the entries in line G by 58.61, line H by 2.57 and line I by 18.93 (totalling 80.11 hours in comparison to the plaintiff’s reduction of 99.7 hours), to reduce the number of vessels for the entry in line K by 1 and to reduce the tonnes for the entry in line U by 164,614, and his calculation of capability of loading coal expressed as a percentage of WICET’s full design capacity for September 2015 otherwise would rise to 54.8 percent. The difference of 2 percent from the plaintiff’s submission lies in the different reduction of hours, because Mr Oldfield has reallocated 19.67 hours to maintenance and optimisation delays. Accordingly, in my view, the defendants’ calculation is the correct one, assuming that Mr Oldfield’s allowance for the delay from bias testing of the sampling plant is dealt with separately under the assessment of Step 3 of his methodology.
In my view, vessel 12 should be removed from the calculation of the average gross loading rate for September 2015.
Acceptance of both my conclusions as to required adjustments to step 3 and step 5 of Mr Oldfield’s methodology results in adjustments to his calculations as shown in the “September (adjusted)” column of the spreadsheet below:

If properly made, the adjustments demonstrate that as at 30 September 2015, Mr Oldfield’s methodology will support the finding by inference that WICET was capable of loading of vessels with coal at 60 percent of the full design capacity, subject to the following points.
As previously mentioned, the defendants submit that three of Mr Oldfield’s opinions or assumptions were too favourable to the capability of WICET. Those assumptions are that other shutdowns should not be included in the hours for shutdowns already considered (191.7 hours), there was no impact on capability from staffing constraints and that the appropriate average allowance was made for inter-vessel arrival time (5.38 hours).
As to the staffing constraints, a document described as the “Operations Manning Buildup” dated 30 November 2016 contains a table setting out staff numbers month by month commencing July 2014 and continuing to and past 30 September 2015. As at September 2015 there were 50 employees across a number of categories, including 17 to 18 operations staff compared to 27 operations staff at May 2016 at the end of the ramp up period. Mr Oldfield opined that there is a strong argument to suggest that WICET had insufficient staffing levels in September 2015 to sustain continuous operation and Andrew Wells, a senior executive at WICET, also expressed the opinion that 17 to 18 operations staff were insufficient for WICET to operate at full capacity for a sustained period.
However, as appears from the spreadsheet set out above, Mr Oldfield made provision in his model to include unavailable hours due to staff constraints but in fact made no reduction in available hours on that ground in his preferred assessment. In my view, it should not be accepted that WICET was not capable of performing at 60 percent of that capacity due to staffing constraints, by reference to the number of staff later employed to operate at full design capacity.
As to other shutdowns, in his various reports, Mr Oldfield opined that it was reasonable to conclude, apparently in addition to the 191.7 shutdown hours he allowed in his preferred assessment, as set out above, that there were an additional 58.3 shutdown hours during September 2015, on account of:
(a)12 hours for Magnet Area Handrail Works;
(b)12 hours for Tapered Shims along the length of the Wharf; and
(c)34.3 hours for the Surge Bin Conveyor.
Again, given that Mr Oldfield did not rely on these additional hours in his preferred assessment, I do not consider that further reductions should be made to the available hours for the loading of additional vessels with coal in September 2015, or to the available hours to load vessels with coal as at 30 September 2015 looking forward.
As to the inter-vessel arrival time, the defendants submit that Mr Oldfield assumed that each departing and arriving vessel would be able to pass in the Gatcombe channel and the Gatcombe Bypass channel but still utilise the same flood tide to depart and berth at WICET. Mr Oldfield’s assessment of an average 5.38 hours for inter-vessel arrival times was calculated by adjusting the average period of 3.38 hours allowed in the SMS Simulation Model upwards. SMS had assumed that some vessels would be able to pass in the Clinton Bypass channel, that is closer to WICET than the Gatcombe channel or the Gatcombe Bypass channel. In effect, Mr Oldfield allowed for an extra hour steaming out of port to the passing point by the departing vessel and an extra hour steaming from the passing point into WICET by the arriving vessel, thereby adding two hours to SMS’s average inter-vessel arrival time.
The defendants submit that Mr Oldfield’s adjustment is not enough, because he still assumes that the departing vessel and the arriving vessel will be able to make use of the same flood tide, described as “hot berthing”. It is not disputed that it was a condition of the departure of vessels from and berthing of vessels onto the WICET wharf that both manoeuvres must be performed on a flood tide. The defendants submit that Mr Oldfield’s hot berthing assumption is too favourable to WICET’s capability, having regard to the evidence of the harbour master, Mr Fallon, that depending on the tidal heights and under-keel clearances, it may not be possible to hot berth on the same flood tide and that, in any event, congestion in the channels may result in other shipping movements being given priority over WICET vessel movements. The defendants note that the SMS Simulation Model assumed that 42 percent of ships per year would be able to depart from and arrive at WICET on the same flood tide. They submit that assumption is inconsistent with the assumption inherent in Mr Oldfield’s calculations that all vessels would be able to do so.
In my view these points place a significant difficulty in the path of an inference that the appropriate assumption for the calculations made by Mr Oldfield is that the average inter-vessel arrival time at 30 September 2015, looking forward, was 5.38 hours. The potential inaccuracy created by the 5.38 hour assumption was identified in the evidence, but the solution was not established by other evidence. In the end, the evidence on this point was left in an unsatisfactory state.
The plaintiff submits that this consideration is not significant, in effect for three reasons.
First, the plaintiff submits that the inter-vessel arrival time is an externality that does not affect the capability of WICET to load vessels with coal, within the meaning of the definition of the Port Facilities (Initial) Available Date. I accept that some externalities should not be treated as going to capability in this context. For example, if there are insufficient ships arranged to make full use of the capability of WICET to load vessels with coal, in my view, that does not affect the relevant capability. But other constraints that were present when the “nominal capacity” and “full design capacity” of WICET of 27 million tonnes per annum was settled upon are not necessarily to be ignored, simply because they are physically external to WICET. Accordingly, in my view, the effect upon the available time for loading of coal caused by the necessity for one vessel to depart the wharf and another vessel to berth at the wharf is a matter that does go to the capability of WICET to load vessels with coal. That exchange of vessels necessarily employs the harbour and its physical attributes and restrictions in coming into and going out of the Port of Gladstone.
Second, the plaintiff submits that the possibility of congestion causing delay to WICET’s vessel movements should also be treated as an externality that does not go to the capability of WICET to load vessels with coal. On this point, general evidence was given by the harbour master, Mr Fallon, on which my mind has wavered. In any busy port, such as the Port of Gladstone, there are likely to be priorities in the order of movements in the main shipping channels. That is something that may be taken into account, in a general way, when considering inter-vessel arrival times at a loading facility. However, increased congestion caused by changes occurring after the nominal capacity or full design capacity of WICET was determined for the purposes of the WIRP Deeds is not something that the hypothetical reasonable observer would necessarily take into account. In any event, there was no detailed evidence of the extent to which congestion might affect the assumed average inter-vessel arrival time of 5.38 hours for WICET because congestion might prevent hot berthing on the same flood tide.
Third, the plaintiff submits that the appropriate assumption for inter-vessel arrival time should be made on the basis that departing and arriving vessels would be able to pass in the Clinton Bypass, with the consequence that the additional average two hours of steaming time assessed by Mr Oldfield should be rejected. In my view, as at 30 September 2015, it was not appropriate to assume that departing and arriving vessels would be able to use the Clinton Bypass. As Mr Fallon said, approval of the harbour master was required before that manoeuvre would be permitted and, before any such permission would be granted, it would be necessary to show that it could be performed safely. As at 30 September 2015, no application for permission had been made and there was no evidence either that it was intended to make such an application in the near future or that any such application was likely to be approved. The fact that in the following year there was one occasion when WICET vessels did pass in the Clinton Bypass channel, apparently without approval, does not detract from those conclusions.
Taking these points into account, in the end, I am unpersuaded that as at 30 September 2015, looking forward, it was a reasonable assumption or assessment that on average there would be an inter-vessel arrival time of 5.38 hours.
For that reason, notwithstanding the other adjustments that, in my view, should be made to Mr Oldfield’s calculations, I am not satisfied, on the basis of his calculations and the evidence otherwise, that by 30 September 2015 WICET was capable of Handling coal by loading vessels with coal at 60 percent or more of the rate of 27 million tonnes per annum.

CITATION:	Aurizon Network Pty Ltd v Glencore Coal Queensland Pty Ltd & Ors [2019] QSC 163
PARTIES:	AURIZON NETWORK PTY LTD ACN 132 181 116 (Plaintiff) v GLENCORE COAL QUEENSLAND PTY LIMITED ACN 098 156 702 (First Defendant) AND CALEDON COAL PTY LIMITED ACN 120 967 839 (IN LIQ) (Second Defendant) AND YARRABEE COAL COMPANY PTY LTD ACN 010 849 402 (Third Defendant) AND WESFARMERS CURRAGH PTY LTD ACN 009 362 565 (Fourth Defendant) AND WASHPOOL COAL PTY LTD ACN 139 976 819 (Fifth Defendant) AND COLTON COAL PTY LTD ACN 140 768 636 (Sixth Defendant)
FILE NO/S:	BS No 2880 of 2016
DIVISION:	Trial Division
PROCEEDING:	Trial - Claim
ORIGINATING COURT:	Supreme Court at Brisbane
DELIVERED ON:	27 June 2019
DELIVERED AT:	Brisbane
HEARING DATE:	10, 11, 12, 13, 14, 17, 18 and 19 September 2018
JUDGE:	Jackson J
ORDER:	The order of the court is that: 1. It is declared that each of the notices given by the defendants under clause 6.1(c) of the contracts made between the plaintiff and the defendants styled the “Wiggins Island Project Deed (2011)” is invalid and of no operative contractual effect. 2. The defendants’ counterclaims are dismissed. 3. The parties are directed to provide submissions in writing on the question of costs within 21 days.
CATCHWORDS:	CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – CUSTOM AND USAGE – INCORPORATION INTO CONTRACT – CONSISTENCY WITH EXPRESS TERMS – where ordinary meaning of text is clear - where defendants submit that legal meaning of text cannot be affected by extrinsic facts - whether the ambiguity requirement is a gateway that must be passed through before admission of evidence of extrinsic facts in every dispute relating to the construction of a contractual term in a formal written contract – whether ambiguity gateway does not apply where something has clearly gone wrong with the text on its ordinary meaning. CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – CUSTOM AND USAGE – INCORPORATION INTO CONTRACT – CONSISTENCY WITH EXPRESS TERMS – where ordinary meaning of text is clear - where defendants submit that legal meaning of text cannot be affected by surprising operation or commercial inconvenience or disadvantage to the plaintiff - whether the operation of the text on its ordinary meaning amounts to a commercial absurdity – whether the court may depart from ordinary meaning in order to avoid a commercial absurdity – whether the construction contended for is sufficiently clear CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – GENERALLY – where ordinary meaning of text is clear - where defendants submit that term cannot be implied because of failure to satisfy requirements for implication of a term implied in fact – whether the implied term contended for is sufficiently clear CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – GENERALLY – where each defendant notified the plaintiff and each Other Customer under cl 6.1(c) of the WIRP Deed that every relevant Customer’s Segment for the defendant was to cease being a Customer’s Segment – where notice had effect of reducing each defendants’ liability to pay the WIRP Fee to nil – where notice had effect of shifting the burden of the WIRP Fee for the Customer’s Proportion for the Segment onto any remaining Segment Customer for the Segment – whether there is an implied term in the WIRP Deed that a Customer is obliged to act in good faith towards and deal fairly with the plaintiff in respect of giving notice under cl 6.1(c). The Queensland Competition Authority Act 1997 (Qld), s 84, s 100, s 101, s 133, s 136, s 158, s 250. Adams v Lambert (2006) 228 CLR 409, cited Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570, cited Air New Zealand Ltd v Nippon Credit Bank Ltd [1997] 1 NZLR 218, cited Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349, cited Allgood v Blake (1873) 8 Ex 160, cited Amcor Ltd v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241, cited AMP v 400 St Kilda Rd [1991] 2 VR 417, cited Apple and Pear Australia Ltd v Pink Lady America LLC (2016) 343 ALR 112, cited Australian Broadcasting Corporation v Australasian Performing Rights Association Ltd (1973) 129 CLR 99, cited Bank of New Zealand v Simpson [1900] A.C. 18, cited Bartlett v Australia & New Zealand Banking Group Ltd (2016) 92 NSWLR 639, cited Bayside Council v Corp Constructions Pty Ltd [2017] NSWCA 120, cited Boyes v Cook (1880) 14 ChD 53, cited Burger King Corporation v Hungry Jack’s Pty Ltd (2001) 69 NSWLR 558, cited Burns Philp Hardware Ltd v Howard Chia Pty Ltd (1987) 8 NSWLR 642, cited Byrnes v Kendle (2008) 243 CLR 253, cited Cherry v Steele-Park (2017) 96 NSWLR 548, cited Coast Corp Pacific Pty Ltd v Stockland Development Pty Ltd [2018] QSC 305, cited Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, cited Commonwealth Bank of Australia v Barker (2014) 253 CLR 169, cited Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297, cited Cushman & Wakefield(NSW) Pty Ltd v Farrell [2017] NSWCA 24, cited Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2016) 261 CLR 544, cited Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640, cited Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228, cited Farrelly v Phillips (2017) 128 SASR 502, cited Fitzgerald v Masters (1956) 95 CLR 420, cited Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603, cited Gemmell Power Farming Co Ltd v Nies (1935) 35 SR (NSW), 469, Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529, cited Goss v Lord Nugent (1833) 5 B & D 57; 110 ER 713, cited Grant v Grant (1861) 5 CP 727, cited Grey v Pearson (1859) 6 HLC 61, 106; 10 ER 1216, cited Hart v MacDonald (1910) 10 CLR 417, cited Helicopter Sales (Aust) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1, cited Horsfall v Braye (1908)7 CLR 629, cited Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151, cited Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church (Archdiocese of Sydney) (1993) 31 NSWLR 91, cited Inglis v John Buttery & Co (1878) 3 App Cas 552, cited International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151, cited Jackson Nominees Pty Ltd v Hanson Building Products Pty Ltd [2006] QCA 126, cited Jackson v Swift Australian Company Pty Ltd [1968] 1 Qd R 1, cited Jireh International Pty Ltd v Western Exports Services Inc [2011] NSWCA 137, cited John v Price Waterhouse [2002] EWCA Civ 899, cited LG Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235, cited Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633, cited Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd (2015) 237 FCR 534, cited McGrath v Sturesteps (2011) 81 NSWLR 690, cited McVeigh v National Australia Bank Ltd (2000) 278 ALR 429, cited Meehan v Jones (1982) 149 CLR 571, cited Mills v Mills (1938) 60 CLR 150, cited Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297, cited Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd & Anor (2015) 256 CLR 104, cited Netglory Pty Ltd v Caratti [2013] WASC 364, cited Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, cited Paciocco v ANZ Banking Group Ltd (2015) 236 FCR 199, cited Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, cited Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64, cited Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575, cited Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429, cited Platinum United II Pty Ltd v Secured Mortgage Management Ltd (in liq) [2011] QCA 162, cited PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301, cited Prenn v Simmonds [1971] 1 WLR 1381, cited Purves v Smith [1944] ALR 269, cited Queensland Power Co Ltd v Downer Edi Mining Pty Ltd [2010] 1 Qd R 180, cited Reardon Smith v Hansen-Tangen [1976] 1 WLR 989, cited Reliance Rail Pty Ltd v Permanent Custodians Ltd (2017) 122 ACSR 317, cited Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, cited Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd (2012) 37 VR 486, cited Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45, cited Schwartz v Hadid [2013] NSWCA 89, cited Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, cited Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84, cited Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2019] NSWCA 11, cited Specialist Diagnostic Services Pty Ltd v Healthscope Ltd (2012) 41 VR 1, cited Stratton Finance Pty Ltd v Webb (2014) 314 ALR 166, cited Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd (2014) 48 WAR 261, cited The Eastern Extension Australasia and China Telegraph Co Ltd v Commonwealth (1908) 6 CLR 647, cited The River Wear Commissioners v Adamson (1877) 2 App Cas 743, cited Toll (FGCT)Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, cited Tredegar v Harwood [1929] AC 72, cited Trump International Golf Club Scotland Ltd v Scottish Ministers [2015] UKSC 74, cited United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618, cited
COUNSEL:	D Clothier QC, M Lyons and E Doyle-Markwick for the Plaintiff J McKenna QC, S Cooper and S Hooper for the First Defendant D Turner for the Second Defendant D O’Sullivan QC, J O’Regan and A Stumer for the Third to Sixth Defendants
SOLICITORS:	Quinn Emanuel Urquhart & Sullivan for the Plaintiff Holding Redlich for the First Defendant Clayton Utz for the Second Defendant Norton Rose Fulbright for the Third to Sixth Defendants

Period	Actual	FY2016 Plan	Nominal Capacity	Made Available
September 2015	648,038	482,000	675,000	975,505
Period to date	1,206,279	1,441,000	1,687,500	2,309,493

Vessel	Official Tonnes	Berth Time Commence	First Coal	Last Coal	Berth Time Complete	Gross Load time	Loan Time
10	105,390	31/08/2015 5:18	31/08/2015 9:05	01/09/2015 22:48	02/09/2015 7:46	37.72	50.47
11	165,042	03/09/2015 20:15	03/09/2015 22:09	05/09/2015 11:02	06/09/2015 13:28	36.88	65.22
12	164,614	12/09/2015 16:18	12/09/2015 18:52	16/09/2015 1:08	16/09.2015 20:04	78.27	99.77
13	159,776	18/09/2015 10:37	18/09/2015 12:38	20/09/2015 3:07	20/09/2015 10:42	34.48	48.08
14	82,500	22/09/2015 12:58	22/09/2015 14:28	23/09/2015 14:50	24/09/2015 2:24	24.37	37.43
Total	677,322	211.72	300.97

Dates	Cause of unavailability	Hours
5-11 September 2015	Planned shutdown for optimisation and rectification work	136
14 September 2015	Bias testing during loading of Vessel 12	19.66
17 September 2015	Installation of tapered shims on jetty conveyors	12
27 and 28 September 2015	Installation of tapered shims on jetty conveyors	24
Total	191.7