Midland Brick Co Pty Ltd v CMS Gas Transmission of Australia
[2000] WASC 283
•23 NOVEMBER 2000
MIDLAND BRICK CO PTY LTD -v- CMS GAS TRANSMISSION OF AUSTRALIA & ANOR [2000] WASC 283
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2000] WASC 283 | |
| Case No: | CIV:2042/2000 | 16 NOVEMBER 2000 | |
| Coram: | MASTER SANDERSON | 23/11/00 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Application succeeds in part | ||
| PDF Version |
| Parties: | MIDLAND BRICK CO PTY LTD (ACN 008 674 244) CMS GAS TRANSMISSION OF AUSTRALIA (ARBN 078 902 397) ARC ENERGY NL (ACN 009 204 031) |
Catchwords: | Practice and procedure Application to strike out statement of claim Turns on its own facts |
Legislation: | Nil |
Case References: | Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 21 WAR 425 B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Assoc Pty Ltd (1994) 35 NSWLR 227 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Darbyshire v Leigh [1896] 1 QB 554 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Charide Nominees Pty Ltd v Matour Nominees Pty Ltd [1987] WAR 137 Clifton v Coffey (1924) 34 CLR 434 Jones v Walton [1966] WAR 139 Manufacturers' Mutual Insurance Ltd v Withers (1988) 5 ANZ Ins Cas 60-853 Noyes v Klein (1984) 3 BPR 9216 State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
CMS GAS TRANSMISSION OF AUSTRALIA (ARBN 078 902 397)
First Defendant
ARC ENERGY NL (ACN 009 204 031)
Second Defendant
Catchwords:
Practice and procedure - Application to strike out statement of claim - Turns on its own facts
Legislation:
Nil
(Page 2)
Result:
Application succeeds in part
Representation:
Counsel:
Plaintiff : Mr G H Murphy
First Defendant : Mr P G Doherty
Second Defendant : Mr R J Ainslie
Solicitors:
Plaintiff : Phillips Fox
First Defendant : Minter Ellison
Second Defendant : Mallesons Stephen Jaques
Case(s) referred to in judgment(s):
Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 21 WAR 425
B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Assoc Pty Ltd (1994) 35 NSWLR 227
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Darbyshire v Leigh [1896] 1 QB 554
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Case(s) also cited:
Charide Nominees Pty Ltd v Matour Nominees Pty Ltd [1987] WAR 137
Clifton v Coffey (1924) 34 CLR 434
Jones v Walton [1966] WAR 139
Manufacturers' Mutual Insurance Ltd v Withers (1988) 5 ANZ Ins Cas 60-853
Noyes v Klein (1984) 3 BPR 9216
State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170
(Page 3)
1 MASTER SANDERSON: This is the first and second defendants' applications to strike out par 9, par 10, par 11, par 12, par 17 and par (a) of the prayer for relief of the statement of claim. Both defendants brought their application under the provisions of O 20 r 19. They claimed that the statement of claim or the paragraphs complained of disclosed no reasonable cause of action.
2 The statement of claim was annexed to the writ of summons. The first four paragraphs identify the parties. Paragraph 5 and par 6 read as follows:
"(5) By separate written agreements dated 1 February 1985 made with the plaintiff, each of the original sellers agreed to sell and supply certain proportions of a total quantity of gas from the area the subject of the pleaded production licenses ('the Dongara area') which the plaintiff agreed to buy upon terms and conditions therein contained.
(6) The agreements pleaded in paragraph 5 were varied by:
(a) further written agreements made between the plaintiff and each of the original sellers respectively, being agreements made on 29 August 1986, 28 October 1986, 26 February 1987 and 1 July 1996, and
(b) letters dated 8 December 1988 and 26 June 1996."
4 Paragraph 9 pleads the effect of the agreements pleaded in par 5 "as varied up to and including the variation made on 26 February 1987". In other words, the plaintiff is pleading what it says is the effect of the original agreement and the variations up to a specified date. That is perfectly proper pleading practice: See Darbyshire v Leigh [1896] 1 QB 554 at 559. In fact, although application was made to strike out par 9 it was not the subject of detailed submissions by either counsel who appeared for the defendants.
(Page 4)
5 It is to be noted that par 9 sets out what the plaintiff says was the contractual position as at 26 February 1987. It does so by reference to the agreement pleaded in par 5 as varied by the agreements referred to in par 6(a) and made on 29 August 1986, 28 October 1986 and 26 February 1987. At this point in the pleading no reference has been made to the effect on the relationship between the parties of the variation by written agreement on 1 July 1996 and the variation by letters dated 8 December 1988 and 26 June 1996. Paragraph 10 is then in the following terms:
"10. When the variation agreement dated 1 July 1996 was executed, it was the fact, as the original sellers and the plaintiff then knew, that:
(a) the reserves of gas in the Dongara area had been substantially depleted by earlier sales and the volume, economic recoverability and deliverability of the tail gas from the Dongara area were not capable of certain and precise determination,
(b) the second term of the agreements pleaded in paragraph 5 had commenced on 1 February 1988,
(c) in February 1990, the original sellers had notified the plaintiff of their expectation that the amount of deliverable gas would fall below the plaintiff's daily contract quantity during 1993,
(d) as a result of such notifications, the plaintiff, in order to ensure security of gas supplies, had in 1990 entered into a gas supply contract with Consolidated Gas under which the plaintiff was purchasing 3.65 TJ per day of gas and had agreed to buy at least 8 PJ of gas,
(e) as a result of that contract with Consolidated Gas, the plaintiff had been and was only purchasing gas from the original sellers to the extent that the plaintiff's requirements exceeded 3.65 TJ per day,
(f) the original sellers had estimated that the economically recoverable quantity of tail gas in the Dongara area, estimated by reference to the schedule of well completions and equipment
(Page 5)
- configuration as at 1 July 1994, and after allowing for gas sales to SECWA and Alcoa, was 15.175 PJ, and the plaintiff had accepted that estimate,
- (g) the original sellers had agreed to waive and abandon the take or pay provisions pleaded in paragraph 9(b) above and the plaintiff had agreed to continue to take gas from the sellers and not exercise or retain its rights of termination of the agreements pleaded in paragraph 9(e) above,
(h) arising from the matters pleaded in sub-paragraphs (a) to (g) above, it was the common objective of the plaintiff and the original sellers to release up to 8PJ of gas from the buying and selling obligations under the agreements pleaded in paragraphs 5 and 6, to enable the original sellers to sell up to such quantity to third persons in order to restore their cash flow from the Dongara area and to enable the plaintiff to reduce its gas purchases from the original sellers by up to an amount equal to that which the plaintiff had agreed to buy from Consolidated Gas,
(i) the plaintiff, at the request of the original sellers, had released the original sellers, to the extent of an amount equal to the total quantity of gas which the plaintiff had agreed to buy from Consolidated Gas, namely 8PJ, from their commitment to supply gas from the Dongara area to the plaintiff, on terms that the quantity of such released gas that was sold to third parties would reduce the total quantity of gas which the plaintiff was obliged to buy from the original sellers."
6 The defendants say that by par 10 the plaintiff pleads material facts which at trial will need to be proved by parol or extrinsic evidence of the written agreement between the parties. The defendants say that such evidence is inadmissible and consequently it is not proper to plead material facts as found in par 10 because it will not be possible to lead evidence to establish those facts. Alternatively, it is said that if such
(Page 6)
- evidence is to be led at trial, no basis has been established on which such evidence could be led. For instance, there is no plea that the agreements are ambiguous, such as would justify the court receiving parol evidence to allow for the proper interpretation of those agreements. The defendants relied on the High Court decision in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337. Particular reliance was placed on what was said by Mason J (as he then was) at 352.
7 For the plaintiff it was said that it was entirely inappropriate on a pleading summons to strike out a paragraph of the statement of claim based upon an assessment of what evidence might or might not be permitted at trial. Furthermore, counsel submitted that it was always open to a party when contending for a particular interpretation of a contract to introduce evidence of background facts to put the agreement in context. Counsel also referred to the Codelfa Construction case and to various other authorities, including B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Assoc Pty Ltd (1994) 35 NSWLR 227 and Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 21 WAR 425.
8 It is not necessary for me to go through these and other authorities quoted by counsel in any detail. It is sufficient if I say that in broad terms I agree with the submissions made by counsel for the plaintiff. In any case where a written contract is in question, the starting point is the terms of the written agreement. However, it is clear from the authorities that evidence may be led as to the respective positions of the parties when agreement was reached. The purpose of such evidence is not to allow for the parties subjective views as to the consequence of the contract, but simply to put the contract itself in context. Of course, if upon examination the contract is found to be ambiguous in its terms, then parol evidence may be admissible to explain the ambiguity. In any event, all of these matters must be decided at trial. To attempt on a pleading summons to determine what evidence might or might not be admissible at trial is inappropriate and unrealistic.
9 However, there are two particular subparagraphs of par 10 which plead more than background facts. Paragraph 10(g) and (i) plead variations to the contracts pleaded in par 5. In my view, these two subparagraphs can not be read in any other way. It may be that what is pleaded are oral variations or variations by conduct; but they are nonetheless variations. This is important because par 12 pleads what the plaintiff says is the proper construction of the present contractual position between the parties. As I understand the way the pleading is structured,
(Page 7)
- par 9 pleads the contractual position as it stood as at 26 February 1987. Paragraph 10 sets out background facts which are relevant to the written variation of 1 July 1996. The present position is the contractual position as at 26 February 1987 (par 9) as varied by the letters of 8 December 1988 and 26 June 1996 (par 6(b)), taken together with the variation agreement of 1 July 1996, as seen against the background facts pleaded in par 10. If in fact there are two further variation agreements as appears to be pleaded by par 10(g) and par 10(i), then that must be pleaded. The pleading as it stands at the moment is not in a proper form.
10 There were two further complaints made by the defendants. The first related to par 11. By par 11 the plaintiff pleads an interpretation of a descriptive term, namely "the Dongara area maximum deliverability". The defendants say that such a plea is not proper. Clearly the plaintiffs contend for a particular interpretation of this descriptive term. The defendants have not pointed to a definition of this term in the agreement itself and simply say that the plaintiff has not explained the basis upon which parol evidence as to the meaning of the term would be admissible. In my view the plea is entirely proper. Evidence of extrinsic circumstances is generally admissible to identify the meaning of a descriptive term: See DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 429.
11 The final complaint relates to par 17 of the statement of claim. The second defendant says that it is not a party to any of the agreements pleaded. Rather, the agreements are between the plaintiff and the first defendant. The second defendant concedes that it is a proper party to these proceedings as it will be affected by any decision arising as between the first defendant and the plaintiff. This is explained by par 13 and par 14 of the statement of claim. Essentially the second defendant has reached an agreement with the first defendant to supply gas to enable the first defendant to fulfil its contractual obligations to the plaintiff. Clearly a decision affecting the supply arrangements between the plaintiff and the first defendant will have implications for the second defendant.
12 It may be that par 17 of the statement of claim is not entirely happily worded. The second defendant is not, strictly speaking, "bound" by any interpretation of the contractual arrangements between the plaintiff and the first defendant - it is simply not a party to those arrangements. But an interpretation of the contractual arrangements between the plaintiff and the first defendant will have implications for the contract between the first defendant and the second defendant. I think that emerges from the way in
(Page 8)
- which par 17 is presently worded and I would not be prepared to strike out that paragraph.
13 It follows from what I have said that the defendants' applications must succeed in part. Paragraph 10(g) and par 10(i) cannot stand. Having reached that conclusion I will hear the parties as to the precise form of orders and as to costs.
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