QNI Resources Pty Ltd & Anor v North Queensland Pipeline No 1 Pty Ltd & Anor - [2023] HCATrans 69

[2023] HCATrans 069

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Brisbane No B44 of 2022

B e t w e e n -
QNI RESOURCES PTY LTD ABN 14 054 117 921
First Applicant
QNI METALS PTY LTD ABN 56 066 656 175
Second Applicant
and
NORTH QUEENSLAND PIPELINE NO 1 PTY LTD
First Respondent
NORTH QUEENSLAND PIPELINE NO 2 PTY LTD
Second Respondent
Application for special leave to appeal

GORDON J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO CONNECTION

ON FRIDAY, 19 MAY 2023, AT 1.33 PM

____________________

GORDON J: In accordance with the Court’s protocol for remote hearings, I will announce the appearance for the parties.

MR D.F. VILLA, SC appears with MR P.F. SANTUCCI and MR S. HOARE for the applicants. (instructed by Alexander Law)

MR G.D. BEACHAM, KC appears with MS B.J. O’BRIEN for the respondents. (instructed by King & Wood Mallesons)

GORDON J: Yes, Mr Villa.

MR VILLA: Your Honours, there are two special leave issues that arise in this application. The first relates to the question of whether or not Australian law recognises an implied contractual obligation of good faith, and the second relates to the operation of the doctrine of penalties in the context of what might be described as a take or pay contract where the innocent party had various self‑help remedies available to it to protect its interests.

Your Honours, in respect of the first issue, this Court has, on a number of occasions, been presented with opportunities to determine whether or not Australian law recognises an implied contractual obligation of good faith. It would be sufficient for our purposes to contend that an obligation of good faith should be implied at law into that category of contracts that may be described as relational or cooperative commercial contracts. But your Honours will appreciate there is, discussed in the authorities and the academic literature, the possibility that such a duty might be implied into all contracts or at least into all commercial contracts. Your Honours, by relational ‑ ‑ ‑

EDELMAN J: Mr Villa, the specific content of the good faith obligation that you seek the Court to recognise is the failure to exercise the clause 14.9 power to correct the positive imbalance. Is that right?

MR VILLA: In the particular circumstances, yes, your Honour. We would say that that in the specific context of this contract and the facts as they occurred would fall

within the third of the rules that Justice Allsop spoke of in Macquarie International and which your Honour discussed with apparent approval in your Honour’s judgment in Mineralogy v Sino.

Your Honours, what I mean by relational cooperative contracts as the subcategory of contracts in which we say such a good faith obligation should be implied are, of course, contracts of the kind in these proceedings where, over a long period of time, the parties require ongoing cooperation in order to ensure the management…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

AGLC: QNI Resources Pty Ltd & Anor v North Queensland Pipeline No 1 Pty Ltd & Anor [2023] HCATrans 69
Case: [2023] HCATrans 69
Decision Date

CaseChat Overview and Summary

QNI Resources Pty Ltd and QNI Metals Pty Ltd (the applicants) sought special leave to appeal from a decision of the High Court of Australia. The dispute concerned the interpretation and application of a contract for the transportation of gas through a pipeline, specifically relating to obligations concerning gas imbalances and the potential for an implied duty of good faith. The applicants argued that an implied contractual obligation of good faith should be recognised in relational or cooperative commercial contracts, and that this duty was breached by the respondents' failure to exercise a power to correct a positive gas imbalance.

The High Court was required to determine two primary legal issues. The first was whether Australian law recognises an implied contractual obligation of good faith, particularly within relational or cooperative commercial contracts. The second issue concerned the operation of the doctrine of penalties in the context of a "take or pay" contract, where the innocent party possessed self-help remedies to protect its interests. The applicants contended that the imbalance charge imposed by the respondents constituted a penalty because the respondents' legitimate interests were already protected by other contractual provisions.

In refusing special leave, the High Court indicated that the applicants' grounds of appeal did not have sufficient prospects of success. While the specific reasoning is not detailed in the provided transcript, the Court's decision suggests it did not consider the arguments regarding the implied duty of good faith or the penalty doctrine to be arguable. The applicants' submissions on good faith faced challenges regarding its consistency with express contractual terms and the need for factual assessment, while the penalty argument was also met with difficulties in its application to the contractual context and the availability of alternative remedies.

Consequently, the High Court refused the application for special leave to appeal and ordered that the applicants pay the respondents' costs.

Orders