Pilbara Iron Company (Services) Pty Ltd v Chevron (Tapl) Pty Ltd - [2020] WASC 296

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   PILBARA IRON COMPANY (SERVICES) PTY LTD -v- CHEVRON (TAPL) PTY LTD [2020] WASC 296
CORAM:   ARCHER J
HEARD:   23 & 24 JULY 2020
DELIVERED          :   14 AUGUST 2020
FILE NO/S:   CIV 1626 of 2020
BETWEEN:   PILBARA IRON COMPANY (SERVICES) PTY LTD
First Plaintiff
HAMERSLEY IRON PTY LTD
Second Plaintiff
ROBE RIVER MINING CO PTY LTD
Third Plaintiff
AND
CHEVRON (TAPL) PTY LTD
First Defendant
CHEVRON AUSTRALIA PTY LTD
Second Defendant
MOBIL AUSTRALIA RESOURCES COMPANY PTY LTD
Third Defendant
SHELL AUSTRALIA PTY LTD
Fourth Defendant
OSAKA GAS GORGON PTY LTD
Fifth Defendant
TOKYO GAS GORGON PTY LTD
Sixth Defendant
JERA GORGON PTY LTD
Seventh Defendant
CHEVRON (TAPL) PTY LTD
First Plaintiff by counterclaim
CHEVRON AUSTRALIA PTY LTD
Second Plaintiff by counterclaim
MOBIL AUSTRALIA RESOURCES COMPANY PTY LTD
Third Plaintiff by counterclaim
SHELL AUSTRALIA PTY LTD
Fourth Plaintiff by counterclaim
OSAKA GAS GORGON PTY LTD
Fifth Plaintiff by counterclaim
TOKYO GAS GORGON PTY LTD
Sixth Plaintiff by counterclaim
JERA GORGON PTY LTD
Seventh Plaintiff by counterclaim
AND
PILBARA IRON COMPANY (SERVICES) PTY LTD
First Defendant by counterclaim
HAMERSLEY IRON PTY LTD
Second Defendant by counterclaim
ROBE RIVER MINING CO PTY LTD
Third Defendant by counterclaim

Catchwords:

Gas Sale Agreement - Price review clause - Proper construction

Legislation:

Nil

Result:

Judgment for the plaintiffs
Counterclaim dismissed

Category: B

Representation:

Original Action

Counsel:

First Plaintiff	:	S K Dharmananda SC & C V Wren
Second Plaintiff	:	S K Dharmananda SC & C V Wren
Third Plaintiff	:	S K Dharmananda SC & C V Wren
First Defendant	:	M N Solomon SC & C E McKay
Second Defendant	:	M N Solomon SC & C E McKay
Third Defendant	:	M N Solomon SC & C E McKay
Fourth Defendant	:	M N Solomon SC & C E McKay
Fifth Defendant	:	M N Solomon SC & C E McKay
Sixth Defendant	:	M N Solomon SC & C E McKay
Seventh Defendant	:	M N Solomon SC & C E McKay

Solicitors:

First Plaintiff	:	Johnson Winter & Slattery - Perth
Second Plaintiff	:	Johnson Winter & Slattery - Perth
Third Plaintiff	:	Johnson Winter & Slattery - Perth
First Defendant	:	Norton Rose Fulbright Australia
Second Defendant	:	Norton Rose Fulbright Australia
Third Defendant	:	Norton Rose Fulbright Australia
Fourth Defendant	:	Norton Rose Fulbright Australia
Fifth Defendant	:	Norton Rose Fulbright Australia
Sixth Defendant	:	Norton Rose Fulbright Australia
Seventh Defendant	:	Norton Rose Fulbright Australia

Counterclaim

Counsel:

First Plaintiff by counterclaim	:	M N Solomon SC & C E McKay
Second Plaintiff by counterclaim	:	M N Solomon SC & C E McKay
Third Plaintiff by counterclaim	:	M N Solomon SC & C E McKay
Fourth Plaintiff by counterclaim	:	M N Solomon SC & C E McKay
Fifth Plaintiff by counterclaim	:	M N Solomon SC & C E McKay
Sixth Plaintiff by counterclaim	:	M N Solomon SC & C E McKay
Seventh Plaintiff by counterclaim	:	M N Solomon SC & C E McKay
First Defendant by counterclaim	:	S K Dharmananda SC & C V Wren
Second Defendant by counterclaim	:	S K Dharmananda SC & C V Wren
Third Defendant by counterclaim	:	S K Dharmananda SC & C V Wren

Solicitors:

First Plaintiff by counterclaim	:	Norton Rose Fulbright Australia
Second Plaintiff by counterclaim	:	Norton Rose Fulbright Australia
Third Plaintiff by counterclaim	:	Norton Rose Fulbright Australia
Fourth Plaintiff by counterclaim	:	Norton Rose Fulbright Australia
Fifth Plaintiff by counterclaim	:	Norton Rose Fulbright Australia
Sixth Plaintiff by counterclaim	:	Norton Rose Fulbright Australia
Seventh Plaintiff by counterclaim	:	Norton Rose Fulbright Australia
First Defendant by counterclaim	:	Johnson Winter & Slattery - Perth
Second Defendant by counterclaim	:	Johnson Winter & Slattery - Perth
Third Defendant by counterclaim	:	Johnson Winter & Slattery - Perth

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

Alliance Petroleum Australia NL v Australian Gas Light Company (1985) 39 SASR 84
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219, 9
Bondi Diggers Club Ltd v Vitarni Pty Ltd (1996) 7 BPR 15,061
Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187
Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd (No 5) [2016] QSC 199
Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd (1995) 58 FCR 365
Douglas v Cicirello [2006] WASCA 226; (2006) ANZ ConvR 2
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Duckworth v Water Corporation [2012] WASC 30; (2012) 261 FLR 185
EIT Kwinana Partner Pty Ltd v Electricity Generation and Retail Corporation [2020] WASC 238
Electricity Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Gollin & Co Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455
GR Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80
Harrington v Browne (1917) 23 CLR 297
Mango Boulevard Pty Ltd v Mio Art Pty Ltd [2013] QCA 271
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Raves v Fobone Pty Ltd (1991) NSW ConvR 55‑564
Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80, 11
Starmark Enterprises Ltd v CPL Distribution Ltd [2002] 4 All ER 264
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632
Trustees of Henry Smith's Charity v AWADA Trading & Promotion Services Ltd (1984) 7 P&CR 607
United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904

Table of Contents

Introduction

The factual background

Urgency

The issue

Legal principles

General construction principles

Essential terms

Provisions as to time stipulations

Equitable presumption
Mercantile contracts
Rent review clauses
Non‑promissory conditions precedent
Alliance Petroleum

Other principles - penalty clauses and exclusion clauses

The parties' positions

Summary of approach

The Contract

General provisions

Price

The Price Review

Deeming provisions

Liability, default and termination

Clause 32.1

Analysis

Textual considerations in cl 14.3

Clarity of time stipulation
The definition
Condition precedent?
An initiating power or a machinery provision?
United Scientific Factors
Work to do?
Breach of the clause
Deadline Notice?

Textual considerations outside of cl 14.3 but within cl 14

Clause 14.5 - the trigger
Clauses 14.5 and 14.6 - negotiation
Negotiation - value and role
Time required to negotiate
No fixed start time for arbitration
Work-arounds
Conclusion on negotiation
Clause 14.17 - imposition of interest
Clause 14 as a whole - the purpose of the price review process

Textual considerations outside of cl 14

Clause 31.10 - limited right of termination (and cl 5 - take or pay)
Clauses 31.1 and 31.3 - delay in performance generally
Clause 32.1 - general provision permitting later exercise of right
No deeming provision

Certainty

Commerciality/harsh result

Conclusion

ARCHER J:

Introduction

This case raises a deceptively simple question - is a notice issued outside of a stipulated time period effective? The parties have drawn my attention to various presumptions and principles of construction that, unfortunately, pull in different directions. Ultimately, the question must be answered by the contract itself. This is truly a case where the devil is in the detail.

The factual background

The facts were not in issue. The following reproduces or draws upon the helpful summaries set out in the parties' submissions.
The defendants are joint venture participants in the Gorgon Gas Project. The plaintiffs are entities within the Rio Tinto Iron Ore group, which operates iron ore mines in Western Australia.
The parties entered into an Agreement for Sale and Purchase of Gas on or about [date redacted] (Contract). The Contract is a long‑term contract for the sale of natural gas by the defendants (Sellers) to the first plaintiff (Buyer). The second and third plaintiffs provide guarantees under the Contract with respect to the Buyer's obligations.
The Contract was amended by five separate written deeds of amendment. Each of the deeds of amendment dealt only with progressive extensions to the 'Start Date'. The Start date was to be [date redacted], but was delayed by the amendment deeds to [date redacted].
Clause 14 of the Contract contains a mechanism by which, on a [number redacted] yearly basis, either party may initiate a 'Price Review'. Clause 14.3 provides that a Price Review may be initiated by issuing a notice which complies with cl 14.4 (Price Review Notice) not more than 120 days nor less than 90 days prior to a 'Price Review Date'. I will refer to the period within which the Price Review Notice is required to be issued as the 'Notice Window'. I will refer to the requirement as the 'time stipulation', or use similar terms.
The first Price Review Date was [date redacted] 2020. Therefore, the Notice Window for that Price Review expired on [date redacted] 2020. The Buyer issued a notice on [date redacted] 2020, after the Notice Window had expired.[1] The notice otherwise complied with the contractual regime.[2]
[1] Relevantly to cl 14.5, it was deemed to have been received on [date redacted] 2020 by cl 28(4)(a) of the Contract.
[2] The Sellers accept that the Buyer's Notice would otherwise be effective: Defence [7(b)].
The defendants contend that the notice was ineffective to initiate a Price Review because it was issued out of time.[3] They assert that the time stipulation is an essential term. The plaintiffs contend to the contrary. Each party seeks a declaration in terms of their respective constructions.
[3] Defence [6].
Both parties emphasised the urgency of the matter.

Urgency

The plaintiffs filed an indorsed writ of summons on 28 May 2020. The defence and counterclaim was filed on 9 June 2020. Due to the urgency, a very tight timetable was set for, among other things, the filing of submissions. After an interlocutory hearing about expert evidence,[4] the parties filed their submissions during the court's winter recess. The matter was heard on 23 and 24 July 2020, in the week following the recess.

The issue

[4] Ultimately, no evidence was adduced.

The issue for determination is whether a notice sent after the stipulated time period can effectively initiate the price review process.
The issue is not what cl 14.3 means. Its meaning is clear. Clause 14.3 clearly requires a Price Review Notice to be sent within the Notice Window. Sending a notice outside of the Notice Window will be a breach of the clause. The question is whether a consequence of breach is that the right to initiate a Price Review is lost.[5]
[5] Until the next Price Review Date.
The question will be answered 'yes' if, on a proper construction of the Contract, that was the objective intention of the parties. Accordingly, the issue for determination is whether, on a proper construction of the Contract, the parties objectively intended that the right would be lost unless the notice was sent within the Notice Window. In other words, did the parties objectively intend the time stipulation to be essential?
The plaintiffs initially sought to preserve some flexibility in their position. They submitted that the notice they issued was effective and that they did not need to stipulate how late a notice could be issued and still be effective.[6]
[6] See, for example, ts 64 ‑ 65 (23/07/2020). Regrettably, the pagination of the transcript of the hearing was unhelpful and was not able to be corrected prior to the delivery of this judgment. The transcript of the first ended on page 86. The second day commenced on page 54. To avoid confusion, therefore, the dates of the transcript references have been added.
In my view, the issue cannot be determined in that way. In determining whether the time stipulation was essential, it is necessary to consider how the Contract would operate if it was an essential term and how it would operate if it was not. This will allow the commerciality and consequences of competing constructions to be evaluated. This may illuminate the parties' objective intention.
The plaintiffs acknowledged that one of the possible constructions was that a notice could be issued until the Price Review Date but not after that date.[7] Although it is somewhat of an overstatement to describe this as the plaintiffs' construction, I will call it that in these reasons.
[7] See ts 160 ‑ 161 (24/07/2020). See also ts 69 ‑ 70 (23/07/2020).
As will be seen, it is this construction that I have accepted.

Legal principles

General construction principles

The principles to be applied to contract construction are not in dispute. In Black Box Control Pty Ltd v Terravision Pty Ltd, the Court of Appeal summarised the relevant principles as follows (citations omitted):[8]
[8] Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219 [42].
(1)The process of construction is objective. The meaning of the terms of an instrument is to be determined by what a reasonable person would have understood the terms to mean.
(2)The construction of a contract involves determination of the meaning of the words of the contract by reference to its text, context and purpose.
(3)The commercial purpose or objects sought to be secured by the contract will often be apparent from a consideration of the provisions of the contract read as a whole. Extrinsic evidence may nevertheless assist in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding of the genesis of the transaction, its background, the context and the market in which the parties are operating.
(4)Extrinsic evidence may also assist in determining the proper construction where there is a constructional choice, although it is not necessary in this case to determine the question of whether matters external to a contract can be resorted to in order to identify the existence of the constructional choice.
(5)If an expression in a contract is unambiguous and susceptible of only one meaning, evidence of surrounding circumstances cannot be adduced to contradict its plain meaning.
(6)To the extent that a contract, document or statutory provision is referred to, expressly or impliedly, in an instrument, that contract, document or statutory provision can be considered in construing the instrument, without any need for ambiguity or uncertainty of meaning.
(7)There are important limits on the extent to which evidence of surrounding circumstances (when admissible) can influence the proper construction of an instrument. Reliance on surrounding circumstances must be tempered by loyalty to the text of the instrument. Reference to background facts is not a licence to ignore or rewrite the text. The search is for the meaning of what the parties said in the instrument, not what the parties meant to say.
(8)There are also limits on the kind of evidence which is admissible as background to the construction of a contract, and the purposes for which it is admissible. Insofar as such evidence establishes objective background facts known to the parties or the genesis, purpose or objective of the relevant transaction, it is admissible. Insofar as it consists of statements and actions of the parties reflecting their actual intentions and expectations it is inadmissible. Such statements reveal the terms of the contract which the parties intended or hoped to make, and which are superseded by, or merged into, the contract.
(9)An instrument should be construed so as to avoid it making commercial nonsense or giving rise to commercial inconvenience. However, it must be borne in mind that business common sense may be a topic on which minds may differ.
(10)An instrument should be construed as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed so as to have some operation.
(11)Definitions do not have substantive effect. A definition is not to be construed in isolation from the operative provision(s) in which the defined term is used. Rather, the operative provision is ordinarily to be read by inserting the definition into it.
In Electricity Corporation v Woodside Energy Ltd,[9] the plurality said (citations omitted):
The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. … [U]nless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties … intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.
[9] Electricity Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35].
In Australian Broadcasting Commission v Australasian Performing Right Association Ltd,[10] Gibbs J said:
… If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate' …
[10] Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109.
The starting point for the proper construction of a contractual clause is the language used in the clause.[11]

Essential terms

[11] Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80 [296].

Whether a term of a contract is essential is a question of construction to be answered having regard to the general nature of the contract considered as a whole and to its particular terms.[12]
[12] DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423, 430 ‑ 431 (Stephen, Mason & Jacobs JJ).
The principle to be applied was stated by Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd:[13]
The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor …

Provisions as to time stipulations

[13] Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632, 641 ‑ 642 (Jordan CJ). See also Douglas v Cicirello [2006] WASCA 226; (2006) ANZ ConvR 2 [13] ‑ [15] (Steytler P, with McLure JA agreeing).

The parties' submissions traversed a wide range of authorities in relation to the proper approach to time stipulations. They discussed an equitable presumption. They discussed non‑promissory conditions precedent. They discussed a 'prima facie rule' that applied in mercantile contracts. They discussed a presumption that applies to rent review clauses. They discussed the principles of construction that apply to penalty clauses and exclusion clauses. Ultimately, however, both parties submitted that the issue fell to be determined on a proper construction of the Contract.

The parties' submissions on the authorities (and more broadly) were comprehensive and extremely helpful. The legal issues they raised are interesting, but also complex. Fully addressing the parties' submissions would take a long time. As I am conscious of the need to provide this judgment urgently, I will deal with the legal issues as succinctly as possible, doing little more than identifying the principles that I accept. I gratefully acknowledge that it is only possible to take this approach because the parties' submissions were so comprehensive.

Equitable presumption

There is an equitable presumption that time is not of the essence. A time stipulation will 'be an essential term only if that is agreed or is reasonably to be implied'.[14]
[14] Douglas v Cicirello [14] (Steytler P, with McLure JA agreeing).
The plaintiffs do not rely on this presumption.[15]

Mercantile contracts

[15] Plaintiffs' Reply Submissions [108].

In Douglas v Cicirello,[16] it was said that, 'in commercial or mercantile contracts, stipulations as to time (other than those as regards time of payment) are usually regarded as being of the essence of the contract'. It was said that this was, however, only a prima facie rule, capable of being defeated by the application of the test in Tramways Advertising.
[16] Douglas v Cicirello [15] (Steytler P, with McLure JA agreeing), citing Harrington v Browne [1917] HCA 36; (1917) 23 CLR 297, 304 ‑ 305. See also Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187 (the relevant sections are not in the reported version) [125] ‑ [127] (Sheller, Beazley & Stein JJA).
Describing it as a 'prima facie rule' appears to mean simply that, given the nature of commercial contracts, one may expect that time will be of the essence as a matter of fact, not presumption.[17]
[17] See, for example, AlliancePetroleum (105). See also ts 129 and 131 (24/07/2020).
In Heydon on Contract, it was said:[18]
Stipulations as to time are often held to be conditions. Examples are stipulations as to the times within which a ship must be nominated; when a ship is expected to be ready to load under a charter party; when goods must be delivered under a contract of sale; when the loading port must be nominated; when a vessel is to be provided; when notice of readiness must be given; when goods must be ready for delivery under an 'fob' contract; and when goods must be shipped, documents tendered and notice of appropriation given under a 'cif' contract. Another example is a stipulation as to the time within which a letter of credit must be opened.
[18] Heydon J D, Heydon on Contract - The General Part (2019) [7.310].
The plaintiffs submit that these examples illustrate the substantive nature of the obligation to which an essential time stipulation attaches, as well as the importance of the time stipulation to that obligation. The plaintiffs submit that these factors enable the conclusion that the time stipulation was of such apparent importance that the parties would not have entered into the Contract without the assurance of strict compliance, and was therefore an essential term.[19] The plaintiffs contrast those types of clauses with the clause in issue in this case.

Rent review clauses

[19] Plaintiffs' Submissions [30]. See also Plaintiffs' Submissions [31].

In United Scientific Holdings Ltd v Burnley Borough Council,[20] the House of Lords held that there is a rebuttable presumption that time stipulations in rent review provisions in a lease will not be essential, unless that is expressly stated or necessarily implied. This has been accepted to be the law in Australia.[21]
[20] United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904.
[21] Gollin & Co Ltd v Karenlee Nominees Pty Ltd [1983] HCA 38; (1983) 153 CLR 455, 468; GR Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd(1991) 24 NSWLR 80, 86, 88, 95, 99 ‑ 100.
In United Scientific, Lord Diplock observed:[22]
My Lords, I see no relevant difference between the obligation undertaken by a tenant under a rent review clause in a lease and any other obligation in a synallagmatic contract that is expressed to arise upon the occurrence of a described event, where a postponement of that event beyond the time stipulated in the contract is not so prolonged as to deprive the obligor of substantially the whole benefit that it was intended he should obtain by accepting the obligation.
So upon the question of principle which these two appeals were brought to settle, I would hold that in the absence of any contraindications in the express words of the lease or in the interrelation of the rent review clause itself and other clauses or in the surrounding circumstances the presumption is that the timetable specified in a rent review clause for the completion of the various steps for determining the rent payable in respect of the period following the review date is not of the essence of the contract.
[22] United Scientific (930).
The effect of United Scientific has been summarised as follows:[23]
(1)Where a rent review clause confers on a landlord or tenant a right for his benefit or protection, as part of the procedure for ascertaining the new rent, and that right is expressed to be exercisable within a specified time, there is a rebuttable presumption of construction that time is not intended to be of the essence in relation to any exercise of that right.
(2)In a case where the presumption applies, the other party concerned may, if he wishes to bring matters to a head after the stipulated time for the exercise of the right has expired, give to the owner of the right a notice specifying a period within which he requires the right to be exercised, if at all; the period thus specified will if it is reasonable then become of the essence of the contract. …
(3)The presumption is rebuttable by sufficient 'contraindications in the express words of the lease or in the interrelation of the rent review clause itself and other clauses or in the surrounding circumstances'. …
(4)Though the best way of rebutting the presumption is to state expressly that stipulations as to the time by which steps provided for by the rent review clause are to be taken is to be treated as being of the essence (see United Scientific Holdings Ltd v Burnley Borough Council)…, this is not the only way. Any form of expression which clearly evinces the concept of finality attached to the end of the period or periods prescribed will suffice to rebut the presumption. The parties are quite free to contract on the basis that time is to be of the essence if they so wish.
[23] GR Mailman (88), citing Slade LJ in Trustees of Henry Smith's Charity v AWADA Trading & Promotion Services Ltd (1984) 7 P&CR 607.
As noted in that summary, the 'best' way of rebutting the presumption is to state expressly that the time stipulation is of the essence. This is not, however, the only way. Other words may convey the same meaning.
The presumption may be rebutted by implication where, for example, the contract contains a deeming mechanism or some other clause that sets out the consequences of a failure to comply with the time stipulation.[24]
[24] See, for example, GR Mailman (90G (Gleeson CJ), 97B (Samuels JA), 100E (Meagher JA)).
There were a number of features of rent review provisions that led to the establishment of this presumption (United Scientific Factors).[25] These included that:
(1)The right to review the rent is to the benefit of both parties. It benefited the landlord by ensuring that the rent could be increased if the rental market changed. It benefited the tenant because it meant that the landlord was willing to enter into a long term contract, giving the tenant security. Generally, the landlord would not have entered into a long term contract without such a right.[26]
(2)A rent review does not create a new contract. The obligation to pay the revised rent determined by the review was an obligation that the parties undertook when originally entering into the contract. These types of clauses are merely a machinery provision in determining the revised rent.
(3)A time stipulation in a rent review clause may be contrasted with a clause that stipulated the time for delivery in a contract for the sale of a wasting asset or of a perishable commodity or something likely to change rapidly in value. A failure to meet a time stipulation in such clauses may cause serious prejudice to the other party.
[25] See United Scientific, in particular at 930, 945 ‑ 946, 948, 950, 951, 961 ‑ 962.
[26] cf Gollin, where the provision was the only mechanism for determining the rent for the last five years of the lease.
The principles in United Scientific have been applied outside of rent review clauses to commercial contracts in various contexts. They have been applied to a time stipulation for obtaining an alternative valuation in a process of determining a variable price under a share sale agreement,[27] a notice that specified the lessor's opinion as to the market value of a property within a process for fixing a purchase price for the exercise of an option to acquire property,[28] and a 'Change Event Notice' that triggered a procedure under which the terms of a coal supply agreement could be adjusted.[29]
[27] Mango Boulevard Pty Ltd v Mio Art Pty Ltd [2013] QCA 271 [82] (Peter Lyons J, with Gotterson JA agreeing); see also [31] ‑ [34] (Fraser JA). The relevant clause is in [4].
[28] Bondi Diggers Club Ltd v Vitarni Pty Ltd (1996) 7 BPR 15,061 (Cohen J).
[29] Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd (No 5) [2016] QSC 199 [138] ‑ [151] (Flanagan J). The adjustments could include adjustments as to price.
They have also been applied to a gas supply contract.[30]
[30] Alliance Petroleum Australia NL v Australian Gas Light Company (1985) 39 SASR 84, discussed later.
The principles have been applied to clauses that initiated a process, not just clauses which provided the machinery for the steps that were to follow the initiation of a process.[31]
[31] See, for example, Callide Power (the relevant clause, cl 12.3(b)(ii) is at [13]) and Raves v Fobone Pty Ltd (1991) NSW ConvR 55‑564.
The defendants accept that the principles enunciated in United Scientific and other cases may be applied to sufficiently analogous circumstances as part of the construction exercise. However, as will be seen,[32] they submit that the circumstances in this case are not sufficiently analogous.
[32] See under the heading 'United Scientific Factors'.
Later, I will explain why I consider the circumstances in this case are sufficiently analogous to apply the principles in United Scientific.[33]

Non‑promissory conditions precedent

[33] See under the heading 'United Scientific Factors'.

The defendants submit (citations omitted):[34]
Clause 14.3 is, in substance, a non‑promissory condition precedent; no particular form of words is required. Generally, non‑promissory conditions precedent are 'endowed' with the character of essentiality and must be strictly complied with in accordance with their terms.
Outside the context of rent review clauses in leases, courts have recognised the difficulties of applying the principles enunciated in United Scientific and the Tramways test of 'essentiality' to non‑promissory conditions precedent. In such other contexts, those difficulties militate against a construction that time is not of the essence.
[34] Defendants' Propositions [8] ‑ [9]. See also Defendants' Submissions [101] ‑ [105], [116] ‑ [121] and ts 137 ‑ 138 (24/07/2020).
In support of these propositions, the defendants cite, among other cases, Perri v Coolangatta Investments Pty Ltd[35] and GR Mailman.
[35] Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537.
In Mango Boulevard, the Queensland Court of Appeal was considering a time stipulation for obtaining an alternative valuation in a process of determining a variable price under a share sale agreement. The Court said (citations omitted):[36]
Samuels JA [in GR Mailman] noted an apparent anomaly in the adoption of the decision in United Scientific, on the ground that in Perri v Coolangatta Investments Pty Ltd it was accepted that the equitable rules concerning time stipulations (including notices to complete) had no application where the time stipulation in the contract was a non‑promissory condition precedent to the existence of the contractual obligation, even where the condition precedent required an act or event to occur within a reasonable time. It might be observed that Mason and Brennan JJ who were parties to the decision in Gollin had also been members of the Court which decided Perri in the previous year. The explanation may lie in the difference in the type of clause under consideration in Perri. Fulfilment of a condition of the type considered in Perri was not something within the control of the party to the contract, to whom it was suggested a notice might be given, so that time might become essential. Moreover, it may also be relevant that non‑fulfilment of such a condition, either by the time stated in the contract, or within a reasonable time where that is implied, would give rise to a right to terminate the contract. The taking of a step in a rent review procedure is of a different character.
[36] Mango Boulevard [79] (Peter Lyons J, with whom Gotterson JA agreed at [67]).
I respectfully agree that Perri dealt with a different type of case.
I accept that it has been recognised that the application of the principles in United Scientific, even within the rent review context, gives rise to some incongruities. Nevertheless, it has been established that the principles in United Scientific apply to rent review clauses. Further, there are many Australian cases where the principles have been applied outside of that context.
Later, I will address the parties' submissions as to whether cl 14.3 is a non‑promissory condition precedent.

Alliance Petroleum

It appears that there has only been one case which considered the application of the mercantile contracts prima facie rule and the rent review presumption in the context of a gas supply agreement. This was a decision of Cox J in Alliance Petroleum.[37]
[37] Alliance Petroleum.
Both parties quoted extensively from this case.
In Alliance Petroleum, the contracting parties executed an agreement for the supply of natural gas. The agreement provided for a contingency period of 12 months, after which the agreement was to run for 30 years from the initial date of supply.
The agreement provided for an initial price for 'sales gas' delivered and taken,[38] but included a clause entitling either contracting party to require a review to be made to adjust the prices payable under the agreement (referred to elsewhere in the agreement as 'the requirement'). The review, which could not be conducted more than once in a period of three consecutive calendar years, was to consider all economic and other relevant factors existing at the time, including the effects of inflation and any increases in capital and operating costs.[39] The contracting parties were required to consult together in good faith and use their best endeavours to agree on a price, or on a formula for fixing a price.[40]
[38] Clause 24(a), reproduced in Alliance Petroleum (86 ‑ 87).
[39] Clause 24(b), reproduced in Alliance Petroleum (87).
[40] Clause 24(c), reproduced in Alliance Petroleum (87).
Clause 24(d) provided, at the relevant time, that if the contracting parties failed to agree a price or formula for fixing a price within three months of the date of the requirement, the matter was to be referred to arbitration by two arbitrators. Each contracting party was to appoint one arbitrator, with such appointments to be made within one month after the expiry of the three month period previously mentioned.[41]
[41] Clause 24(d), reproduced in Alliance Petroleum (88).
Cox J said:[42]
There is nothing in clause (24), considered alone, to suggest that the time allowed for the appointment of the arbitrators was intended to be of the essence of the contract. Of course, par. (b) speaks in so many words of the appointments being made within one month after the expiry of the three‑month period beginning with the request for a review. The language used is, on the face of it, unambiguous and unqualified. However, while that might be a good reason for concluding that failure to make the appointment within the stipulated time will constitute a breach of contract by the defaulting party, it begs the question whether it was the intention of the parties that that should be the end of the matter.
[42] Alliance Petroleum (91).
Cox J noted that the 'par. (d) procedure' was not essential to the ascertainment of the price payable under the agreement at any relevant time. In the absence of a review, the existing price would simply continue, subject to the automatic adjustments under par (a) of cl (24).[43] His Honour continued:[44]
Obviously it will be easier to take a liberal view of the time provisions in a price review clause where it constitutes the only, or even perhaps the usual or expected, avenue for fixing the price in question. That deprives the Producers of an argument that has been available to the defaulting party in some of the reported cases, but it by no means follows that the parties must be taken in the circumstances to have intended that time would be of the essence under par. (d). Looking no further than the default in this case, one might well have thought the opposite. It is significant, in my opinion, that the appointment of arbitrators for the purpose of a price review under clause (24) lies largely outside the main stream of the transactions embodied in the Agreement - the mutual promises about proving the gas reserves, building the treatment plant and the pipeline, supplying gas of the specified quality, receiving it and paying for it, and so on. Certainly the price that AGL has to pay for the gas is of no small importance, but par. (d) remains in an important sense a collateral machinery provision, involving no interruption to the carrying out of the terms of the Agreement generally. In this respect it is important to bear in mind that we are not concerned in this case with the failure of a party to refer the matter to arbitration under par. (d) within the specified period. The lateness relates merely to the subsequent appointment of an arbitrator … It is unlikely that a delay of four days would ever make any significant difference to the outcome of such an arbitration; if it would in any given case, and to the detriment of the party who was not in default, that could be remedied by an award of damages. In the circumstances it is difficult to suppose that the parties intended that a failure by one of them to make an appointment under par. (d) within time was to be utterly irretrievable. Common sense would hardly support such an interpretation of the Agreement, once it is accepted that, in the case of some contracts and in some circumstances, time is not of the essence. The delay could be of the most trifling kind, and arise from circumstances for all practical purposes outside the defaulting party's control. However, none of this matters if, as AGL contends, the law does not permit such a benign construction of a contract of this sort. I therefore turn to the authorities.
[43] Alliance Petroleum (92).
[44] Alliance Petroleum (92).
The defendants emphasised the distinction Cox J drew in this passage between a failure of a party to refer the matter to arbitration under par (d) within the specified period and a lateness in the subsequent appointment of an arbitrator. Cox J plainly saw this distinction as important. Nevertheless, his Honour also clearly thought it was significant that the appointment of arbitrators for the purpose of a price review largely lay 'outside the main stream of the transactions embodied in the Agreement - the mutual promises about proving the gas reserves, building the treatment plant and the pipeline, supplying gas of the specified quality, receiving it and paying for it, and so on'.[45] His Honour noted that the price was obviously important, but the clause did not involve any interruption to the carrying out of the terms of the agreement generally.
[45] Alliance Petroleum (92).

Having analysed the authorities, Cox J rejected an argument that the High Court's acceptance in Gollin of the United Scientific approach was limited to the particular clause under consideration in that case.[46] His Honour also said (citations omitted):[47]
It will be remembered that the Court of Appeal in United Scientific unanimously rejected the supposed dichotomy between 'landlord's option' and 'obligation' review clauses. So did the differently composed Court of Appeal in Cheapside Land Development Co. Ltd. v. Messels Service Co. In the House of Lords only Viscount Dilhorne took a contrary view. In my opinion, if the 'obligation' type of review clause is not, so far as the time for appointing arbitrators is concerned, of the essence of the contract, nor is a clause that gives either party the option of seeking a rent review. It makes no difference that the contract may be so devised (as, for instance, by the stipulation of an irreducible minimum rent) that any review is likely to produce in practice a benefit to the landlord alone.
[46] Alliance Petroleum (104).
[47] Alliance Petroleum (104).
Cox J said that the critical question was whether, as a matter of construction, the 'policy' established in United Scientific should be applied to the time provisions of a price review clause in the contract his Honour was considering. Cox J then summarised what he saw to be the applicable principles (citations omitted):[48]
Time will be of the essence wherever the circumstances of the case indicate that this would fulfil the intention of the parties. Such an intention will be found, 'broadly speaking', in 'mercantile' contracts. That last expression is perhaps of somewhat imprecise meaning. Sometimes the word 'mercantile' is used to refer to trade and commerce. Sometimes it is used interchangably with 'commercial'. If precise classifications matter, then it would seem to me that, contrary to Mr. Von Doussa's submission, the present Agreement embodies a mercantile contract. But that only means that we are in the area in which, generally speaking, time will be of the essence. There is nothing inevitable about it. United Scientific deprecates the attempt to solve these questions by merely classifying the contract as being of a commercial character. … Cases … show that there are contracts and circumstances in which the inclination to find that time is of the essence will be very strong indeed. However, in all cases it will be necessary, in my view, to look not merely at the broad subject-matter of the contract - whether it is for the lease of an office block or the sale of goods or something else - but also the nature of the particular power or obligation that is in question.
[48] Alliance Petroleum (105). See also Mango Boulevard [81].
His Honour then turned to the clause in issue (citations omitted):[49]
Clause (24)(d) is a machinery clause. As I have already said, a failure by one party to nominate an arbitrator within the stipulated time will not affect the amount or quality of the gas supplied by the Producers or the obligation of AGL to receive it and pay for it, and it will have no bearing upon the time at which those mutual obligations will be performed. In short, the fulfilment of the main purpose of the contract will continue without interruption or delay despite the late compliance by the Producers of their obligation under par. (d). We are a long way, then, from those cases that deal with perishable goods, or string contracts, or time charters with their personal service overtones, or shipping and other contracts in which there is a strong tradition of strict compliance unless the parties have chosen to include a 'non‑technicality' clause. A payment of damages for the breach of contract constituted by a late appointment by one party would take care of any loss that the other party might suffer in such a case. Much was made of the virtues of simplicity and certainty and of the advantage of everyone knowing from the outset where they stand, but common sense and a due sense of proportion are also worthwhile attributes in a commercial contract. I have already said something about these last considerations with respect to clause (24). No doubt it borders upon the fictitious to impute to the parties to the Agreement an intention on a subject to which they probably did not address their minds at all, but that is where the matter of policy enters, no less in this case than in United Scientific and Gollin v. Karenlee and the other cases that I have discussed. I see no reason why the courts, when asked to apply a liberal and, as it seems to me, a sensible interpretation to the time table of a price review clause in a contract for the sale of goods, of the kind dealt with this Agreement, should hesitate to do so on the ground that this may conceivably have an unsettling effect upon the construction of contracts generally. It need not do so. I am not called upon to decide whether time is or is not of the essence in other clauses of this Agreement, or in arbitration clauses in other contracts. I am only concerned with the parties' intention, actual or implied, with respect to one feature of this particular price review clause. At any rate, certainty can be bought at too high a price, even in the commercial world.
If it is a matter of applying to this Agreement the principles and policies to which I have referred, I think, for the reasons I have given, that I should hold that the Producers' obligation to appoint an arbitrator within the time specified in par. (d) of clause (24) was not an essential term of the Agreement, and that the appointment that was purportedly made on 6th May was valid and effectual.
[49] Alliance Petroleum (105) ‑ (106).
Neither party suggested that Cox J was plainly wrong in the analysis of the applicable principles (or at all). It is appropriate, therefore, that I follow his Honour's approach.[50] Obviously, the conclusion Cox J reached turned upon the construction of the clause he was considering, and can be no more than illustrative.

Other principles - penalty clauses and exclusion clauses

[50] Duckworth v Water Corporation [2012] WASC 30; (2012) 261 FLR 185, [31].

The plaintiffs sought to draw support for their construction by reference to the principles that apply to the construction of exclusion clauses and penalty clauses.[51]
[51] In relation to exclusion clauses, see Plaintiffs' Submissions [19] and Plaintiffs' Reply Submissions [104] ‑ [106]. In relation to penalties, see Plaintiffs' Submissions [20], [103] and Plaintiffs' Reply Submissions [100] ‑ [103].
In relation to exclusion clauses, the plaintiffs said they were merely drawing attention to the fact that, on the defendants' construction, cl 14.3 'looks like' a time bar.[52]
[52] See ts 77 (23/07/2020).
In relation to penalty clauses, the plaintiffs ultimately said only that 'there is no hint of the clause having a penal effect on the [plaintiffs'] construction in contrast to the [defendants'] construction'.[53]
[53] Plaintiffs' Reply Submissions [103]. See also ts 75 ‑ 76 (23/07/2020).
In my view, the construction principles that apply to penalty clauses and exclusion clauses do not assist the construction task in this case. Given that the plaintiffs' reliance on these principles was at best half‑hearted, and having regard to the urgency in completing this judgment and my ultimate conclusion, I will not take the time to explain why.

The parties' positions

It was common ground that the presumptions and prima facie rules raised by the parties did not, even if they applied, determine the issue. It was common ground that the issue would turn upon a proper construction of the Contract.
That is, the plaintiffs did not submit that the United Scientific presumption meant that the time stipulation was not essential. Nor did the plaintiffs submit that cl 14.3 was, on the defendants' construction, a penalty clause or an exclusion clause, but rather that the principles that applied to such clauses should be applied to the defendants' construction. Similarly, the defendants did not submit that the fact that the Contract was a mercantile contract meant that the time stipulation was essential. Nor did the defendants submit that cl 14.3 was a non‑promissory condition precedent and that therefore the time stipulation was essential. Rather, they submitted that it was a non‑promissory condition precedent and that this made it harder to apply the United Scientific principles and the Tramways test.

Summary of approach

Theoretical physicists have struggled unsuccessfully for centuries to develop a unifying theory to explain all physical aspects of the universe. Unifying the various presumptions, prima facie rules, principles and approaches that arise in relation to time stipulations may take the same length of time.
In my view, the proffered maxims ultimately provide limited assistance. I consider that the relevant principles can be summarised in this way.
First, a time stipulation in a commercial or mercantile contract will generally be essential, as a matter of fact, not presumption.
Second, the Contract is a commercial contract and arguably a mercantile one.
Third, determining whether the time stipulation in cl 14.3 is essential will turn upon the application of the Tramways test.
Fourth, there is a rebuttable presumption that time stipulations in rent review clauses in leases are not essential.
Fifth, the presumption may be rebutted in various ways, such as where there is a deeming provision.
Sixth, in determining whether a time stipulation is essential in contexts other than rent review clauses in leases, the presence of circumstances analogous to the United Scientific Factors may tend to support a construction that the time stipulation is not essential. The presence of a deeming provision may tend to support the contrary construction.

The Contract

Attached to these reasons is an annexure setting out the more relevant clauses of the Contract. They were included in an annexure to reduce the extent to which the body of this judgment will need to be redacted to preserve the confidentiality of the Contract. I will, however, set out cl 14 in its entirety and some of the more critical clauses in the body of this judgment.

General provisions

As noted in the introduction, the Contract is a long‑term contract for the sale of natural gas by the Sellers to the Buyer. The end date is [number redacted] years from the Start Date.
The Contract was entered into before the project facilities had been completed. The Start Date was to be [date redacted], but was delayed by the amendment deeds to [date redacted].
Clause 11 requires the Buyer to give the Sellers information as to the amount of gas to be supplied at various times and in good faith. The Buyer must provide an 'Initial Nomination' at a stipulated time prior to the delivery. If the Buyer fails to meet the time frame, the Sellers may deem the Buyer's Initial Nomination to be the 'DCQ'. Clause 11 also requires the Buyer to provide non‑binding good faith estimates further into the future.
Clause 11 also provides that the quantity of gas which the Buyer may nominate to be made available for delivery should be within a stipulated range. If the Buyer nominates an amount exceeding the maximum of the range, the Sellers may treat the nomination as being for the maximum. Similarly, if the Buyer nominates an amount below the minimum of the range, the Sellers may treat the nomination as being for the minimum.
The defendants summarised the effect of cl 11 as follows:[54]
Put simply, the amount of gas to be supplied for any day is between [number redacted]% and [number redacted]% of [number redacted] TJ,[55] subject to the Annual Contract Quantity and the supply of Make‑Up Gas, and:
(a)the Buyer is required to provide in good faith its best estimates on a yearly basis, then updated quarterly;
(b)the Buyer is required to nominate its precise supply requirements in good faith at 2 pm each Friday for each day of the following week;
(c)that nomination can be altered for a particular day by 2 pm the previous day; and
(d)in the absence of any nomination, the supply amount for a day may be set by the [Contract] at the Sellers' discretion.
The effect of clause 11 is that the [Contract] provides for a graduated process pursuant to which the Buyer's prospective estimates evolve into the Buyer's advance nomination of its requirement for the precise quantity of gas for each particular day. That figure is then referred to in clause 12 as the 'Buyer's Nominated Quantity'.
[54] Defendants' Submissions [15].
[55] Earlier, the defendants had noted that 'TJ' is an acronym for 'terajoule'. One terajoule is equal to one trillion joules (a unit of energy).
Clause 12 deals with the quantities of gas which the Sellers are obliged to supply.
The Contract is a take‑or‑pay contract.[56]

Price

[56] See cl 5. See also cl 11, cl 12 and Items 1, 4, 5 and 6 of the Key Commercial Terms.

Clause 13 deals with price. The defendants agree with the plaintiffs' summary of this clause:[57]
[57] Defendants' Submissions [20], Plaintiffs' Submissions [52] ‑ [55].
52.The amount to be paid for the Gas supplied in each Month, called the 'Gas Quantity Payment' is calculated by reference to the 'Reference Gas Price' applicable to that Month: clause 13.1(a); clause 13.2. Any Take‑or‑Pay Payment payable in a Contract Year under clause 12.7 is calculated by reference to 'the mean of all Reference Gas Prices applicable during that Contract Year': clause 12.7(a); Item 6 of the Key Commercial Terms.
53.Item 3 of Key Commercial Terms sets out how the Reference Gas Price is to be calculated. In effect, it is calculated by reference to the Base Reference Gas Price applicable in that Month adjusted according to a formula for changes in CPI. The formula is expressed as follows:
[formula redacted]
54.Clause 13.1(b) provides 'Unless and until revised amounts have first been agreed, established or determined under Clause 14, the amount of the Base Reference Gas Price shall be BRGP₀ as set out in Item 2 of the Key Commercial Terms'.
55.The Base Reference Gas Price that applies for the period from the Execution Date until Price Review number 1, is the confidential $/GJ figure set out in Item 2 of the Key Commercial Terms.
I will refer to the Base Reference Gas Price by the initialism used in the Contract, 'BRGP'. I will also refer to it at times as 'the price' when it is clear from the context that I am referring to the BRGP.
It can be seen that, by cl 13.1(b), unless or until the BRGP that applies as at the Execution Date (BRGP₀) is altered following a Price Review, it will remain the same.
As will be seen, cl 14.6(a) states the parties agree that, at the Execution Date, BRGP₀ is deemed to be equal to the 'Market Price' and that they intend the BRGP will remain a price equal to the Market Price through Price Reviews conducted under cl 14.
'Market Price' is defined to mean a representative wholesale market price of Gas[58] under Long Term Contracts that have been entered into, amended on price or have had a price review in the last [number redacted] years for supply to the Relevant Gas Market (whether arising from price reviews, new supplies or otherwise) adjusted (by either adding or subtracting transportation costs) as though delivered to the Delivery Point.
[58] Defined in cl 1.1 of the Contract to mean any 'hydrocarbon or mixture of hydrocarbons and other gases, consisting primarily of methane, which at a temperature of 15˚C and an absolute pressure of 101.325 kPa is predominately in the gaseous state'.
'Long Term Contracts' is defined to mean contracts for the wholesale supply of gas for a term of [number redacted] years or greater and an average quantity of [number redacted] TJ or more per Day, but excluding this Contract.
'Relevant Gas Market' is defined to be the wholesale market for gas under contracts for supply for resale to gas customers in Western Australia and as direct sales by gas producers to end users in Western Australia for whose business gas retailers and/or other gas producers would normally be expected to compete.

The Price Review

Clause 14 contains a Price Review mechanism that enables the Buyer or the Sellers to request a Price Review at [number redacted] yearly intervals throughout the life of the Contract. Under a Price Review, a revised BRGP will be determined by agreement or by an arbitral decision.
Clause 14 provides as follows.
14PRICE REVIEW
14.1Purpose
(a)The purpose of this Clause 14 is to enable the Buyer or the Sellers to request a price review in respect of the BRGP ('Price Review') if the Buyer or the Sellers believe the Market Price has moved compared with the Market Price prevailing:
(i)at the Execution Date; or
(ii)when a revised BRGP was most recently agreed or determined in a previous Price Review.
(b)The Base Reference Gas Price applicable in a Month is:
(i)unless Clause 14.1(b)(ii) applies, BRGP₀; or
(ii)the most recent BRGP to apply pursuant to Clause 14.17.
(c)The BRGP established at Price Review number 'r' (expressed in dollars/GJ[59]) shall be referred to as 'BRGP_r'. For example, the BRGP established at Price Review number 2, is referred to as BRGP₂.
[59] Defined as gigajoules in cl 1.1 of the Contract.
14.2Price Review Date
The 'Price Review Date' shall be:
(a)[redacted][60]
[60] The Start Date was [date redacted].
(b)[redacted][61]
[61] Defined in cl 4.4 of the Contract to be the 'End Date' unless the parties agreed to an earlier date or the Contract was terminated before the End Date. The End Date was [number redacted] years from the Start Date - see the definition in cl 1.1 and Item 8 of the Key Commercial Terms.
Any revised BRGP arising from a Price Review will apply in accordance with Clause 14.17.
14.3Initiation of Price Review
The Buyer or the Sellers may initiate a Price Review by issuing, in the case of the Buyer, to the Sellers and the Sellers' Representative and in the case of the Sellers, to the Buyer, a notice which complies with Clause 14.4 ('Price Review Notice') not more than 120 days nor less than 90 days prior to a Price Review Date.
14.4Price Review Notice
A Price Review Notice shall be issued in accordance with Clause 28[62] and shall state:
[62] Clause 28 requires notices to be in writing, signed and served. It also sets out address details, and provides for when notices are taken to have been received. It does not address the consequences of a failure to issue a notice within a time stipulation.
(a)the BRGP at the Price Review Date;
(b)the proposed new BRGP (in the dollars/GJ of the Contract Year of the Price Review Date);
(c)reasons for the proposed new BRGP; and
(d)any other matters the Party or Parties issuing the Price Review Notice consider relevant in determining the proposed new BRGP.
14.5Negotiation period
Upon receipt of the Price Review Notice by the Buyer or the Sellers, the Buyer and the Sellers ('Reviewing Parties') shall meet and, in good faith, discuss the proposed new BRGP and seek to agree on a new BRGP prior to the Price Review Date.
14.6Base Reference Gas Price Pricing Principles
In establishing the revised BRGP, the Reviewing Parties will consider only the factors outlined in this Clause 14.6.
(a)The Parties agree that:
(i)at the Execution Date, BRGP₀ is deemed to be equal to the Market Price; and
(ii)they intend the BRGP will remain a price equal to the Market Price through Price Reviews conducted under this Clause 14.
(b)For the purposes of determining the Market Price regard shall be had to the terms for the supply of Gas under Long Term Contracts[63] that are in existence and unconditional as at the Price Review Date and the corresponding prices that would apply if such Gas was made available under the terms of this Agreement ('Standard Terms'). These terms will include:
[63] Defined in cl 1.1 of the Contract to mean contracts for the wholesale supply of Gas for a term of [number redacted] years or greater and an average quantity of [number redacted] TJ or more per Day, but excluding this Contract.
(i)[redacted][64]
[64] Defined in cl 1.1 of the Contract to mean [redacted].
(ii)[redacted]
(iii)[redacted][65] … [66] … [67]
[65] Defined in Item 1 of the Key Commercial Terms as [redacted].
[66] Defined in Item 1 of the Key Commercial Terms as [redacted].
[67] Defined in cl 1.1 of the Contract to mean [redacted].
(iv)[redacted][68]
[68] Defined in cl 1.1 of the Contract to mean [redacted].
(v)[redacted]
(vi)[redacted]
(vii)[redacted]
(viii)[redacted]
(ix)[redacted]
(x)[redacted]
(xi)[redacted]
(xii)[redacted]
(xiii)[redacted]
(xiv)the capability and/or reliability of seller's facilities.
(c)For the avoidance of doubt, no account shall be taken of:
(i)[redacted]
(ii)[redacted]
(iii)[redacted]
(iv)[redacted]
(v)[redacted]
(vi)[redacted]
(vii)[redacted]
For the purposes of the matters specified above, 'contract' means a Long Term Contract.
(d)In determining the Market Price the weighting given to different Long Term Contracts (converted to Standard Terms) will be determined by:
(i)how recently they were entered into, amended on price or experienced a price review; and
(ii)their significance in establishing the wholesale price of Gas in the Relevant Gas Market[69].
[69] Defined in cl 1.1 of the Contract to mean the wholesale market for Gas under contracts for supply for resale to Gas customers in Western Australia and as direct sales by Gas producers to end users in Western Australia for whose business Gas retailers and/or other Gas producers would normally be expected to compete.
(e)The adjustments for pipeline tariffs used to determine (by either adding or subtracting transportation costs) the Market Price shall be taken to be the lower of:
(i)[redacted]
(ii)[redacted]
14.7Final Price Submission
If the Reviewing Parties have not agreed a revised BRGP by the Price Review Date then, within 3 days of the Price Review Date, each Reviewing Party must submit to the other Reviewing Party in writing a proposed final value for the revised BRGP ('Final Price'). The Final Price must be expressed as a number in $/GJ and not require calculation from variables.
14.8Arbitration
If the Reviewing Parties are unable to agree on a revised BRGP within 7 days of each Reviewing Party submitting its Final Price, then either Reviewing Party may refer the matter to arbitration by giving Notice to the other Reviewing Party ('Arbitrating Parties').
14.9Appointment of Arbitrators
The arbitration shall be heard and determined by three arbitrators. Each Arbitrating Party shall appoint an arbitrator of its choice within 20 days of receipt of a Notice by either Reviewing Party requiring arbitration. The Party‑appointed arbitrators shall in turn appoint a presiding arbitrator within 10 days of the appointment of the last of the Party‑appointed arbitrators. If the Party‑appointed arbitrators fail to agree on a presiding arbitrator or an Arbitrating Party fails to appoint its own arbitrator within the prescribed periods, then either Arbitrating Party may request the President of the Bar Council of the Western Australian Bar Association (Inc) to appoint an independent arbitrator as the presiding arbitrator or for that Arbitrating Party as applicable.
14.10Arbitrators to be independent and impartial
The arbitrators shall be and remain at all times wholly independent and impartial.
14.11Price Review Submission
(a)Each Arbitrating Party shall make a written submission ('Price Review Submission') to the arbitrators within 10 Business Days of the appointment of the presiding arbitrator. The Price Review Submission shall contain:
(i)the Arbitrating Party's proposed Final Price together with:
(A)reasonably substantiated reasoning for its Final Price;
(B)an explanation of all methodologies used to calculate its Final Price;
(C)all relevant data and information to support its Final Price; and
(D)indications of confidentiality issues associated with any of the information and data provided in the Price Review Submission; and
(ii)in relation to the Arbitrating Party who initiated the Price Review, reference to the Price Review Notice.
(b)Within 5 Business Days of an Arbitrating Party sending a Price Review Submission to the arbitrators, the arbitrators shall provide a copy of that Arbitrating Party's Price Review Submission, excluding any confidential information and data, to the other Arbitrating Party. Within 10 Business Days following the receipt of the other Arbitrating Party's Price Review Submission, the receiving Arbitrating Party may submit to the arbitrators a written response ('Price Review Response') to that Price Review Submission and may also submit a revised Final Price. Within 5 Business Days of an Arbitrating Party sending a Price Review Response to the arbitrators, the arbitrators shall provide a copy of that Party's Price Review Response to the other Arbitrating Party excluding any confidential information and data.
(c)Once each Arbitrating Party has received a copy of the other Arbitrating Party's Price Review Submission, or, if a Price Review Response has been submitted by both Arbitrating Parties, a copy of that Price Review Response, the arbitrators will hear oral argument and evidence led from each Arbitrating Party in support of its Price Review Submission and, if any, Price Review Response and in reply to any Price Review Response submitted by the other Arbitrating Party.
14.12Arbitrators to determine revised Base Reference Gas Price only
The arbitrators must determine a revised BRGP in accordance with this Clause 14 and shall only have regard to:
(a)Clause 14.1 and the pricing principles described in Clause 14.6; and
(b)facts, data and information included in the Price Review Submissions, Price Review Responses or oral arguments and evidence led at the hearing (including documents obtained by way of discovery or by the issue of subpoenas) that support, and are consistent with, the matters specified in Clause 14.12(a) above.
The arbitrators are obliged to check the validity of the data supplied in the Price Review Submissions and Price Review Responses to the extent that the confidential nature of the data means either that it is not fully included or described in the Price Review Submissions or Price Review Response or the other Arbitrating Party is not able to critique the data.
14.13Decision period
The arbitrators shall issue their decision as soon as possible, and must take all available steps to issue their decision within nine months of the Price Review Date.
14.14Final and binding decision
The decision of the arbitrators shall be final and binding and each Arbitrating Party irrevocably waives its right to any form of appeal, review or recourse.
14.15Additional requirements
Except as expressly modified by this Clause 14, arbitrations conducted pursuant to this Clause 14 shall be conducted in accordance with the provisions of Clause 24 and Exhibit E. In the event of any conflict between the provisions of this Clause 14 and the provisions of Clause 24 and Exhibit E, this Clause 14 will prevail to the extent of the inconsistency. To avoid doubt, Items E.8, E.9 and E.10 of Exhibit E are not inconsistent with the provisions of this Clause 14.
14.16Costs of Arbitration
(a)Each Party will bear all of its own costs incurred prior to the commencement of arbitration.
(b)Subject to Clause 14.16(c), the allocation of the Arbitration Costs between the Arbitrating Parties shall be determined by the arbitrators and stated in the arbitral decision. In reaching their decision on the allocation of Arbitration Costs the arbitrators will have regard to the relative magnitude of the difference between each Arbitrating Party's Final Price and the value of BRGP determined by the arbitrators.
(c)The Sellers will be treated as one party for the purpose of allocation of costs.
14.17Application of revised BRGP
(a)Following agreement between the Reviewing Parties or issuance of an arbitral decision, the revised Base Reference Gas Price shall be used in the calculation of the Reference Gas Price under Item 3 of the Key Commercial Terms from time to time for each Month commencing on and from the Price Review Date for that Price Review.
(b)Within 30 days of an arbitral decision or the agreement of the Parties, each Seller shall issue a statement to the Buyer showing any sum which becomes owing pursuant to the calculation in Clause 14.17(a); provided that if the Sellers have been recovering costs from the Buyer for new or varied Taxes pursuant to Clause 15.l, then such recovered costs shall be taken into account in determining any sum owing. Such sum shall be paid by the Buyer or the Seller (or Sellers) (as the case may be) in accordance with Clause 17.7 not later than 30 days after issue of the statement to the Buyer. Interest on that sum will be calculated daily at an annual rate equivalent to the Interest Rate plus [number redacted]% and will be compounded at 30 day intervals starting from the Price Review Date and ending on the date of payment.
14.18Price During Price Review
If, and for as long as, no agreement has been reached between the Reviewing Parties in respect of a Price Review and no arbitral decision has been issued or taken effect, the rights and obligations of the Parties and the prevailing BRGP under the Agreement shall continue in full force and effect.
14.19Base Reference Gas Price fully inclusive of Taxes
The BRGP agreed by the Reviewing Parties or determined as a result of a Price Review is and will be fully inclusive of all Taxes prevailing at the time of its establishment.

I will discuss cl 14 in detail later. For now I note that some of the more significant features of cl 14 are as follows.
(1)Clause 14.1 states that the purpose of cl 14 is to enable either party to request a Price Review if it believes the Market Price has moved.
(2)Clause 14.3 provides for the initiation of a Price Review. Either party may initiate a Price Review by issuing 'a notice which complies with Clause 14.4 ("Price Review Notice") not more than 120 days nor less than 90 days prior to a Price Review Date'. As is apparent, the brackets defining a Price Review Notice are placed before the time stipulation.
(3)The obligation in cl 14.5 on the parties to, in good faith, discuss and seek to agree on a new price is triggered by the receipt of a Price Review Notice.
(4)Clause 14.6(a) records that the parties agreed that they intend the BRGP will remain at the Market Price through Price Reviews.
(5)Clause 14.6 requires the parties to consider various matters for the purposes of determining the Market Price.
(6)By cl 14.7, within three days of the Price Review Date, each party must submit its proposed new price to the other party.
(7)By the operation of cl 14.7 and cl 14.8, if the parties do not agree on a new price within 10 days of the Price Review Date, either may refer the matter to arbitration. There is not a fixed date for the commencement of arbitration.
(8)There is also not a fixed date for the completion of arbitration. That said, by cl 14.13, the arbitrators shall issue their decision as soon as possible, and must take all available steps to issue their decision within nine months of the Price Review Date.
I also note that the effect of cl 14.2 is that the parties may initiate a Price Review every [number redacted] years. Therefore, when the parties made submissions in the hearing as to whether the right to a review would be lost if a notice was sent after the Notice Window, they were not discussing whether the right would be lost for all time. They were discussing if it would be lost in relation to a particular Price Review Date. To the extent that I refer to the loss of a right to a review in these reasons, I am doing so in the same way.
In addition to disagreeing as to whether the time stipulation in cl 14.3 is essential, the parties disagree about a number of other aspects of cl 14 relevant to that issue. These will be discussed later, but include:
(1)the purpose of cl 14;
(2)the extent to which cl 14.3 (and the time stipulation) should be seen as the exercise of a power to initiate the review, as distinct from a machinery provision; and
(3)the type of negotiation contemplated by cl 14.5, including the degree of complexity of the task required by cl 14.6 and the likely time required to undertake that task.

Deeming provisions

Several clauses in the Contract deem consequences to follow if something is not done within the terms of the Contract. For example, cl 19.4(b) includes a deeming provision where a notice in another context has not been given in time.[70] I will say more about deeming provisions later.

Liability, default and termination

[70] See also cl 11.3(b) and cl 25.6.

The Contract limits the liability of the parties to each other.[71]
[71] See cl 30 and cl 32.1(f).
The Contract also excuses, by cl 27, some non‑performance caused or materially contributed to by a force majeure. Clause 27 excludes from the definition of force majeure events, among other things, financial hardship, loss of customers, reduction in demand for gas or electricity and inability to perform attributable to the 'Reference Gas Price'.
Clause 31 deals with default, termination and suspension. It provides for when a party 'does not perform on time and as required by this agreement any obligation' under the Contract, other than an obligation to make available or take gas for delivery. It permits the non‑defaulting party to issue a notice where the 'non‑performance is material in the context of this agreement as a whole'. It provides for a 'cure period' within which the default may be remedied.
There is no termination for convenience clause. The only rights of the parties to terminate the Contract are those expressly provided in cl 31 (uncured defaults) and cl 27.9 (prolonged force majeure).

Clause 32.1

Clause 32.1 relevantly provides:
…
(c)No failure to exercise or delay in exercising any right or remedy arising from this Agreement shall operate or be construed as a waiver of a right or remedy.
(d)If a Party does not exercise a right or remedy fully or at a given time, the Party may still exercise it later.
(e)A Party may exercise a right or remedy or give or refuse its consent in any way it considers appropriate (including by imposing conditions), unless this Agreement expressly states otherwise.
(f)A Party is not liable for loss caused by [among other things] the delay in exercising a right or remedy under this Agreement.

Analysis

In seeking to determine the proper construction of cl 14.3, I will first consider the text of cl 14.3 itself. I will then consider other sub‑clauses in cl 14 and the purpose of cl 14 as a whole. I will next consider the Contract as a whole, and discuss those clauses which appear to bear upon the proper construction of cl 14.3. Finally, I will discuss issues of certainty (including cl 11) and the consequences and commerciality of the parties' constructions.

Textual considerations in cl 14.3

Clarity of time stipulation

On its face, cl 14.3 is not ambiguous or unclear. It provides that a Price Review may be initiated by issuing a notice which complies with cl 14.4 not more than 120 days nor less than 90 days prior to a Price Review Date. Clause 14.3 clearly requires that a Price Review Notice be sent within the Notice Window.
However, the issue for determination is not what the clause means. The issue is whether the parties intended the time stipulation to be essential. That is, did they intend that the right to initiate a Price Review is lost if a notice is not sent during the Notice Window.
The defendants do not submit that the clarity of the words in cl 14.3 compel a conclusion that the time stipulation is essential.[72] However, they submit:[73]
The plain and ordinary meaning of the words 'not more than', 'nor less than' in clause 14.3, contained within a mercantile contract negotiated between sophisticated and well‑resourced commercial parties, is a strong textual indicator that the parties objectively intended the power only being exercisable within the timeframe.
[72] See ts 102.2 (24/07/2020).
[73] Defendants' Propositions [15] (see also ts 106.5 ‑ 107 (24/07/2020)). The footnote to [15] stated 'Raves v Fobone Pty Ltd (1991) NSW ConvR 55‑564 at 59,176; Craig Hargraves Investments Pty Ltd v Australian Business Insurance Advisors Pty Ltd (2011) 111 SASR 506 at [56] ‑ [59]. Only two members of the House of Lords in United Scientific expressly addressed this question and each reached a different conclusion: see 939E‑G (Viscount Dilhorne); 955G‑H (Lord Salmon)'.
The cases cited by the defendants in support of this proposition do not support that it is a 'strong textual indicator'.
I accept that the words 'nor more' and 'nor less' tend to support a construction that the time stipulation is essential.[74] I do not accept that the words are a 'strong textual indicator'.

The definition

[74] See ts 102 (24/07/2020). And see ts 107 (24/07/2020), noting that the plaintiffs did not subsequently indicate that they disputed this.

The plaintiffs draw attention to the fact that the definition of Price Review Notice in cl 14.3 comes before the time stipulation. The plaintiffs submit, therefore, that a 'notice that complies with Clause 14.4' is a Price Review Notice (as defined) regardless of whether it is issued within the stipulated time. The plaintiffs point out that cl 14.4 says nothing about time.
As the Court of Appeal said in Black Box, '[a] definition is not to be construed in isolation from the operative provision(s) in which the defined term is used. Rather, the operative provision is ordinarily to be read by inserting the definition into it'.[75]
[75] See also EIT Kwinana Partner Pty Ltd v Electricity Generation and Retail Corporation [2020] WASC 238 [74] ‑ [75] and the cases there cited.
Applying this approach, the plaintiffs submit that cl 14.5 therefore provides that the parties must engage in the negotiations 'upon receipt of a notice that complies with clause 14.4'. They submit that cl 14.5 'does not, on its plain terms, condition the requirement to engage in the Price Review process upon the Price Review Notice being served within the time stipulated in clause 14.3'. They submit that the other steps then follow.[76]
[76] Plaintiffs' Submissions [84] ‑ [85]. See also ts 16 (23/07/2020).
The defendants submit that the primary focus of cl 14.4 is the content of the Price Review Notice and it is therefore unsurprising that the temporal aspect is not included. Further, they submit that cl 14.5 only arises if a Price Review is initiated under cl 14.3, so cl 14.5 presumes that the Price Review Notice was issued within the Notice Window.[77]
[77] Defendants' Submissions [111] and ts 89 ‑ 90 (24/07/2020).
I accept that there is some force in the defendants' submissions. Nevertheless, the drafters placed the definition of Price Review Notice prior to the time stipulation. The defendants accept that the clause could have been expressed in such a way that the time stipulation was included in the definition. The defendants conceded it was, therefore, an indicator in favour of the plaintiffs' construction, but said it was a 'very faint indicator'.[78]
[78] ts 90 (24/07/2020).
In my view, it is more than a faint indicator. While not determinative, I consider it to be significant.

Condition precedent?

As noted earlier, the defendants submit that cl 14.3 'is, in substance, a non‑promissory condition precedent'.[79]
[79] See under the heading 'Non‑promissory conditions precedent'.
Whether or not cl 14.3 is a non‑promissory condition precedent is a matter of construction. The question is, in essence, whether the parties intended that the obligation to engage in the price review process would be conditional upon a notice being issued within the Notice Window.
This question raises the same considerations as are raised by the central issue in this case, namely whether the time stipulation was essential.
As will be seen, having regard to all of the many factors that arise in this case, I do not consider that the parties intended that the time stipulation would be essential. That is, I do not consider that they intended that the right to a review would be lost if a notice was issued outside of the Notice Window. I do not consider that they intended that a late notice would be ineffective to trigger the review process. In other words, I do not consider that they intended that the obligation to engage in the price review process would be conditional upon a notice being issued within the Notice Window.
I therefore would not construe cl 14.3 as a non‑promissory condition precedent, having regard to the many factors. However, in this context, I particularly note the following.
First, cl 14.3 does not use words like 'on the condition that', 'subject to', 'if', 'provided that' or any equivalent phrase. The absence of such words does not mean it is not a condition precedent. It is, however, an absence of an indicator that it is.
Second, unlike the clause that so troubled Samuels JA in GR Mailman,[80] there is no provision in this Contract which is specifically directed to what happens if a notice is not issued within the Notice Window.[81]
[80] See GR Mailman 93G-94B. The clause under consideration was 2.02(b), set out on page 83D. The deeming provision was 2.02(d), set out on page 84A.
[81] See under the heading 'No deeming provision'.
Third, it is the issuing of a Price Review Notice that triggers the review process in cl 14.5. Under cl 14.5, the parties must meet and seek to agree '[u]pon receipt of the Price Review Notice'. The time stipulation in cl 14.3 is placed after the definition of a Price Review Notice. In my view, the obligation to seek to agree in cl 14.5 is not conditional upon the Price Review Notice being issued in the Notice Window. The obligation arises on a notice that complies with cl 14.4 being received.
In those circumstances, and having regard to the Contract as a whole, I do not consider that the parties intended that the obligation to engage in the price review process would be conditional upon a notice being issued within the Notice Window.

An initiating power or a machinery provision?

The defendants draw a distinction between clauses which initiate a process and those which provide the machinery. They submit that cl 14.3 triggers the price review process, and is therefore more than mere machinery. They submit that it is the source, or at least the primary source, of the power to trigger a Price Review. They submit this is a factor that supports their construction.[82]
[82] Defendants' Submissions [97]. See also ts 120 ‑ 121 (24/07/2020).
The defendants acknowledge that this could not be a determinative factor. They acknowledge that an initiating or enabling provision may not be essential.[83] However, they submit it is an indicator of essentiality.
[83] ts 120 ‑ 121 (24/07/2020). And see, for example, Callide Power and Raves v Fobone Pty Ltd.
The defendants also acknowledge that a clause may be comprised of both an essential component and a non‑essential component. However, they submit that cl 14.3 should be construed, in its entirety, as an enabling provision. They point out that cl 14.3 uses the word 'may' and that there has been a drafting choice to include in that subclause the time stipulation.[84]
[84] See ts 120 ‑ 121 (24/07/2020).
The plaintiffs criticise the defendants' description of cl 14.3 as an enabling power. The plaintiffs accept that cl 14.3 initiates a Price Review and appear to accept that it sets out a right to initiate a Price Review. However, they submit it is still part of the machinery by which the parties had agreed Price Reviews would be conducted. The plaintiffs also draw a distinction between the right to initiate a Price Review, and the time within which the Price Review Notice must be issued.[85]
[85] See the Plaintiffs' Reply Submissions [86] ‑ [92].
I will adopt the plaintiffs' language of 'right'. This is not, however, to be interpreted as a rejection of the defendants' language of 'power'. In my view, having regard to the context in which the defendants used the word 'power', the defendants were using it as a synonym of 'right'.
In the overall context of this Contract, I do not consider that the presence of the time stipulation in the clause which contains the initiating right is an indicator in favour of the defendants' construction. This is for three reasons.
First, I am not persuaded that the distinction is, of itself, meaningful. It will always depend on the nature of the initiating right, as well as the nature of the process being initiated by the exercise of the right.
Second, and in any event, I would not construe the time stipulation in cl 14.3 to be part of the right to initiate a Price Review. This is particularly because of the location of the brackets defining a Price Review Notice, and the fact that the parties' obligations in cl 14.5 are triggered by the receipt of a Price Review Notice.
Third, as I will later explain,[86] I consider that the purpose of cl 14 is to enable the parties to have the price adjusted to reflect the Market Price at regular intervals if either believes that the Market Price has changed. In light of that purpose, I consider that cl 14.3 should be construed as part of the machinery to achieve that end.

United Scientific Factors

[86] See under the subheading 'Clause 14 as a whole - the purpose of the price review process'.

As noted earlier,[87] the defendants accept that the principles enunciated in United Scientific and other cases may be applied to sufficiently analogous circumstances as part of the construction exercise. However, they submit that the circumstances in this case are not sufficiently analogous.[88]
[87] See under the subheading 'Rent review clauses'.
[88] Defendants' Propositions [7] and Defendants' Submissions [70] ‑ [74].
The defendants submit that the rent review clauses that attract the United Scientific presumption do not prescribe elaborate regimes and, in particular, do not typically require negotiation of any kind. They submit that '[t]ypically, either the tenant agrees with the revised rent proposed by the landlord or disputes the revised amount. In the absence of agreement, a form of arbitration or determination follows, usually by one or more valuers'.[89] I accept this is generally so, although there are exceptions.[90]
[89] Defendants' Submissions [70]. See also at [71] ‑ [72].
[90] See, for example, Starmark Enterprises Ltd v CPL Distribution Ltd [2002] 4 All ER 264.
The defendants submit that, by contrast, long term gas supply contracts invariably contain mandatory obligations for negotiation prior to any arbitral process.[91] I accept this too. I also accept this is a relevant distinction.
[91] Defendants' Submissions [73].
Nevertheless, I consider that the circumstances are sufficiently analogous to apply the principles in United Scientific. In particular:
(1)Like a rent review mechanism, the right to review the price is for the benefit of both parties. The Market Price could move up or down.
(2)Like a rent review, a Price Review does not create a new contract. Similarly to rent review clauses, the obligation to pay the revised price determined by a Price Review is an obligation that the parties undertook when originally entering into the Contract. The parties had agreed upon the formula that would be applied in determining that price.
(3)As I will later explain,[92] I accept that the receiving party may be prejudiced by the late issuance of a Price Review Notice. Nevertheless, the nature of that prejudice is not of the quality of the prejudice that could be suffered by a failure to comply with a clause that stipulated the time for delivery in a contract for the sale of a wasting asset or of a perishable commodity or something likely to change rapidly in value.
[92] See under the heading 'Commerciality/harsh result'.
That said, applying the principles in United Scientific does not determine the proper construction. It remains necessary to consider the multitude of relevant factors.

Work to do?

Time stipulations are frequently found to not be essential. Indeed, as has been seen, there is a presumption that time stipulations in rent review provisions are not essential.[93] This does not mean that non‑essential time stipulations have no work to do. If breached, the defaulting party will have breached the contract and may be liable in damages. In addition, as I will explain, the time stipulation may set the time at which a 'Deadline Notice' can be sent by the non‑defaulting party, making time of the essence.
[93] See under the subheading 'Rent review clauses' under the heading 'Legal Principles'.
The defendants submit that the time stipulation in cl 14.3 achieves neither of those things, and therefore has no work to do if it is not essential.[94] The plaintiffs submit it at least achieves the second.

Breach of the clause

[94] Defendants' Submissions [61] and [92]. See also ts 108 ‑ 111 (24/07/2020).

If the time stipulation is not essential, a notice issued outside of the Notice Window will be effective to initiate a Price Review. However, it will still be a breach of cl 14.3. Whether that would have any practical effect is another question.
The plaintiffs were unable to identify any quantifiable loss that the non‑defaulting party would suffer, entitling them to more than nominal damages.[95]
[95] See also the defendants' oral submissions at ts 111 ‑ 112 (24/07/2020).

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

Atwell v Roberts [2013] WASCA 37 (S)
Blatchford v Laine [2018] WASC 207 (S)
Duro Felguera Australia Pty Ltd v Samsung C&T Corporation [2017] WASC 348 (S)
Eclipse Resources Pty Ltd v The State of Western Australia [No 2] [2015] WASC 137
Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (S)
Heartlink Ltd v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S)
Insurance Commission of Western Australia v Antony Leslie John Woodings as Liquidator of the Bell Group Ltd (in liq) [No 3] [2018] WASC 44 (S)
Mentha as Receiver and Manager of Westgem Investments Pty Ltd (in liq) v Hughes as Liquidator of Westgem Investments Pty Ltd (in liq) [2014] WASC 478 (S)
Mirvac (WA) Pty Ltd v Binningup Nominees Pty Ltd [2020] WASC 28 (S)
Pilbara Iron Company (Services) Pty Ltd v Chevron (TAPL) Pty Ltd [2020] WASC 296
Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S)

ARCHER J:

Introduction

On 14 August 2020, I gave judgment for the plaintiffs in Pilbara Iron Company (Services) Pty Ltd v Chevron (TAPL) Pty Ltd.[180]
[180] Pilbara Iron Company (Services) Pty Ltd v Chevron (TAPL) Pty Ltd [2020] WASC 296.
On 16 September 2020, the parties filed a minute of proposed consent orders (Minute) under which the following orders are sought:
1.The Defendants shall pay the Plaintiffs' costs of the action (including any reserved costs) to be taxed if not agreed.
2.Special costs orders be made under section 280(2) of the Legal Profession Act 2008 (WA) that the Plaintiffs' costs of the action be taxed without the limits imposed by:
(a)the maximum allowable hourly and daily rates for Senior Counsel and Senior Practitioners fixed under Table A of the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2018 and under Table A of the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2020; and
(b)the maximum allowances for time, number and experience of legal practitioners or total costs under items 1, 10(a), 11(d), 18 and 21 of Table B of the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2018 and under items 19 and 22 of Table B of the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2020,
and any taxation be performed on the basis that an allowance be made for the costs of Senior Counsel and Junior Counsel including for attendance at all pre-trial hearings and the trial.
In support of the application for these orders, the plaintiffs filed submissions and an affidavit. The affidavit was sworn on 15 September 2020 by George Alexander Croft, a partner of Johnson Winter & Slattery, and who had conduct of the matter on behalf of the plaintiffs (Croft Affidavit).
For the following reasons, I am satisfied that I should make orders in the terms proposed.
It is appropriate to make the order proposed in paragraph 1 of the Minute as the plaintiffs were successful.
The order sought in paragraph 2 requires a little more evaluation.

Special costs order

The order sought in paragraph 2 is a special costs order under s 280(2) of the Legal Profession Act 2008 (WA) to remove the limits imposed by the relevant costs determination. That section provides that a court may make such an order if it is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter.

The legal framework

The core requirements of special costs orders were set out in Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2][181] (citations omitted):
Before such a power will be exercised, the court must form an opinion that has two components. First, the court must form the view that the maximum amount allowable under the relevant scale item is inadequate in the sense that there is a fairly arguable case that the bill to be presented to the taxing officer may properly tax at an amount which is greater than the limit which would be imposed by the relevant cost determination. Secondly, the court must also form the opinion that the inadequacy of the costs allowable under a costs determination arises because of the 'unusual difficulty, complexity or importance of the matter'. Issues of the kind which arise are addressed as matters of impression, rather than as matters of detailed evaluation, precision or science.
For the purposes of exercising the powers conferred by s 280(2) of the Act, it will not ordinarily be necessary for the court to determine what amount should be allowed on taxation, but only whether there is a fairly arguable case that a greater amount should be allowed than that which is allowable under the relevant determination …
A fairly arguable case to that effect will not be established merely because a party incurred greater costs than those allowable under the relevant determination. However, depending on the particular case and all the circumstances, the fact that a party has applied significantly greater legal resources to each step in the litigation than those for which allowance is made under items of the relevant determinations, when viewed in the context of the difficulty, complexity or importance of the matter, may sustain the conclusion that there is a fairly arguable case that each of the items identified is inadequate (and thereby the amount of costs allowable in respect of the matter is inadequate) because of the unusual difficulty, complexity or importance of the matter.
The word 'unusual' in s 280(2) of the Act qualifies only the 'difficulty' of the matter, and not its 'complexity' or 'importance'. The word 'unusual' in this context means unusual having regard to what one might describe as the usual run of civil cases determined in the court. That essentially involves the making of a value judgment by the court, having regard to the court's experience of the particular case when compared with the usual run of cases: … Also, the reference to 'importance' in this context allows the court to have regard to the significance of the issues that arose in the litigation. Significance can arise either because of the significance of the issues to the parties, or because of the significance of the issues to other prospective parties, or to the public or community generally …
… the question of unusual difficulty, complexity or importance arises in respect of the proceedings as a whole and not in respect of each individual item in the relevant costs determination.

Analysis[182]

Unusual difficulty, complexity or importance

[181] Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) [12] ‑ [16].

[182] The legal principles referred to in this section are drawn, or reproduced, from my decision in Mirvac (WA) Pty Ltd v Binningup Nominees Pty Ltd [2020] WASC 28 (S).

It is convenient to begin with the issue of whether the proceedings were unusually difficult, complex or important.
As noted in the extract above, the adjective 'unusual' qualifies only the term 'difficulty' and not the terms 'complexity' or 'importance'.
The matter was undoubtedly complex. It involved the construction of a contract in light of various presumptions, prima facie rules, principles and approaches which were difficult to reconcile. The written submissions exceeded 100 pages, the argument took two full days of hearing, and the unredacted judgment was 80 pages excluding the annexure.
I am also satisfied that the proceedings were important compared to the usual run of civil cases. The importance arose due to the significance of the case to the parties. On the plaintiffs' estimation, whether or not a price review will occur in respect of the particular Price Review Date could ultimately result in a net difference of payments for gas by the first plaintiff of many tens of millions of dollars.[183]

The opinion

[183] Affidavit of George Alexander Croft in Support of Plaintiffs' Application for Special Costs Orders sworn on 15 September 2020 (Croft Affidavit) [9].

As set out in the above extract, before a special costs order may be made, the court must form an opinion that there is a fairly arguable case that, on taxation, costs may properly be allowed in an amount greater than the limit imposed by the relevant costs determination, and that that is because of the unusual difficulty, complexity or importance of the matter.
The Croft Affidavit set out the legal fees billed to the plaintiffs by the solicitors and the disbursements, including counsel fees. Mr Croft set out the hourly rates of senior counsel and himself. He also attached a table setting out an estimate of the maximum amounts that the plaintiffs could potentially recover under various items of the scale of costs in the 2018 and 2020 Legal Profession (Supreme and District Courts) (Contentious Business) Determination if the maximum rates and the relevant limits on costs and fixed amounts in the scales were applied upon a taxation. Mr Croft deposed that he considered that the plaintiffs have incurred costs exceeding what would be allowable under the limits for each item in the determinations for which a special costs order is sought. Mr Croft did not, however, prepare a draft bill of costs.
The failure to produce a draft bill of costs is not fatal.[184] Indeed, in some cases, no evidence will be required at all.[185] The issues that arise in an application for a special costs order are to be addressed as matters of impression, rather than as matters of detailed evaluation, precision or science.[186] It would be undesirable to require a party to produce more evidence than was necessary to enable the court to address the issues. This would inevitably involve extra, and self‑evidently unnecessary, costs.[187] It should be remembered that the reasonableness of costs actually to be awarded will always remain within the discretion of the taxing officer.[188]
[184] Atwell v Roberts [2013] WASCA 37 (S) [23].
[185] See Eclipse Resources Pty Ltd v The State of Western Australia [No 2] [2015] WASC 137 [33] (Beech J), citing Martin CJ in Mentha as Receiver and Manager of Westgem Investments Pty Ltd (in liq) v Hughes as Liquidator of Westgem Investments Pty Ltd (in liq) [2014] WASC 478 (S).
[186] Sino [No 2] [12]; Blatchford v Laine [2018] WASC 207 (S) [43].
[187] And see Heartlink Ltd v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [20] (Martin CJ) and Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (S) [4] (Martin CJ).
[188] Sino [No 2] [11].
In my view, the plaintiffs have produced sufficient material to enable me to address the issues.
In my view, on the facts in this case, no evidence is required before I could conclude that there is a fairly arguable case that the plaintiffs' bill would properly tax at an amount that is greater than the total amount allowable under those items that stipulate a capped sum for particular work. Further, no evidence is required before I could conclude that this would be because of the importance or the complexity of the proceedings.

Lawyers' hourly rates

The plaintiffs seek that the costs of the work done by Mr Croft and senior counsel be taxed without the limits imposed by the maximum allowable hourly and daily rates in the scale. The Croft Affidavit establishes that the rates charged by the plaintiffs' solicitors and senior counsel exceeded the scale rates.
Merely because the actual rates are higher than the scale rates is not a sufficient reason of itself to lift the scale rates.[189] However, the nature and importance of the proceedings may permit the court to conclude that a party was justified in engaging counsel and solicitors with greater experience and expertise in commercial litigation than in the usual run of civil cases. It may permit the court to conclude that a party was justified in engaging lawyers who charged more than the scale rates.[190] I am satisfied that the importance and complexity of these proceedings fully justified this.
[189] Sino [No 2] [22].
[190] See, for example, The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 5] [2013] WASC 121 (S) [20] (Le Miere J); Duro Felguera Australia Pty Ltd v Samsung C&T Corporation [2017] WASC 348 (S) [10]; Insurance Commission of Western Australia v Antony Leslie John Woodings as Liquidator of the Bell Group Ltd (in liq) [No 3] [2018] WASC 44 (S) [55] (Pritchard J, as her Honour then was).
I am satisfied that there is a fairly arguable case that a taxing officer might properly allow costs for senior counsel and Mr Croft at a rate greater than the scale rates, due to the importance and complexity of the proceedings.
Accordingly, I am satisfied that it is appropriate to order that the plaintiffs' costs for senior counsel and Mr Croft be taxed without the limits imposed by the maximum allowable hourly and daily rates in the scale.

The writ and the statement of claim - items 1(a) and 1(c) of the 2018 determination

The maximum amount allowable under the determination for preparation of a writ of summons is $742 for 1.5 hours at a 'Senior Practitioner' rate of $495 per hour. The amount allowable for the statement of claim is $4,950 for 10 hours at a 'Senior Practitioner' rate of $495 per hour.
Mr Croft deposed that the commencement of the proceedings was complicated by both the urgency of the matter and confidentiality issues. He said that the confidential nature of the contract the subject of the proceedings meant that the proceedings had to be commenced in such a manner so as to comply with the plaintiffs' confidentiality obligations and preserve the confidentiality of sensitive information for the benefit of all parties. Mr Croft also deposed that senior and junior counsel were closely involved in the preparation of both the writ and the statement of claim.[191]
[191] Croft Affidavit [15] ‑ [17].
When the matter first came before me at a directions hearing on 3 June 2020, I heard from the parties as to the urgency, and was satisfied that the matter was urgent. As a result, very tight programming orders were made and the trial took place within two months of the proceedings being commenced. I also accepted that there were significant confidentiality issues. Both of these factors would have significantly hampered the ability to efficiently produce the writ and the statement of claim.
The assessment I am required to make is not whether the amounts the plaintiffs actually incurred in relation to these items was reasonable. Rather, I must assess whether there is a fairly arguable case that the plaintiffs' bill for those items would properly tax at an amount that is greater than the total amount allowable under those items.
I am satisfied it was reasonable for greater amounts of time to be spent than the time allowed under items 1(a) and 1(c). I am so satisfied because of the importance and complexity of the proceedings. I would therefore lift the limits in relation to the time and total amount for these two items.
The plaintiffs also seek that the limit for the experience of fee earner be lifted.[192] Presumably, this is to prevent any question arising as to whether the scale operates so as to limit the recovery of costs for these items to work done only by a 'Senior Practitioner'. This would seem to be an unlikely construction, but it is unnecessary to consider this. This is because, if it does operate in that way, I would lift such a restriction. Given the importance and complexity of the matter, it was entirely reasonable to involve both senior and junior counsel in the preparation of the writ and the statement of claim.
[192] Plaintiffs' written submissions [24].
Accordingly, I am satisfied that it is appropriate to order that the plaintiffs' costs be taxed without the limits that apply to these items.

Directions hearing - item 11(d) of the 2018 determination

As noted earlier, at the directions hearing on 3 June 2020, I heard from the parties as to the urgency of the matter. The plaintiffs had sought orders to have the matter heard on an urgent basis and filed written submissions and a supporting affidavit. Both senior and junior counsel appeared, with two instructing solicitors.
Having regard to the urgency, the issues, the materials that were produced and the arguments that were advanced, I am satisfied it was reasonable for both senior and junior counsel to attend the directions hearing with an instructing solicitor. This was justified by the complexity and importance of the matter. However, on the materials available to me, I do not accept that there needed to be more than one instructing solicitor. It is, of course, open to the plaintiffs to seek to persuade the taxing officer that this was reasonably required.
It was also reasonable for the plaintiffs to file the materials to support their application for an urgent hearing. These costs may however be more appropriately claimed as part of the preparation for trial.
I am satisfied that it is appropriate to order that the plaintiffs' costs be taxed without the limits that apply to this item.

Special appointment - item 10(a) of the 2018 determination

For the same reasons, I am satisfied it was reasonable for both senior and junior counsel to attend the special appointment with a single instructing solicitor. I am satisfied that it is appropriate to order that the plaintiffs' costs be taxed without the limits that apply to this item.

Preparation of case and preparation component of fee on brief - items 18, 21(a) and (b) of the 2018 determination and items 19, 22(a) and (b) of the 2020 determination

Having regard to the issues, the materials that were produced and the arguments that were advanced, I am satisfied it was reasonable for significantly greater amounts of time to be spent than the time allowed under these items. Even disregarding the importance of the proceedings, this was justified by the complexity of the proceedings alone.
Accordingly, I am satisfied that it is appropriate to order that the plaintiffs' costs be taxed without the limits that apply to these items.

Senior and junior counsel

Finally, the plaintiffs seek an order that any taxation be performed on the basis that an allowance be made for the costs of senior counsel and junior counsel including for attendance at all pre‑trial hearings and the trial.
I have already indicated that I consider that, given the importance and complexity of the matter, it was entirely reasonable to involve both senior and junior counsel in all aspects of the work undertaken. Similarly, I consider that, given the importance and complexity of the matter, it was entirely reasonable to have both senior and junior counsel attend the pre‑trial hearings and the trial. Nevertheless, to avoid any doubt, I will make this order.

Conclusion

For the reasons I have given, I am satisfied that the limits sought to be removed should be removed. The removal of those limits does not mean that the taxing officer must allow an amount greater than those limits. It remains for the taxing officer to determine what is reasonable.
I will make the orders sought, with an amendment to proposed order 2(b) so as to correct what appears to be a typographical error. I would not order that the costs be taxed without the limits imposed by the 'maximum allowances for … experience of legal practitioners'. Rather, order 2(b) will relevantly be that the costs be taxed without the limits imposed by the maximum allowances for time, number of legal practitioners and total costs or by the classification of the experience of the fee earner.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

SW
Associate to the Honourable Justice Archer

24 SEPTEMBER 2020