GPM Resources Pty Ltd v Golden Mile Milling Pty Ltd - [2020] WADC 102

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION:   PERTH
CITATION:   GPM RESOURCES PTY LTD -v- GOLDEN MILE MILLING PTY LTD [2020] WADC 102
CORAM:   SWEENEY DCJ
HEARD:   17-21 JUNE & 26 SEPTEMBER 2019
DELIVERED          :   24 JULY 2020
FILE NO/S:   CIV 494 of 2018
BETWEEN:   GPM RESOURCES PTY LTD
Plaintiff
AND
GOLDEN MILE MILLING PTY LTD
Defendant

Catchwords:

Mining contract - Gold in circuit - Claim for stand down - Construction of terms - Agency - Implied terms - Estoppel - Waiver - Unjust enrichment

Legislation:

Nil

Result:

Plaintiff's claim dismissed

Representation:

Counsel:

Plaintiff	:	Mr J M Healy
Defendant	:	Mr A Metaxas

Solicitors:

Plaintiff	:	Cullen MacLeod Lawyers
Defendant	:	Metaxas Legal

Case(s) referred to in decision(s):

Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Bayconnection Property Developments Pty Ltd v Commissioner of Taxation [2013] AATA 40
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Canning v Temby [1905] HCA 45; (1905) 3 CLR 419
Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169
Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353
Hightime Investments Pty Ltd v Lungan [No 2] [2010] WASC 296
Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406
Louinder v Leis (1982) 149 CLR 509
Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India (the 'Kachenjunga') [1990] Vol 1 LLR 391
Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221
Peninsular and Oriental Steam Navigation Company v Johnson [1938] HCA 16; (1938) 60 CLR 189
Pilbara Iron Ore Pty Ltd v Ammon [2020] WASCA 92
Scarf v Jardine (1882) 7 App Cas 345
Smith v Hamilton [1951] CH 174
Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387

Table of Contents

Introduction

Overview

Issues to be determined

Witnesses called and personnel involved

The contract

The processing of payments pursuant to the contract and in practice

The concept of 'gold in circuit'

Invoice 152 and evidence that the gold in circuit was sold to the Mint

The plaintiff's argument that failure to pay invoice 152 was a breach of the terms of the invoice

Was there an implied term of 'cooperation' in paying the plaintiff for the gold?

Was there an implied term that the plaintiff could 'claim payment' for the gold?

The plaintiff's argument that the defendant is estopped from denying that invoice 152 is payable

The plaintiff's argument that the defendant has been unjustly enriched

Discussions about the pleadings at the close of the evidence

The plaintiff's application to amend its statement of claim

The concept of a stand down claim

The roads and the rain

The ore at the Lakewood Mill begins to run out

The errors in the Daily Production report spreadsheets

The plaintiff's case in relation to the Daily Production report spreadsheets

Did the plaintiff rely upon the errors in the spreadsheets?

Was the defendant's entitlement to claim stand down contingent upon compliance with cl 9?

Was any stand down factor notified at the time it arose?

Did the defendant waive its right to claim stand down costs?

Is the defendant's claim for stand down substantiated?

Conclusion

SWEENEY DCJ:

Introduction

The plaintiff company owns and operates the Excelsior Gold mine north of Kalgoorlie. The defendant company owns and operates a processing plant, the Lakewood Mill. The mill processes gold‑bearing ore, producing 'dore gold', which can then be further refined by the Perth Mint, to achieve gold bullion.
The plaintiff sues the defendant for the value of certain gold worth $517,687 in January 2018, owned by the plaintiff and processed by the defendant pursuant to their contractual arrangement, then sold by the defendant on behalf of the plaintiff to the Perth Mint. In January 2018, the defendant paid the plaintiff $282,684 for that gold, but retained the sum of $233,524 by way of 'stand down' costs pursuant to the contract. The plaintiff sues for that outstanding sum, while the defendant argues that its 'stand down' claim was good and that no money is owing.
For reasons which appear below, but for the defendant's claim for stand down costs, the defendant would be obliged to account to the plaintiff and pay the outstanding money, but the claim for stand down is made out, and hence no money is outstanding.

Overview

On 22 November 2016, the plaintiff and defendant entered into a contract whereby the plaintiff was to deliver its ore to the defendant's mill to be processed into dore gold, the defendant would then send the dore gold down to the Mint, the Mint would refine the dore gold into bullion and then purchase that bullion through the defendant and the defendant, after deducting its processing expenses, would pay the balance from the sale to the plaintiff. At all times, in all its various forms, the gold remained the property of the plaintiff until it was purchased by the Mint.
This case concerns 'gold in circuit'. When gold‑bearing ore is mined, its gold content can be calculated. After it is processed at the mill, its gold content can again be calculated. During processing, the plant at the mill catches and retains some of the gold in the machinery, which will be indicated in the calculations of the gold content before and after processing, which thereby accounts for the 'gold in circuit'. The gold caught up in the machinery is not lost – it can ultimately be recovered and sold. But, in any event, its value can be calculated and it can be very valuable. In this case, it was worth more than $500,000.
At all times, the gold in circuit remained the property of the plaintiff, until it was ultimately purchased by the Mint. The contract provided specifically for the obligation of the defendant to account to the plaintiff for the gold in circuit and, if it was sold to the Mint, the defendant was obliged to pass that purchase price on, less costs, to the plaintiff.
The contract provided a method by which defendant was to account to the plaintiff for the purchase money obtained by the defendant from the sale of the gold to the Mint. The purchase of the bullion by the Mint and the defendant's accounting of that sum to the plaintiff, minus its own costs, was to be documented. It involved the defendant providing a payment certificate to the plaintiff setting out various figures, justifying the final figure to be passed on to the plaintiff which was, in effect, the value of its gold sold to the Mint less the cost of processing it, at both the defendant's mill and the Mint.
From pretty much the outset, however, at what appears to have been the suggestion of someone in the accounts department of the plaintiff, the parties did not comply with that regime. Instead of providing the payment certificate required by the contract, the defendant simply invoiced the plaintiff for its costs and, that amount of its invoice having been pre‑approved by the plaintiff's representative at the mill, deducted its fees and costs from the money it had received in selling the gold to the Mint and passed on the balance to the plaintiff. And the plaintiff also 'invoiced' the defendant - even though it had in fact supplied no goods or services to the defendant - for the full purchase price paid by the Mint for the gold.
None of the witnesses before the court were from the accounts department of the plaintiff. Why that method was adopted - whether it was for convenience, or because the plaintiff wanted to generate its own record or was more familiar with and more comfortable with invoices, or whether this was something to do with royalties, or because the staff in the accounts department just didn't really consider the contract and came up with their own idea - remains a mystery.
It made no difference at all, however, to the final figure passed on to the plaintiff. The source of the figure in the plaintiff's invoices was passed to it by the defendant and was the figure from the Perth Mint as to the purchase price of the gold. And the defendant was still just passing on the purchase money it received from the Mint, less its fees and costs.
The mutual invoice method also made no difference to the legal foundation upon which the plaintiff was entitled to be paid for the value of its gold, less the processing costs. At all times the plaintiff remained the owner of the gold, and the defendant was obliged both by the contract and by the fact that it was selling that gold to the Mint as the plaintiff's agent, to account to the plaintiff for the value of the gold, less its fees and costs. It was obliged to do that irrespective of whether or not the plaintiff chose to send it an invoice for the amount it was already obliged to pay. The invoice was not the source of the legal obligation.
This trial concerned the last invoice from the plaintiff to the defendant, invoice 152 dated 30 October 2017, which related to the value of 308 ounces of gold in circuit which was ultimately sold to the Mint. In January 2018, the defendant agreed by letter that the final gold in circuit figure was 308 ounces and placed a value on that of $509,740, but paid the plaintiff only $282,684 after deducting from that figure its claim for 'stand down' of $233,524.
The contract provided for the defendant to claim costs in addition to its usual processing costs in certain circumstances, and one of those circumstances was where the defendant had been required to cease treating the ore for a period of five consecutive hours or more, which was 'caused or contributed by' the plaintiff's delay in delivery of its gold‑bearing ore to the defendant's mill.
That is what the defendant's 'stand down' claim related to. In March 2017 it rained in the area of the Excelsior Gold mine and the Lakewood Mill, sufficient to result in the closure of the haul roads from the mine and to the mill. The stockpile of the plaintiff's ore at the defendant's mill ran down, and then ran out, resulting in the shutting down of the plant at the mill. It was shut down for several days before the roads opened and the plaintiff was able to deliver sufficient ore to make it viable to restart the mill.
The plaintiff sues for the outstanding $233,524. It says the defendant did not comply with the contract in making its claim for stand down costs, in that it failed to notify the plaintiff as soon as practicable after becoming aware that a circumstance had arisen giving rise to a likely claim for stand down costs (as required by cl 4 of the contract) because it had provided incorrect information to the plaintiff about the rate at which it was processing ore in the days leading up to the stand down. It also argues that the defendant failed to make its claim for stand down within the time limit that the plaintiff says is set down in cl 9 of the contract.
What this trial ought to have been about was simply whether the defendant's claim for stand down costs was a good one. If it was, then the defendant has a complete defence to the claim.
Unfortunately, in its pleadings as they stood at the beginning of the trial, the plaintiff rather missed the forest for the trees. Perhaps because the plaintiff had chosen to send the defendant invoices, rather than just adhere to the terms of cl 9 of the contract which dealt with the payment process between the parties, its pleadings struggled to characterise the legal basis upon which the defendant was obliged to pay for the gold in circuit. Hence the plaintiff pleaded that the defendant was obliged to pay invoice 152 because it was an invoice, which required payment, and/or because the defendant had paid every other invoice preceding it, or because the plaintiff had been led to expect that the defendant would pay all of its invoices and so it hadn't terminated the contract earlier when the defendant breached the contract by sending it incorrect information and so now the defendant was estopped from not paying this last invoice, or that there was an implied term that the defendant had to cooperate in paying money from the Mint to the plaintiff, or the defendant was unjustly enriched if it held on to the money.
Oral submissions by the plaintiff's counsel at the close of the evidence rested upon the proposition that the contract had provided no mechanism by which the plaintiff could seek payment for the gold in circuit if the parties had failed to comply with the payment process set out by the contract, and therefore the contract either failed for lack of consideration and the defendant should not be unjustly enriched by getting to keep the value of the gold in circuit, or the defendant should not be allowed to refuse to pay the final invoice when it had paid all the others preceding it because this is how the parties had chosen to conduct themselves.
Although it is to the defendant's credit that its pleadings asserted that it was under no obligation to pay any invoice but, rather, had been the plaintiff's agent in the sale of any gold, which therefore hinted at an obligation to pay the plaintiff for the gold in circuit in any event, nowhere in its pleadings did the defendant admit that, but for its stand down claim, it was obliged to account to the plaintiff for the gold in circuit. It could have done, but was not obliged to. But it had, after all, paid the plaintiff for the gold in circuit, only deducting its stand down claim figure. Unless the defendant's claim for stand down was made out, the plaintiff could ask the court to order the defendant to account to it for the outstanding money: Peninsular and Oriental Steam Navigation Company v Johnson [1938] HCA 16; (1938) 60 CLR 189, 218 (Latham CJ).
In discussions between the court and the defendant's counsel at the close of the evidence, in which he was asked on what basis, but for the stand down claim, the defendant could have retained the $233,524, counsel did not wish to be drawn on that topic. Indeed the court was informed that it was not here to do justice between the parties. From the pleadings and the candid evidence of Mr Baldock and the manner in which the defendant ran its case, however, it became clear that the defendant was not asserting any positive case that it was not obliged to account for the gold in circuit, over and above its claim for stand down costs. But what the defendant was arguing was that invoice 152 provided no legal basis for demanding that it account for the gold in circuit, and nor had any previous invoice been the legal basis upon which the defendant had ever paid money to the plaintiff.
The defendant's counsel agreed that the entire focus of the trial ought to have been whether or not the defendant could make good its claim for stand down. Discussions were also had with counsel about what prejudice might be occasioned the defendant in the event that the plaintiff amended its pleadings. No prejudice could be identified over and above costs thrown away in possibly ventilating issues which did not need to be ventilated. The defence objected, however, to any amendments to the pleadings at that late stage in the proceedings.
Nevertheless, the court invited the plaintiff to seek to amend its pleadings and, after the close of submissions concerning the evidence, the trial was adjourned to enable the plaintiff to file a minute of a proposed amended statement of claim, and for the defendant to file an amended defence in the event that the plaintiff was given leave to amend its statement of claim.
The proposed amendments to the statement of claim do not abandon any of the plaintiff's case as run at trial, but include a pleading to the effect that the defendant acted as the plaintiff's agent in the sale of gold and was obliged to account to the plaintiff for the proceeds of the sale of the gold in circuit to the Perth Mint on or about 10 January 2018.
When the court convened again to hear argument, I reserved my decision on the proposed amendments, with a view to dealing with them as part of this judgment.

Issues to be determined

Almost all of the issues in dispute in this case turned upon the construction of the contract that the parties entered into, with some factual findings required. The plaintiff advanced certain propositions about how the contract was to be construed which needed to be analysed. Clause 9, the payment clause, has to be analysed, as does cl 4, the stand down clause, as well as other aspects of the contract. The basis of the defendant's liability to pay for the gold in circuit occupied a large portion of the trial and must be analysed, particularly as the plaintiff did not abandon its original pleadings. And objection was taken to the plaintiff seeking to amend its case, and reasons need to be given in respect of that.
However the plaintiff's case is pitched, if the defendant's claim for stand down is made out, it has a complete defence to this action.
The second part of this judgment concerns whether the defendant was justified in holding back the sum of $233,524 by virtue of its claim for stand down costs. It was not in issue at trial that the mill did shut down, but factual findings need to be made about what caused the stockpile of the plaintiff's ore at the Lakewood Mill to deplete to the point where the mill shut down for several days, and whether the defendant notified the plaintiff as soon as practicable after becoming aware of circumstances likely to give rise to the claim, or whether the provision of incorrect information to the plaintiff by an employee of the defendant as to the rate of processing at the mill had the effect that notification was not given.
A further issue to be determined is whether the defendant's claim for stand down was conditional upon compliance with cl 9 of the contract and had to be made within a particular timeframe, or within a reasonable time, and whether it was made too late.
If the stand down claim is good in broad principle, findings need to be made about the quantum of that claim.
Before turning to the contractual arrangement the parties entered into, a brief introduction to the key personnel involved in each party is required.

Witnesses called and personnel involved

The first of the plaintiff's three witnesses, Mr Robert Rowan ('Rowan') Johnston, was the managing director of GPM Resources, the plaintiff company, and the executor director of its parent company. The plaintiff ran the Excelsior Gold mine in the north-eastern goldfields of Kalgoorlie. The corporate structure was not really explained. It was the plaintiff company which entered into the contract the subject of the dispute. I gather the plaintiff may have had a name change and was once named Excelsior Gold. That is what Mr Johnston's evidence implied and many of the plaintiff's documents tendered at trial were on Excelsior Gold letterhead. Mr Ford and Mr Hamlyn described themselves as employees of 'Excelsior Gold'. No point was made at trial of the precise corporate structure and I have regarded it as the one entity for the purposes of the issues to be determined.
The plaintiff's second witness, Mr Randell Ford was, at the relevant time, the plaintiff's mining operations manager and Mr David Hamlyn, the third witness for the plaintiff, was its general manager of operations and based in the Perth office.
Other names associated with the plaintiff company which featured in the trial were Ms Karen Clunies‑Ross, the financial controller for the plaintiff, Mr Ron Smith, the plaintiff's representative at the mill, and his replacement Mr Kevin Phelan, and Mr Della‑Marta, who compiled various stock takes.
Turning to the defendant's two witnesses, Mr Lawrence Hargrave is the sole director of Golden Mile Milling, the defendant company, and Mr Patrick ('Pat') Baldock, the second witness for the defendant, is the general manager of the company.
It was Mr Baldock who was the defendant's key witness. At the time of the events with which this trial was concerned, Mr Hargrave was entirely new to the mining industry. Mr Baldock, by contrast, was experienced in the industry and Mr Hargrave really relied upon him for the day to day management of the Mill.

Other names which featured in the trial associated with the defendant company were: Mr Phil Milkins, the superintendent at the mill, who looked after the day to day running of the mill and liaised with the plaintiff's representative at the mill, and Ms Andrea Huckson, senior metallurgist for the defendant.
This is not a case which turned particularly on the resolution of disputed facts. There is not a lot in dispute as to the factual situation, although there is a key factual issue as to the extent to which the plaintiff relied upon incorrect information provided by the defendant. But, fortunately, most of the events were captured in some way by contemporaneous documentation, mostly in the way of emails but also some spreadsheets and records of meetings. Where there was contemporaneous documentation, I have placed more reliance upon that than upon evidence given from memory, which sometimes conflicted with the written record.
By way of general comment, I found every witness in the trial to have been honest, doing his best to give a truthful account. They were testifying about matters more than two years on and so naturally they were assisted by the documentation and naturally they sometimes lacked memory or lacked clear consistent memory. The most impressive witness, for his honesty, balance and detailed and reliable recall, was Mr Baldock for the defendant. Mr Ford and Mr Hargrave had reasonably limited evidence to give, but both gave honest evidence. I have made some findings about certain evidence of both Mr Johnston and Mr Hamlyn that I consider to be unreliable. But both witnesses did their best to assist the court by giving truthful evidence.
Although the defendant's counsel invited me to make findings against the plaintiff's director, Mr Johnston, to the effect that he had deliberately given evidence that best suited the plaintiff's case – with the suggestion then that he had tailored his recall – I found that submission harsh and I have not so found. That submission made no allowance for the passage of time, genuine differences in perception and perspective, the fact that, as the managing director and the person instructing the lawyers, Mr Johnston had probably gained an understanding of their legal characterisation of the case, and the fact that the cross‑examination of the witness was prickly, to say the least, and would have made anyone a bit defensive.
Little is to be gained by summarising what each witness said in turn. I will mention the significant evidence as I deal with each issue only in so far as it is required to cast light on a specific question.
I turn now to the terms of the contract the parties entered into, first generally and then honing in on the manner in which payments were to be processed and the clauses dealing with the gold in circuit. The 'stand down' clauses will be dealt with separately and later.

The contract

On 22 November 2016 the parties entered into a toll milling agreement, executed by Mr Johnston for the plaintiff and Mr Hargrave for the defendant, in which the plaintiff was described as the customer and the defendant as the toller.
The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose, and is an objective task – determining what a reasonable person would have understood those terms to mean: Pilbara Iron Ore Pty Ltd v Ammon [2020] WASCA 92 [85] ‑ [90].
By cl 2.1, the plaintiff agreed to retain the defendant to treat its gold‑bearing ore at the defendant's Lakewood Mill. By cl 3, the defendant was to be paid a fixed rate of $32 per dry tonne processed, exclusive of GST.
The gold‑bearing ore was to be processed by the defendant to extract and refine the gold contained in the ore, the resulting product being 'dore gold'. The dore gold was then to be delivered by the defendant to the Perth Mint (cl 6) known in the contract as 'the Refiner', to be further refined into gold bullion.
Clause 8 of the contract provided:
8.1The Toller shall periodically deliver Dore Gold to the Refiner.
8.2The Refiner will assay the Dore Gold and provide an Outturn Statement to the Toller.
8.3The Refiner will then Refine the Dore Gold.
8.4Payment by the Refiner for the Refined Gold is the purchase price of the Refined Gold minus the charge levied by the Refiner to Refine the Dore Gold ('Revenue').
8.5The Refiner will pay the Revenue directly to the Toller.
The Mint was not actually a party to the contract, so cl 8 was directed only at regulating the defendant's dealings with it. So the Mint received the dore gold from the defendant, refined it into 'Refined Gold' (bullion) and then purchased the gold it had refined, paying the purchase price - minus its refining costs - to the defendant. Clause 8 authorised the defendant by necessary implication to sell the gold to the Mint. It also authorised the defendant to receive the purchase money from the Mint.
By cl 9, after deduction of the defendant's processing and other costs from the 'Revenue' from the Mint, the resulting 'Residual Revenue' was to be paid by the defendant to the plaintiff. That is because, at all times, the ore and the gold it contained in its various stages of refinement, as well as the money obtained from the sale of that gold to the Perth Mint, remained the property of the plaintiff: cl 17.
The contract therefore authorised the defendant to sell property to which it had no title, and to directly receive that revenue from the Mint and to then deduct from that money its fees and costs, transferring the balance to the plaintiff. The contract did not require a trustee account to be set up for receipt of the plaintiff's money. It went into its own account.
Apart from the authority given to it by the plaintiff, the defendant had no other right to sell the plaintiff's gold. It was therefore, at least in the sale of the gold, the plaintiff's agent. The defendant accepted that in its pleadings. The contract did not employ the term 'agent' but, in relation to the sale by the defendant of the plaintiff's gold to the Mint, that is the relationship it established. And that is consistent cl 9 and other terms of the contract which dealt with disclosure by the defendant to the plaintiff of certain information in relation to the gold delivered and sold to the Mint.
Whether that agency was or was not disclosed to the Perth Mint was not the subject of evidence. The documentation before the court generated by the Mint does refer to the gold as 'EXG', which is probably a reference to the plaintiff's Excelsior Gold mine, but may or may not reflect any awareness on the part of those at the Mint of the plaintiff as the owner of the gold. The issue was not ventilated before me and I consider it has no bearing on the outcome of this case.
Because the defendant sold the gold as agent for the plaintiff, it had an obligation at law to account to the plaintiff for that purchase sum, less its expenses. The defendant accepted as much in closing submissions. It had that obligation both on the terms of the contract, which set up a relationship of agency and expressly required the defendant to account to the plaintiff for the purchase money, and also because the relationship in relation to the sale of the gold to the Mint was one of agency, and therefore it was required to account to the principal in relation to the moneys received for the sale of its property, less its expenses.
That was the case at law as a result of that agency, and it was also expressly provided for in the contract. Clause 9 was the clause by which it was to account to the plaintiff. That clause will be dealt with in more detail a little later, as will cl 6 and cl 7, which dealt with gold in circuit.
Apart from being entitled to deduct its processing costs from the purchase price it obtained from the Perth Mint, the parties also acknowledged and agreed that the defendant may incur other costs from time to time. Clause 4 of the contract provided for these 'Other Costs'. One such other cost was a claim for 'stand down' – a period of time during which the defendant had to stop processing for five hours or more - which was caused or contributed to by the plaintiff's delay in the delivery of gold-bearing ore to the defendant's Lakewood Mill. Clause 4 will be dealt with in greater detail later in this judgment.
Clause 5, which required the defendant to work to certain standards of diligence and care, will be mentioned later when I deal with the error in spreadsheets provided by the defendant to the plaintiff. Clause 13 dealt with the requirement for the defendant to furnish reports to the plaintiff, and to keep records.
The contract provided for the plaintiff to have its own representative – the evidence indicates that representative was an agent rather than an employee – at the Lakewood Mill, to look after its interests. Clause 12 provided that the plaintiff's representative was there to liaise with the defendant in relation to any matters arising from the contract, and could be present at the Lakewood Mill from the delivery of the ore through its treatment at the mill, and have input, but the defendant was to have sole authority over operational matters and safety.
The contract could be terminated by either party upon the other party committing an event of default which continued for two days after notice was given specifying the default, or without cause on the giving of two days' notice, or if an event of force majeure continued for 30 days. 'Force majeure' was not defined in the contract. While originally pleaded by the plaintiff against the defendant's stand down claim, counsel for the plaintiff at trial abandoned any reliance upon force majeure.

The processing of payments pursuant to the contract and in practice

There was a great deal of attention given during the trial to the proper construction to be placed upon cl 9, which set out how payments were to be processed between the parties, and the manner in which payments were actually processed between the parties. During the course of the contract, the plaintiff issued some 52 invoices to the defendant worth about $42 million. The plaintiff's claim is for the value of 'gold in circuit', the subject of its final invoice, invoice 152.
The concept of gold in circuit will be dealt with after I consider the processing of payments, but much hinges on the position put forth by the plaintiff to the effect that the defendant was obliged to pay invoice 152 according to its terms. Multiple legal bases are put forward as to why the defendant was obliged to pay invoice 152.
The first basis is that the invoice required payment within seven days. The plaintiff pleads that it issued invoice 152 to the defendant, which invoice required payment within seven days, the terms of which have been breached. The defendant is said to have 'failed to pay the entirety of the invoice' 'in breach of the terms of the invoice', as though the fact of the invoice itself was the basis of the obligation on the part of the defendant to pay invoice 152. And so it is necessary to consider the question of how and why payments were made by the defendant to the plaintiff.
Clause 9 set out the method by which the defendant would account to the plaintiff for the 'Residual Revenue'. The purchase price for the gold paid by the Mint minus its processing fees was the 'Revenue', and the 'Residual Revenue' was what was left after deduction of the defendant's fixed processing fee and other costs. Clause 9 provided:
9.1The Toller will advise the Customer of the payment of Revenue as soon as reasonably practicable following receipt of Revenue.
9.2No later than five (5) Business Days following receipt of Revenue:
9.2.1The Toller will issue a Payment Certificate to the customer setting out the Residual Revenue to be paid by the Toller to the Customer; and
9.2.1.1The Payment Certificate will include:
9.2.1.1Opening Stock;
9.2.1.2Closing Stock;
9.2.1.3Gold Produced;
9.2.1.4Outturn Statement;
9.2.1.5Charges levied including but not restricted to Fixed Costs and .Other Costs; and
9.2.1.6Dry Tonnes Milled.
9.2.2The Toller will deposit the Residual Revenue as directed by the Customer into either an account at an authorised deposit taking institution nominated by the Customer or by way of a credit to the Customer's nominated gold account.
9.2.3The parties agree that the residual Revenue is to be calculated by the Toller as follows:
9.2.3.2Revenue received minus any deductions from Revenue by the Toller for costs including:
9.2.3.2.1Fixed Costs;
9.2.3.2.2Other Costs
9.2.3.2.3Such other amounts as mutually agreed by the parties.
By virtue of the definitions contained within cl 1, the references to 'Opening Stock' and 'Closing Stock' were references to opening and closing stock at Lakewood Mill, not at the Mint. 'Gold Produced' was defined to mean 'Refined Gold Poured by the Refiner plus Closing Stock minus Opening Stock'. On its face, that required the defendant to account for the gold in circuit, if that calculation was in its favour, each time gold bullion was sold to the Mint.
It is the defendant's position that the closing stock figure was not calculated, however, unless the defendant was moving from processing one stockpile to another, or from processing one client's ore to another. That was the evidence from Mr Baldock for the defendant. I will deal with that a bit later when I discuss the concept of gold in circuit in more detail. Of course, the fact that the closing stock figure was not assessed every time dore gold was sold to the Mint does not mean that cl 9.2 did not require it to be calculated every time gold dore was sold to the Mint. It may, however, constitute some part of the explanation as to why the parties did not strictly comply with cl 9.
The 'Outturn Statement' was defined to mean 'the statement provided to the Toller by the Refiner after assaying the Dore Gold', so the outturn statement was the document provided by the Mint, prior to refining the dore gold, as mentioned in cl 8.2. 'Residual Revenue' was defined to have the meaning described in cl 9.2.3. 'Other Costs' was defined in the contract to have the meaning described in cl 4.3.
So what the contract required was that the defendant provide, by way of a 'Payment Certificate', certain information which included the calculations made at Lakewood of the opening stock versus the closing stock – which gives the calculation of the gold in circuit – and the gold produced after the Mint had refined it, the outturn statement produced by the Mint, any charges the defendant levied against the revenue and the quantity of dry tonnes milled.
It is uncontroversial that the defendant never provided the plaintiff with such a payment certificate.
On 12 December 2016, just less than three weeks after the contract was signed, Ms Clunies‑Ross, the financial controller for the plaintiff, emailed Mr Pat Baldock of the defendant, and copied in various other key people including Mr Rowan Johnston, the plaintiff's managing director, and others including Mr Smith, the plaintiff's representative at the mill, to the effect:
Hi Pat
I've just spoken with Rowan about the invoicing process. We will invoice you for the sale of the gold, and you'll invoice us for the treatment costs. Rowan mentioned that you will take the current outstanding payment of $205,681.22 out of the next sale funds you receive from the Perth Mint, is that correct?
I'll send through the invoice for the sale of gold today.
One more question in regards to what happens with the proceeds from sale of silver each month?
Silver does not get a mention in the contract. Mr Baldock's response (copied to the same people) was non‑responsive to most of the email:
Hi Karen,
The Silver is usually sold at the end of the month and usually takes care of the refining cost. We can leave it at that ore (sic) we can sell it and pay you from that sale. I think today's silver was worth $154.00.
Let me know which way you want to go.
There is no pleading to the effect that the email from Ms Clunies‑Ross of 12 December 2016, and Mr Baldock's non‑responsive reply, amounted to an agreed variation of the contract. Pursuant to cl 27.5, the contract could only be amended or supplemented in writing signed by the parties. This was a commercial agreement worth a significant amount of money, and a variation to a clause as significant as cl 9 would be expected to be dealt with in a formal way. The defendant does not accept that any variation occurred, although it accepts that the parties did not comply with cl 9. The case does not require a determination of whether there was a variation effected, except to the extent that I have made findings below concerning the standing of the plaintiff's so‑called 'tax invoices'. I have reasoned on the basis that cl 9 continued to form part of the contract but that the parties did not comply with aspects of it.
The manner in which the parties actually dealt with processing payments followed a predictable pattern. After the defendant had processed the ore and then caused the dore gold to be delivered to the Mint (via a security company) it received, within a few days, a 'Memorandum of Outturn' from the Mint. That document was dated, addressed to the defendant, and provided a description of what the Mint had received by means of the initials 'EXG' (presumably a reference to Excelsior Gold) with identifying numbers. It provided the official weight of what was received, the assay report results and its calculation of the resulting fine gold and fine silver by the ounce, together with a list of its charges that were due to the Mint. It did not specify the daily price for gold or silver.
It was closely followed, however, by a tax invoice issued by the Mint, dated and addressed to the defendant, which did specify the price of gold that it was offering for the purchase of the refined gold, always commencing 'We confirm our transaction where Perth Mint Refinery Buy as follows', followed by the quantity of gold which matched the quantity in ounces allowed for fine gold in the preceding memorandum of outturn, the price per ounce on offer and the total price, and a request to the defendant to confirm the transaction by the following day. The bundle of tax invoices from the Mint to the defendant relating to each and every sale of fine gold to the Mint was before the court, and each has been signed by Mr Baldock for the defendant, confirming the sale to the Mint of that amount of gold at that price. The defendant emailed each tax invoice from the Mint to the plaintiff.
Mr Johnston testified that Mr Baldock would always telephone him or email him or, in his absence, Ms Clunies‑Ross, to obtain the plaintiff's consent to the sale of the gold to the Mint. He said Mr Baldock would tell him 'This outturn of the statement. This is the price of the gold. Would you like to sell the gold at that price?' To which our answer was yes…'. The gold was sold and the purchase price was received from the Mint into the defendant's bank account.
The contract did not, however, require the defendant to seek the plaintiff's consent to the sale of the individual lots of dore gold to the Mint. The contract already authorised the sale of the gold by the defendant to the Mint by cl 8, and did not require prior consent to be obtained. Further, the contract only contemplated one potential purchaser of the gold, being the Mint, so there was no obligation on the defendant to shop around for a best price. In theory perhaps the defendant could have stood in credit for the gold at the Mint and sold it at a later date (as the evidence indicates it did with the gold the subject of invoice 152). But the evidence also indicates the plaintiff was keen for the prompt payment of its money.
Still, the defendant did seek approval for each sale. Nothing turns on the seeking of approval, except insofar as the seeking of approval which notified the plaintiff of the terms of the sale was not inconsistent with cl 9, and Mr Johnston's evidence makes it clear that the plaintiff received the information in the memorandum of outturn.

In the meantime, and not necessarily coinciding with a load of dore gold being transported down to the Mint, Mr Ron Smith, the plaintiff's representative at the Mill, and Mr Phil Milkins, the defendant's mill superintendent, would sit down together on about a weekly basis, generally a Monday, and agree the amount of dry tonnes treated at the Mill, as well as the amount of chemicals used in the processing, to see if they exceeded the contract rate and justified a cost addition pursuant to cl 4 for the purpose of compiling the defendant's invoice to the plaintiff for its fees and costs. Mr Milkins would give Mr Baldock that information, Mr Baldock would generate the defendant's invoice and then he would take it to Mr Smith who would sign it as being approved by him for payment by the plaintiff. Nowhere in the contract was there provision for this invoice – cl 9 had required a payment certificate, not an invoice.
Mr Baldock testified that, when he received a transfer of money from the Mint into the defendant's account, he would transfer the money to the plaintiff. Once the defendant's invoice to the plaintiff was 'cleared' – by which he meant the process involving Mr Smith approving the payment of the invoice by the plaintiff - he arranged for a bank transfer to be made to the plaintiff's account of any residual funds left over from the Mint's purchase of the gold less the defendant's invoiced amount. He testified that he would then send Ms Clunies‑Ross of the plaintiff a remittance to say that he had paid the plaintiff from the sale of the gold, and then she would send him an invoice from the plaintiff.
The exhibits before the court indicate that, generally a few days after receipt by the defendant of the tax invoice from the Mint, the plaintiff would generate a document described as a 'tax invoice' addressed to the defendant, for the precise amount of the total purchase price paid by the Mint to the defendant. Each invoice was described as being for the sale of the gold referred to in the documentation from the Mint. The invoices were emailed to Mr Baldock.
Mr Baldock testified that he didn't do anything in relation to those invoices and he didn't pay them. He said, by the time he received those invoices, he would have made the bank transfer to the plaintiff's account already of the residual funds from the purchase money received from the Mint. As to the exchange of 12 December 2016, in which Ms Clunies‑Ross of the plaintiff had initially proposed the sending of mutual invoices, Mr Baldock testified that he didn't have an understanding of her proposal and didn't see the need for, or the point of, the plaintiff sending the defendant an invoice, but it made no difference to him. He agreed that he had not responded to her proposal, as he didn't see the point in it. He also agreed that he never told her to not to send invoices.
This is contrary to Mr Johnston's evidence. Mr Johnston testified that the defendant paid every one of the plaintiff's invoices except the last, being invoice 152 the subject of this trial. When tackled on this in cross‑examination, he was adamant that, between the money that was transferred and the offset of the defendant's own costs, the defendant had paid every one of the plaintiff's invoices in full. He would not agree with the proposition that the defendant never paid the invoices, and never paid the full sum of any invoice.
I accept Mr Baldock's evidence, as he was clearly an honest witness and his evidence on this issue so plainly accords with common sense and the contractual relationship between the parties. He was also directly involved in the process of the invoices and across the process the parties followed, which Mr Johnston was not. Ms Clunies‑Ross was not called as a witness to contradict anything said by Mr Baldock and Mr Baldock's understanding is supported by the documentation.
That is no reflection, however, on the honesty of Mr Johnston's evidence. The cross‑examination on this issue began with a blanket proposition in which counsel simply put his own legal characterisation of the situation to the witness, rather than leading the witness through the factual building blocks and leaving the legal conclusion for the court. It began like this:
The plaintiff sent about 50 invoices to the defendant for - which totalled a little over $42 million, you'd agree?‑‑‑I believe those are the numbers. I think it's 52 invoices, yes.
Yes. And is it the case also that not one of those invoices was paid by GMM?‑‑‑No.
Are you saying that GMM paid GPM 40 - a little over $42 million?‑‑‑No, I did not.
It didn't, did it? So when I said to you that GMM or the defendant never paid one of the invoices, that's correct, isn't it?‑‑‑I don't believe that case, no.
A later exchange went like this:
GMM deducted from the money it was paid by the mint, the treatment costs for the ‑ that it was owed by GPM, under the toll milling agreement?‑‑‑My understanding is that an invoice for the total amount of gold sold was ‑ was generated from G - from us, GMM (sic: GPM)
Yes?‑‑‑And then the - what was forwarded to us was the difference between that gold price, the - that gold sale and the - the toll treatment costs.
Yes. So as I said to you, when I started, GMM never paid an invoice that it received from GPM in the amount stated in the invoice?‑‑‑They paid the invoice, less ‑ they paid it on the invoice, less the amount that was deducted for milling.
I interject here to note that that was not the proposition put when counsel started, which was a blanket proposition that 'not one of those invoices was paid'. It continued:
I'll take that as a yes, all right? Because that's ‑ ‑ ‑?‑‑‑If that's ‑ ‑ ‑
Your answer was ‑ ‑ ‑?‑‑‑ ‑ ‑ ‑ the way you read it, I do not.
Your answer is that you agree with me GPM was never paid the amount invoiced, was it?‑‑‑It was paid the amount invoiced, less what was milled.
Yes. All right. So Mr Johnston, GPM issued all of these invoices over a period of about a year, correct?‑‑‑Yes.
Not one of them was paid in full, was it?‑‑‑In full? They pay ‑ they were - they were all paid in full, less what was deducted for milling.
Yes. All right. So for what purpose were these invoices raised?‑‑‑Look, I - I'm not an accountant but I find it extremely difficult to believe that you can't (sic) run a company without tax invoices.
Well, what ‑ ‑ ‑?‑‑‑How would ‑ ‑ ‑
‑ ‑ ‑ did ‑ ‑ ‑?‑‑‑How would we recover the gold?
Mr ‑ ‑ ‑?‑‑‑How would you know ‑ ‑ ‑
Yes?‑‑‑ ‑ ‑ ‑ how much gold is - goes into our books?
Yes?‑‑‑How much gold did we receive and what price did we receive it for?
The witness had good reason to be on his guard in cross‑examination. The tone of the cross‑examination was, at times, abrasive. Early in the piece and pretty unnecessarily, he was asked 'Are you telling me that the primary purpose in your evidence was to tell the truth?'
From Mr Johnston's perspective, invoices were sent by the plaintiff and paid by the defendant, and it was only the last invoice that this trial concerns that remained outstanding. He was not involved in the accounting process, although his instinctive desire for invoices may have been shared by the accounts department. The plaintiff's invoices were, from his perspective, paid in full, because they were paid by way of a combination of the money passed on from the Mint less the defendant's deduction of its own fees and costs. His personal perception of whether the invoices were being paid at all, or in full, or partly by money and partly by setting off the defendant's costs, barely matters in fact. It is the court's assessment of the facts that matters.
His perception – incorrect though it is – is entirely understandable, and is also no doubt informed by the fact that his lawyers based the plaintiff's case on the proposition that the fact that the plaintiff rendered an invoice created an obligation in the defendant to pay it. If that position made sense to his lawyers, naturally he was confirmed in his perception that the defendant had paid the invoices, all but the last. I consider his evidence to represent his honest understanding of the situation.
It was not correct, however.
According to the Oxford English Dictionary (both UK and US editions online) an invoice is 'a list of goods sent or services provided, with a statement of the sum due for these: a bill'.
As was said in Bayconnection Property Developments Pty Ltd v Commissioner of Taxation [2013] AATA 40 [86] (DP Frost), a case concerning a disallowed claim for input tax credits:
We concur with the view that tax invoices are documents of considerable importance; indeed they can represent cash to those seeking to claim ITCs on creditable acquisitions. However, the reality is that a tax invoice does not create a taxable supply; it records one. If a taxable supply did not take place, then a 'tax invoice' is meaningless. In other words, documents that are so called 'tax invoices' cannot substantiate a creditable acquisition, if in fact there was no supply or acquisition. It must follow that scrutiny of transactions is always essential …
Notwithstanding the description of the plaintiff's document as a 'tax invoice', there was no contractual (or other) basis upon which the plaintiff was entitled to issue an invoice to the defendant for the value of the plaintiff's gold sold to the Mint, because at no stage did the plaintiff provide any goods or services to the defendant. It delivered its ore to the defendant for processing, but at no stage did title ever pass in that ore, and it provided no services to the defendant for which it was entitled to render an invoice. According to the contract, the residual revenue was also the property of the plaintiff. In the sale by the defendant of the gold to the Mint, the defendant acted as the plaintiff's agent and with its consent as per the contract, with a corresponding obligation to account for that purchase price to the plaintiff, less its own costs, but not because there had been any supply of goods or services on the part of the plaintiff to the defendant in that process.
The fact that the plaintiff in this case did render multiple invoices to the defendant did not, as a result, bring into being some transaction by which the plaintiff supplied goods or services to the defendant.
Nor did the fact that the amount of money transferred by the defendant to the plaintiff corresponded to the plaintiff's invoice, once the deduction was made for the defendant's own costs. Naturally the figures corresponded. The sum claimed by the invoice from the plaintiff was derived from, and therefore matched, the figure paid for the gold by the Mint after deduction of its expenses, and the contract obliged the defendant to pass that sum back to the plaintiff after deduction of its own fees and costs. But of course the defendant did not pay the plaintiff a sum corresponding to the total on any of its invoices, because the plaintiff's invoice total did not make any deduction for the defendant's fees and costs.
It was not the plaintiff's so-called 'tax invoices' which entitled it to payment. They were redundant. The defendant never complained that there was no contractual basis for the plaintiff to invoice it for the gold purchased. It made no difference to the defendant.
That also accounts for why there seems to have been no complaint about the unreasonableness, at face value, of the due date specified on some of the plaintiff's invoices, which varied from several days to as short as one day. Mr Baldock said he did look at the invoices when they came in, to see the due date, and a four day window was standard, but sometimes the plaintiff expected payment the day he received the invoice. So clearly he had some regard to how quickly the plaintiff wanted its money passed on. Sometimes the money from the Mint came in the day the sale was made, and sometimes an intervening weekend held the money up until the Monday, but the money was just being passed on. While such a short payment due date would be unreasonable if the invoices represented the true basis upon which payment was due, in reality the defendant was passing on money it had already received from the Mint, and the plaintiff would have had that expectation as it was the price provided by the Mint which saw the generation of the plaintiff's invoice. The due dates gave scant regard for the time limit contained in cl 9 of the contract, namely five business days following receipt by the defendant of revenue from the Mint.
And nor were the invoices actually paid. In fact the defendant simply passed on to the plaintiff the money it had received from the Mint, less its fees and costs. It was obliged to by the contract, and by the fact that it had acted as the plaintiff's agent in the sale of the gold and, if the plaintiff had not sent it a single invoice, the defendant was still obliged to pass that money on, less its fees and costs.
The defendant, by contrast, did provide services to the plaintiff by way of processing the ore, delivering it to the Mint and then selling it, as per its contractual obligations. The defendant therefore did have an underlying foundation – if not a contractual foundation - upon which an invoice could be raised.
Clause 9 of the contract, however, obviated the need for any invoice to be issued by the defendant because it was the party that received the revenue from the Mint and was, in effect, able to pay itself its fixed fee and any other costs, before passing on the balance to the plaintiff. The contract specified that it was the 'residual revenue' that was the property of the plaintiff. The payment certificate which was supposed to be issued by the defendant to the plaintiff was not an invoice, but a statement setting out the information and the calculations by which the defendant purported to account to the plaintiff for the money it had received from the sale of the plaintiff's gold, less its fees and costs. There was no real problem with the defendant sending an invoice to the plaintiff, providing it was understood as nothing more than a recording of the defendant's fees and costs which had been paid already, by its deducting that sum from the revenue it was to pass on. The plaintiff's contractual obligation to pay the defendant its costs of processing the gold‑bearing ore did not actually arise from the rendering of any invoice from the defendant to the plaintiff, but rather from cl 3, which entitled the defendant to a fixed fee, and cl 4, which entitled it to other costs. Clause 9 limited the defendant's obligation to account to the plaintiff for the 'Residual Revenue', being what was left after the defendant's deductions.
There is no evidence before the court to suggest that the plaintiff ever complained that the defendant was not producing the payment certificates required by cl 9. Clause 9 barely got a mention in the plaintiff's pleadings, until it was relied upon to defeat the defendant's stand down claim.
Much of cl 9 was complied with in substance, if not in form. The defendant's invoices contained a figure for the dry tonnes milled. Mr Baldock emailed each memorandum of outturn and tax invoice from the Mint to the plaintiff. But the opening and closing stock figures were not calculated by reference to every delivery to the Mint, but rather at the beginning and end of the processing of each individual stockpile of ore.
Invoice 152 which this trial concerns was for the final calculation of the gold in circuit. Notwithstanding that, the concept of gold in circuit remained fairly elusive during the plaintiff's case and really only became clear during the questioning of the key defence witness, Mr Baldock. His evidence about the concept of the gold in circuit was unchallenged and I accept it. To the extent to which he gave evidence about what he understood certain terms in the contract mean, obviously the objective construction of the contractual terms trumps his personal understanding, but really the two were consistent and certainly his evidence was of assistance in bringing those terms into practical context.

The concept of 'gold in circuit'

The plaintiff's claim is for the value of the gold in circuit, the subject of its invoice 152.
The gold‑bearing ore was mined at Excelsior Gold mine in stockpiles and delivered to, and processed at, Lakewood Mill in designated stockpiles. The stockpiles were named and they were not mixed, at either end. That was to retain the individual grade and characteristics of each stockpile, about which calculations/predictions would be made as to expected yield and economic return. The processing of each stockpile was referred to as a 'campaign', and the completion of the processing of the entire stockpile as the 'end of the campaign'. There was more than one campaign during the course of the contract, although the end of the contract seems to have been referred to as the end of the campaign as well.
'Gold in Circuit' was defined in the contract to mean 'gold extracted (or in solution) at each stage of the treatment process including gold extracted from gravity separation, loaded carbon and electrowinning until it is Dore Gold'. It is the inventory of the gold as it is processed to become dore gold, and the aim of processing is to see as much of the gold content from the gold‑bearing ore as is possible captured in the dore gold. But the act of processing the gold‑bearing ore leads to a quantity of gold being left in the machinery at the mill. Calculating the 'gold in circuit' enables the value of that gold produced overall to be calculated. The term seems to have been used in two different senses during the trial - although the contract defines the 'gold in circuit' in terms of the whole of the gold, so that the gold in circuit is really the inventory of the whole, the witnesses spoke of the gold in circuit in terms of the gold left in the plant and unaccounted for at the end of the campaign. Its use in that second sense is not inconsistent with the first sense and I do not consider anything turns on that, and I intend to refer to the gold in circuit as the gold unaccounted for, as that is what invoice 152 concerned.
The quantity of gold in circuit is capable of being calculated, based on the difference between the gold present in the ore at the outset of processing – the opening stock – and the gold present at the end of the processing – the closing stock. The difference is capable of being valued. It is also capable of being recovered. It is not lost to the machinery for all time. In any event, by cl 17.1 of the contract, it remained the property of the plaintiff.
The contract dealt specifically with the gold in circuit and how it was to be accounted for. Clause 6 of the contract provided:
6.1The Toller will deliver Dore gold to the Refiner pursuant to its existing shipping and refining contract with the Refiner.
6.2The parties agreed that the total Dore gold recovered for each Treatment is to be calculated using the following formula:
Gold Recovered = B+CS-OS
Where:
B = fine gold bullion calculated from the Refiner's turn out for the relevant toll Treatment period
CS = Closing Stock Gold In Circuit (Gold In Circuit value).
OS = Opening Stock Gold In Circuit (Preliminary Meeting)
'Treatment' in cl 6 was defined and was a reference to the treatment of the ore at the Lakewood Mill, not at the Mint. Clause 7 of the contact provided:
7.1If the Closing Stock is greater is greater than the Opening Stock the Toller will allocate the difference between the Closing Stock and the Opening Stock to the Customer's Metal Account;
7.2If the Closing Stock is less than the Opening Stock the Toller will allocate the difference between the Closing Stock and the Opening Stock to the Toller's Metal Account.
'Opening Stock' was defined in cl 1 to mean 'the Gold in Circuit prior to Treatment'. 'Closing Stock' was defined to mean the 'Gold in Circuit at the completion of Treatment'. And 'Treatment', as discussed above, referred to the Lakewood Mill. In other words, if the mill gained gold in the treatment process, it had to account for that gain to the plaintiff – and if it lost (which meant there had already been gold in the plant prior to the processing of the ore, and the ore gained in gold content) then the plaintiff had to account to it.

Working on the basis that the mill did not restart until 8.15 am on 2 April 2017, the down time one might have thought would have been 8.15 hours, which allows a claim of nine hours down time. Yet the record indicates downtime of 2.22 hours – a very precise calculation which is inconsistent with the clock time. Mr Baldock did not bother to claim those 2.22 hours in his spreadsheet. The precise method by which downtime was calculated was not explained – it affects only one day in that the other days were all 24 hour periods – but this document suggests that the 24 hour period employed did not coincide with a midnight to midnight start and end point.
Similarly, based on the comment in the daily management meeting for 24 March 2017 indicating 'mill feed off' at 7.30 am on 23 March 2017, a layman might have thought that that is when the mill stopped processing, but the same record indicates that the mill ran for only 1.50 hours on 23 March 2017 with 22.50 hours down time.
So the hours do not appear to be calculated from midnight to midnight and, as Mr Baldock said, he in fact under‑claimed that 22.50 hours as 19 hours, consistent with his evidence that he based his spreadsheet on what the superintendent had told him, which he recalls was five hours down time.
On the basis of the daily production management records then, the defendant actually under‑claimed its stand down by 5.72 hours. Multiplied by the agreed rate of $995 per hour of part thereof, that represented an under‑claiming of $5,691.40.
Mr Hargrave was able to contribute the evidence that he was at the mill in March 2017 on a daily basis including most of the time at weekends when he could, and was aware that it stopped treating any ore for a time and that, at the time it stopped, it had been processing the plaintiff's ore. He recalled receiving Mr Baldock's email of 4 April 2017 at 3.29 pm with its spreadsheet attached setting out the lost income from stand down, and testified that the spreadsheet figures accorded with his memory of when the mill was not processing any ore.
I accept the accuracy of the figures contained in the daily production management records. Indeed, in cross‑examination, the plaintiff's counsel held the daily management meeting reports up as 'the most definitive source of that information'.
The reports are a company record and they accord well with the spreadsheet prepared by Mr Baldock except for the two discrepancies which worked in the plaintiff's favour. Mr Baldock did not check them at the time, but it must be remembered that his spreadsheet was actually prepared for Mr Hargrave – it was apparent that he had not expected Mr Hargrave to immediately send his email and spreadsheet to Messrs Johnston and Hamlyn.
There is no such document covering the down time for 27 and 30 March 2017, given that reports for Tuesday 28 March and Friday 31 March 2017 are not before the court, if they existed. But all of the oral and documentary evidence rebuts any suggestion that the mill in fact restarted and processed some ore on those single days. There was no ore to process, so by necessary inference the down time for those days was 24 hours each.
A survey of the Lakewood Mill stocks as at 1 April 2017 indicated there were 2188 cubic metres on the ROM pad (which a calculator tells me equates to about 5273 tonnes). Mr Baldock accepted that figure and said the plaintiff started hauling on 28 March 2017, but they did not get to 10,000 tonnes on the ROM until 2 April 2017.
Mr Baldock said the mill could not restart until there was about 10,000 tonnes of ore on the ROM. He described that as a 'basic requirement' and explained that the reasoning behind that is that, if they start with only 2000 – 3000 tonnes and hauling stops, then the mill has to be turned off again and 'it's just more wear and tear on clutches and motors and that. Because once the mill is running, it runs a lot better than it does stop-starting.' He said it restarted on the morning of 2 April 2017. He was not tackled on his claim that it was a 'basic requirement' that there be 10,000 tonnes on the ROM to justify restarting, nor was evidence led to contradict him.
At the outset of Mr Johnston's evidence he testified that, back in mid‑November 2016 – so this is prior to the signing of the contract - 'we were looking at the beginning of a toll treatment process to the Golden Mile Milling process plant. The agreement was to attempt to get 10,000 tonnes on the ROM pad prior to them starting milling'. Counsel for the defendant objected to the evidence on the basis of its form, in that the witness was not giving evidence of what was said and there was a written agreement before the court, and then the subject was dropped. The evidence does not cast any light on the written contract entered into on 22 November 2016, but what it does do is support the evidence from Mr Baldock that it was a 'basic requirement' that there be 10,000 tonnes on the ROM to justify restarting. As does an email from Mr Ford to Mr Hamlyn of 10 March 2017 to the effect 'Rivet are still hauling to Lakewood. We will review the stockpile at Lakewood today and stop hauling if there is more than 10,000t on the Lakewood ROM'.
I accept Mr Baldock's evidence and find that, on account of the explanation he gave, it was reasonable for the defendant to not restart the mill until 2 April 2017.
He said that, while the mill was shut down, employees could still do work in the nature of maintenance and other work, and the defendant was still obliged to pay them their salaries.
One final point: the defendant's haul road was also out of action from 23 March 2017 on account of the rain. Had the plaintiff been able to haul ore during those days, it could not have delivered it to the Lakewood ROM pad. Mr Ford's recollection was that he opened the haul road from the mine on 27 March 2017. By the time the defendant was able to arrange haulage to Paddington Mill in the morning and Lakewood Mill in the afternoon of 28 March 2017, the Lakewood haul road was open.
This makes no difference to the quantum of the defendant's claim. Firstly, the plaintiff could not arrange to haul any ore to Lakewood. It could not haul the ore from the mine, therefore it matters not that it could not have delivered it in any event. Second, the pending rains indicated a need to haul significantly more ore to Lakewood Mill than was usually hauled, or run the risk of the rain impeding the next likely haulage. By combination of the plaintiff's action in requesting the defendant to prioritise its ore and process at a higher rate, while retaining its usual approach of not wanting to leave more than 10,000 tonnes on the Lakewood ROM pad, together with not giving itself a buffer against the risk of a lengthy rain spell by hauling far more than its usual amount in the days leading up to the rain, the plaintiff's delay in delivery caused or was a contributing cause to the stand down.
I find that the defendant's claim for stand down is substantiated and the quantum is proved. I referred earlier to a small shortfall in the amount paid to the plaintiff of $1,479.07, which I inferred was due to some very modest fluctuation in the gold price at the time. Given that the defendant in fact under-claimed for stand down in excess of that amount, I do not award judgment to the plaintiff for the small shortfall.

Conclusion

The plaintiff's claim is dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
DD
Associate to Judge Sweeney
24 JULY 2020