Macquarie Generation v Peabody Resources Ltd

Macquarie Generation (the appellant) appealed a decision concerning two coal supply contracts, 3806C and 4007C, with Peabody Resources Ltd (the first respondent) and Renison Limited (the second respondent). The dispute centred on alleged misrepresentations made by Peabody regarding the workforce size and operational capacity of the Narama Joint Venture, which was formed to supply coal to the Electricity Commission of New South Wales (the Commission). The appellant, as the successor to the Commission, argued that these representations, made during the tender process and at the time of contract formation, were false and had induced the Commission to enter into the contracts.

The court was required to determine whether certain representations made by Peabody concerning the Narama Joint Venture's workforce and operational capacity were false, and if so, whether these misrepresentations induced the Commission to enter into Contract 4007C. Specifically, the court had to consider whether a representation, true at the time it was made, could be considered a continuing representation that became false due to a change in circumstances before the contract was concluded, thereby rendering the contract voidable. The court also had to assess the legal principles governing the duty to correct representations that have become untrue.

The court applied the principle established in *With v O’Flanagan*, which holds that a party making a representation has a duty not to leave the other party under an error when circumstances change and falsify that representation, particularly when there is an interval between the representation and the contract, and the representee relies on the representation. However, the court cautioned against an absolute interpretation of this duty, emphasising that the applicability of the continuing representation principle depends on the specific facts and circumstances, and whether it was reasonable for the representee to rely on the representation at the time of contract. The court found that the representations made by Peabody regarding the workforce size were indeed false at the time of contract, and that the Commission relied on these representations, making the contract voidable.

The appeal was dismissed, and the appellant was ordered to pay the costs of the respondents.