Newmont Power Pty Ltd v Barrick Gold of Australia Ltd
[2008] WASCA 74
•1 APRIL 2008
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: NEWMONT POWER PTY LTD -v- BARRICK GOLD OF AUSTRALIA LTD [2008] WASCA 74
CORAM: McLURE JA
PULLIN JA
HEARD: 20 DECEMBER 2007
DELIVERED : 1 APRIL 2008
FILE NO/S: CACV 121 of 2007
BETWEEN: NEWMONT POWER PTY LTD
Appellant
AND
BARRICK GOLD OF AUSTRALIA LTD (ACN 008 143 137)
NORKAL PTY LTD (ACN 008 940 743)
KALGOORLIE LAKE VIEW PTY LTD (ACN 004 990 274)
NEWMONT GRPL PTY LTD (formerly GOLD RESOURCES PTY LTD) (ACN 008 976 958)
NORTH KALGURLI MINES PTY LTD (ACN 008 747 886)
First respondentsKALGOORLIE CONSOLIDATED GOLD MINES PTY LTD (ACN 009 377 619)
Second Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :TEMPLEMAN J
Citation :BARRICK GOLD OF AUSTRALIA LTD -v- F L SMIDTH INC [2007] WASC 186
File No :CIV 1753 of 2001
Catchwords:
Practice and procedure - Lengthy delay in applying for summary judgment - Error in failing to consider merits - Arguable claim - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 16 r 1
Result:
Leave refused
Category: B
Representation:
Counsel:
Appellant: Mr M D Howard
First respondents : Mr G H Murphy SC
Second Respondent : Mr G H Murphy SC
Solicitors:
Appellant: Maxim Litigation Consultants
First respondents : Jackson McDonald
Second Respondent : Jackson McDonald
Case(s) referred to in judgment(s):
Carlin v Hamersley Iron Pty Ltd [2003] WASCA 270
Chemeq Ltd v Shepherd Investments International Ltd [2007] WASCA 117
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Concut Pty Ltd v Worrell (2000) 176 ALR 693
Home Building Society Ltd v Pourzand [2005] WASCA 242
House v The King (1936) 55 CLR 499
Wilson v Metaxas [1989] WAR 285
McLURE JA: The appellant (sixth defendant) seeks leave to appeal and to appeal from the decision of Templeman J dismissing its application for leave to apply for summary judgment.
The appellant supplies electricity to the respondents (plaintiffs) pursuant to an electricity supply agreement made in writing in October 1996 (ESA). In 1996 there were a number of interruptions to the electricity supply. The respondents commenced Supreme Court proceedings in September 2002. The writ was served on the appellant on 7 October 2003. The respondents claimed common law damages for breach of the ESA.
The respondents filed and served their statement of claim in the action on 16 January 2004. In September 2005 that action was consolidated with other actions and the respondents filed a consolidated statement of claim on 28 November 2005.
In February 2006 the appellant filed an application for leave and for summary judgment. That application was not pressed and was subsequently dismissed.
In March 2006 the respondents filed an amended statement of claim in the consolidated action. On 5 September 2006 the appellant filed a further application for leave and for summary judgment. The dismissal of that application is the subject of this appeal.
Order 16 r 1 of the Rules of the Supreme Court 1971 (WA) provides that any defendant may, within 21 days after appearance or at any later time by leave of the court, apply to the court for summary judgment.
The primary judge concluded that the delay in applying for summary judgment was not justified by the likelihood of consolidation and that the appellant had not provided an adequate explanation for much of its delay which had caused considerable prejudice to the respondents.
As noted by the primary judge, both counsel before him accepted that the merits of the appellant's defence was a relevant consideration in determining whether to extend the time to make a summary judgment application. However, the primary judge concluded that there were factual issues arising from pars 77 and 78 of the statement of claim that barred the appellant's access to O 16 r 1. He said it was not appropriate to construe the ESA until those issues had been resolved. He also held that it would be impermissible to determine the construction of the ESA on the basis that the facts might be found as pleaded in the statement of claim, relying on Carlin v Hamersley Iron Pty Ltd [2003] WASCA 270. On that basis he concluded that the appellant's defence was only arguable.
Grounds of appeal and contention
The appellant claims that the primary judge erred:
(1)in holding that the likelihood of consolidation did not give the appellant any justification for its delay in bringing the application;
(2)in holding that the appellant had not provided an adequate explanation of much of its delay;
(3)in holding that the respondents had suffered considerable prejudice;
(4)in not considering the prejudice to the appellant of not granting leave (that is, defending proceedings that will be long‑running, complex and expensive);
(5)in holding that the matters pleaded in pars 77 and 78 of the respondents' amended consolidated statement of claim made it inappropriate to construe the ESA.
The respondents contend that in the event the appellant succeeds on ground 5, the judgment of the primary judge should be affirmed on the further ground that cl 14.3 of the ESA should be construed as conferring contractual rights in addition to, not in substitution for, the common law remedy of damages for a breach of the ESA.
The appellant's counsel conceded, correctly in my view, that any summary judgment application must fail if the respondents have an arguable contractual claim.
The appellant appeals from a discretionary decision on a matter of practice and procedure. The appellant must demonstrate an express or implied material error of fact or law: House v The King (1936) 55 CLR 499, 505. As this is an application for leave concerning interlocutory orders, the court must also be satisfied that a substantial injustice would be done if it remains unreversed: Wilson v Metaxas [1989] WAR 285, 294.
Relevant provisions of the ESA
The respondents are engaged in a joint venture which involves the mining and processing of gold ore in the Kalgoorlie area. The processing plant includes a grinding mill (SAG mill) used for crushing ore.
Clause 2 of the ESA provides that:
The Supplier shall sell and deliver and the Buyers shall purchase and take, a continuous supply of electricity for use in the Premises, on Contract Terms, throughout the Supply Period.
The Supplier is the appellant and the Buyers are the respondents. The Premises is defined to mean the Points of Supply specified in Attachment A, one of which is Point of Supply Location Number 2 on Fimiston Feeder B which covers the SAG mill.
Clause 6.1 provides:
The Supplier will supply electricity at the Points of Supply at a nominal voltage of 33 kV and at a nominal frequency of 50 Hz, subject to the voltage and frequency requirements of the Goldfields Integrated Electricity System. Under abnormal or emergency conditions when the Parkeston Power Station is operating temporarily isolated from the Goldfields Integrated Electricity System, the Supplier will maintain frequency within the range of 49.5 Hz to 50.5 Hz and voltage within the range of 33 kV to 36 kV
The Goldfields Integrated Electricity Supply System means the electricity transmission and distribution systems operated by Western Power Corporation. Under the ESA the appellant had to deliver electricity from the Parkeston Power Station to, inter alia, Point of Supply at Location Number 2 on Fimiston Feeder B.
It is necessary to refer to large parts of cl 14.1 ‑ cl 14.3, cl 14.7 and cl 14.8 of the ESA. They provide:
14.1Limited Default
(a)The following events of a technical nature shall constitute an event of limited default ('Limited Default'):
(i)by the Supplier:
(A)failure to meet the electricity quality specifications expressed in clause 6.1;
(B)failure to maintain the Metering Equipment within the Prescribed Limits of Error in Accordance with clause 10;
(C)if the continuous supply of electricity to the Buyers is interrupted by more than 3 power dips in any 12 consecutive Months;
(D)if the continuous supply of electricity to the Buyers is interrupted by more than 7 power trips in any 12 consecutive Months; or
(E)if outage exceeds 10 hours in aggregate in any 12 consecutive Months;
and in the case of events (C), (D), and (E) where the power dip, power trip or outage is attributed to the Supplier and has not been pre‑arranged and agreed in writing between the Supplier and the Buyers;
…
(b)Should an event of Limited Default occur then at the request of either the Supplier or the Buyers, the Supplier and the Buyers shall meet forthwith in an endeavour in good faith to agree what action (if any) can be taken and upon what terms and within what time limit in order to initiate or restore the delivery or acceptance of electricity on the relevant Contract Terms.
(c)If the Supplier and the Buyers are unable to reach satisfactory agreement within SEVEN (7) days of their meeting under subclause 14.1(b) the matter at issue shall (at the request of either party) be referred in accordance with clause 20 to an Expert to determine:
(i)the cause of the failure;
(ii)whether such failure can be remedied within a reasonable period of time and at a reasonable cost; and
(iii)what such reasonable period of time should be.
(d)If the Buyers and the Supplier have agreed, or the Expert has determined, that the failure in issue can be remedied at a reasonable cost and within a reasonable period, then the party responsible for the Limited Default shall proceed forthwith with diligence to remedy such failure and this Agreement shall continue in full force and effect.
(e)If the parties have agreed or the Expert has determined that the failure cannot be remedied at a reasonable cost or within a reasonable period; or if the party responsible fails to remedy the failure within the period agreed or determined by the Expert as required by the preceding subparagraph (d), then the party responsible for the Limited Default shall be deemed in default and the provisions of clause 14.2 shall apply.
14.2Default
(a)The Supplier will be in default:
(i)if it fails to make electricity available on Contract Terms by 1 February 1997;
(ii)if it is the party deemed in default by operation of clause 14.1(e);
(iii)if it fails to pay any amount due to the Buyers on the due date for payment thereof in terms of this Agreement (less any amount the subject of a bona fide dispute in accordance with clause 12.6) and such failure to pay continues for FIFTEEN (15) Working Days after demand in writing therefore has been served on the Supplier by the Buyers;
(iv)if it commits a solvency default within the meaning of clause 14.6 and all of the outstanding obligations of the Supplier to the Buyers under this Agreement are not assumed to the Buyers' reasonable satisfaction by a Related Body Corporate of GMK (which is not itself the subject of a solvency default) whose obligations so assumed are guaranteed by GMK, in writing, in terms of clause 40, within a period of FIFTEEN (15) Working Days from the date of the solvency default affecting the Supplier;
(v)if a representation or warranty made or given under this Agreement by the Supplier is incorrect or misleading in any material respect when made or given which, if capable of remedy, is not remedied within FIFTEEN (15) Working Days after notice by the Buyers requiring such failure to be remedied;
(vi)if a covenant, warranty or undertaking on the part of the Supplier given in clause 21 is not met, observed or performed in its terms which, if capable of remedy, is not remedied within FIFTEEN (15) Working Days after notice by the Buyers requiring such failure to be remedied; or
(vii)if it fails to perform any other material obligation of the Supplier to the Buyers under this Agreement and such failure continues for THIRTY (30) Working Days after notice by the Buyers to the Supplier requiring such failure to be remedied.
(viii) …
(b)The Buyers will be in default if they:
(i)fail to pay any amount due to the Supplier on the due date for payment thereof in terms of this Agreement (less any amount the subject of a bona fide dispute in accordance with clause 12.6) and such failure to pay continues for FIFTEEN (15) Working Days after demand in writing therefore has been served on the Buyers by the Supplier;
(ii)are the party deemed in default by operation of clause 14.1(e); or
(iii)fail to perform any other material obligation of the Buyers to the Supplier, under this Agreement if that failure continues for THIRTY (30) Working Days after notice by the Supplier to the Buyers requiring such failure to be remedied.
14.3Remedies
If either the Supplier or the Buyers are in default for the purposes of clause 14.2 and such default is continuing, then the other party as the non‑defaulting party may exercise either or a combination of the following remedies:
(a)terminate this Agreement by notice to the defaulting party;
(b)sue the defaulting party for Compensation; or
(c)exercise any other available legal or equitable remedy (other than in respect of damages), including, without limitation, suit for specific performance, injunctive relief or other relief order.
…
14.7For the purposes of clause 14.1;
(a)a 'power dip' is when voltage at a Point of Supply is less than 70% of the nominal voltage expressed in clause 6.1 and has the effect of causing the Buyers' machinery to fail to operate;
(b)a 'power trip' is a failure of electricity supply at a Point of Supply; and
(c)'outage' is time without electricity at a Point of Supply.
14.8Termination of this Agreement pursuant to this clause 14 shall take effect from the date of the relevant notice of termination, or the date specified in such notice as the case may be, and shall:
(a)be without prejudice to any other right or remedy of any party in respect of any antecedent breach by any other or any of the provisions hereof on the part of that other to be observed or performed; and
(b)not operate so as to extinguish or affect any accrued obligation outstanding as at the date of termination.
Clause 34 relates to consequential loss. It provides:
Subject to remedies specifically prescribed by this Agreement in respect of any Default it is expressly agreed and declared by the Buyers and the Supplier that upon any Default under this Agreement by one party giving to the other a right to damages in respect of such Default then in all events such damages shall be limited to Compensation.
Compensation is defined to mean 'compensation for loss or damage suffered by a party as a result of a Default and is limited to direct and foreseeable loss or damage and shall not include any indirect or consequential loss or damage'.
The amended statement of claim
Paragraphs 77 to 80 provide:
77.At all material times since on or about 1 October 1996, the usual operation of the SAG Mill and its associated drive system, for the purpose of grinding the Fimiston/Paringa Joint Venture ore and the KMA ore, depended upon electricity being delivered by [the appellant] from the Parkeston Power Station to Location Number 2 on Fimiston Feeder B pursuant to the ESA.
78.At all material times:
(a)[the appellant] knew the facts pleaded in paragraph 77 herein;
(b)alternatively, [the appellant] knew, as was the fact, that the electricity delivered by it pursuant to the ESA would be used for the processing of the First Plaintiffs' ore [particulars provided].
79.While the SAG Mill was operating, electricity supply delivered by [the appellant] pursuant to the ESA from the Parkeston Power Station to Location Number 2 on Fimiston Feeder B was suddenly and unexpectedly shut off on the following material occasions (the 'Power Excursions'):
Date
Time (Hrs)
2 October 1996
15:39
14 October 1996
02:24
27 October 1996
01:46
6 December 1996
15:03
18 December 1996
06:48
80.(a) (i) Each of the Power Excursions was caused by an unplanned shutdown of the LM6000 generators at the Parkeston Power Station.
(ii)Each unplanned shutdown of the LM6000 generators caused the Power Excursion which occurred immediately after that shutdown.
(b)During each unplanned shutdown of the LM6000 generators, the frequency of the supply of electricity delivered by [the appellant] pursuant to the ESA from the Parkeston Power Station to Location Number 2 on Fimiston Feeder B rapidly fell below 49.5 Hertz, while the voltage of this supply of electricity remained at or near 33kV.
The breaches are pleaded in par 94 which provides:
94.(a) Each Power Excursion was a breach by [the appellant] of its obligations contained in clause 2 of the ESA … in that on the occasion of each Power Excursion, [the appellant] failed to deliver a continuous supply of electricity.
(b)In the circumstances pleaded in paragraph 80(b) herein, [the appellant] breached its obligations contained in clause 6.1 of the ESA … in that:
(i)on the occasion of each Power Excursion, [the appellant] failed to deliver a supply of electricity at a nominal frequency of 50 Hertz, notwithstanding that the frequency requirements of the Goldfields Integrated Electricity System did not otherwise require; and
(ii)further and alternatively, on the occasion of each Power Excursion, there existed abnormal or emergency conditions when the Parkeston Power Station was operating temporarily isolated from the Goldfields Integrated Electricity System, and [the appellant] failed to deliver a supply of electricity with a frequency within the range of 49.5 Hertz to 50.5 Hertz.
The respondents claim common law damages for breach of the ESA. Some of the damage claimed is direct and some arguably consequential.
Grounds 1 and 2
These grounds are without merit. The appellant fails to identify any relevant appellable error. In any event, the primary judge was correct to conclude for the reasons he gives that the likelihood of consolidation did not justify the appellant's delay in applying for summary judgment. There was no suggestion the contractual claim against the appellant materially altered in the consolidated statement of claim or the amendment thereto. To the contrary, the unchallenged finding of the primary judge was that the substance of the appellant's defence to the contractual claim was contained in the defence in the original action filed on 6 October 2004. The possibility of an application to consolidate and an amendment to the pleading does not justify the appellant's inaction.
Grounds 1 and 2 are related. The delay due to the likelihood of consolidation was not justified. As to the other matters relied on, the trial judge was correct for the reasons he gives. I would dismiss grounds 1 and 2.
Ground 3
The trial judge accepted evidence from a solicitor acting for the respondents that they had been unable to progress the consolidated action against the other defendants to the consolidated action while the summary judgment application remained outstanding which he said reflected considerable prejudice. The appellant's complaint is that the primary judge ought not to have accepted the evidence because it was an assertion unsupported by detail. I infer the challenge is to weight not admissibility. That ground does not disclose an appellable error. In any event, the very experienced primary judge who was managing the proceedings was in an excellent position to assess what weight if any to give to the evidence. I would dismiss ground 3.
Ground 4
The appellant complains that the primary judge did not consider the prejudice to the appellant of not granting leave. This ground is without merit. It is apparent on the face of the reasons, in particular [28], that the primary judge had regard to the potential prejudice to the appellant. I would dismiss ground 4.
Ground 5
The issue is whether the primary judge made a material error of law in determining that the factual issues arising from paragraphs 77 and 78 of the amended statement of claim barred the appellant's access to summary judgment.
The appellant's primary contention was that the ESA is unambiguous with the consequence that evidence of surrounding circumstances is inadmissible on the construction of the ESA, relying on Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352. This court has not taken a position on the question whether ambiguity is required: Home Building Society Ltd v Pourzand [2005] WASCA 242 [25] ‑ [33]; Chemeq Ltd v Shepherd Investments International Ltd [2007] WASCA 117 [154]. I propose to approach this matter on the provisional basis that the ESA is relevantly ambiguous.
If surrounding circumstances are relevant and admissible in relation to the proper construction of an agreement, the agreement cannot be finally construed unless there is uncontradicted evidence of those circumstances. The only surrounding circumstances in issue in this case are the matters pleaded in pars 77 and 78 of the amended statement of claim. The appellant in its defence does not admit the allegations in those paragraphs. However, the uncontradicted evidence adduced on behalf of the respondents in the summary judgment application, which is supported by the content of the ESA (in particular Figure A3 which identifies the Fimiston Points of Supply) supports the substance of the pleaded matters. Accordingly, there is no relevant factual dispute that would prevent the grant of summary judgment. In any event, I am not persuaded the matters pleaded in pars 77 and 78 are relevant to the primary construction issue. That being so, I would uphold ground 5.
Merits
The appellant's first proposition is to the effect that the obligations in cl 2 and cl 6.1 are qualified or subject to the 'Limited Default' provisions in cl 14.1 of the ESA. That claim is not supported by the express terms or apparent purpose of cl 14.1. The references in cl 14.1(a)(i) to 'failure' and the 'interruption' of a continuous supply of electricity suggest the obligations are not so qualified. Further, this proposition is linked with the appellant's second proposition which is to the effect that cl 14.1 exclusively and exhaustively identifies all remedies for the appellant's breach of its contractual obligations of a technical nature. The link is the proposition that the absence of a remedy supports the inference of an absence of a right. My conclusions on the second proposition do not assist the appellant.
I do not intend to reflect on the strength or otherwise of the appellant's contentions. It is sufficient to say that the appellant's first proposition is not unarguably correct. Accordingly, summary judgment is not available on that ground.
As foreshadowed, the appellant's second proposition is that cl 14 is the exclusive source of the remedies available to the respondents arising from the appellant's breach of the ESA. That is, cl 14 excludes all common law and equitable remedies save to the extent that they are expressly adopted in cl 14.3. The ramifications of this contention need to be fully understood. They are as follows.
First, if there is a breach of a technical nature that falls within cl 14.1(a)(i)(A), (B), (C), (D) or (E), which breach is not continuing, the respondents have no remedy for the breach because the remedies in cl 14.3 are exclusive and cl 14.3 requires the default to be continuing. The evidence in this case was that the claimed breaches were not continuing because the cause of the problem had been rectified.
Secondly, if the breach is of a technical nature but of a lesser severity (eg insufficient dips, trips or outage hours) or, I interpolate, of a different type, the respondents have no remedy at all. This second proposition is essential to the appellant's case because there is no claimed or proven default under cl 14.1(a)(i)(B) ‑ (E) and there is a clearly arguable question of construction as to whether the failure to meet the electricity quality specifications must be continuing. The respondents contend that it is apparent from cl 14.1 as a whole that it is solely concerned with breaches that reflect systemic failures.
Thirdly, the same analysis must also apply to the non‑technical breaches in cl 14.2 if they are not continuing.
In support of the second proposition, the respondents rely primarily on cl 14.3 which it says is not confined to termination but relevantly provides that the non‑defaulting party may exercise 'either or a combination of' the remedies specified in pars (a), (b) and (c).
The respondents contend that cl 14 provides a contractual right to terminate the ESA when the specified events occur and are not remedied, and that the common law right to damages subsists concurrently with the rights in cl 14. They rely on Concut Pty Ltd v Worrell (2000) 176 ALR 693 in which the High Court endorsed the principle of construction that clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of the contract arising by operation of law.
I am satisfied that, having regard to the presumption, the respondents have an arguable contractual claim. The ESA does not expressly provide that cl 14 is the exclusive source of all remedies for breach of the ESA. The appellant relies on an implication to that effect. The primary source of the implication is the alternative remedies in cl 14.3(b) and (c) of the ESA. That may arguably be characterised as a relatively slim basis when the consequences of the construction contended for by the appellant are prima facie draconian. Further, there is some support in cl 14.8 for a slight variant of the respondents' position. On one view, the purpose and effect of cl 14.8(a) is to preserve and protect any other right or remedy, including a common law right or remedy, for any antecedent breach whether or not related to the ground on which the ESA was terminated. That is, subject to the cap in cl 34, the innocent party has a common law right to damages for all antecedent breaches if the ESA is terminated. This may suggest that the remedies in cl 14.3(a), (b) and (c), if they are truly in the alternative, relate only to breaches of a kind that justify termination of the ESA even if the termination option is not taken. The breaches relied on by the respondents are not of that kind.
Thus, the appellant would not be entitled to summary judgment even if it had acted promptly. I would refuse the application for leave. In these circumstances it is unnecessary to determine the notice of contention.
PULLIN JA: I agree with McLure JA.
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