Regional Power Corporation v Pacific Hydro Group Two Pty Ltd (No 2) - [2013] WASC 356

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: REGIONAL POWER CORPORATION -v- PACIFIC HYDRO GROUP TWO PTY LTD [No 2] [2013] WASC 356

CORAM: KENNETH MARTIN J

HEARD: 1 MAY 2013

DELIVERED : 26 SEPTEMBER 2013

FILE NO/S: CIV 1925 of 2012

BETWEEN: REGIONAL POWER CORPORATION
Plaintiff
AND
PACIFIC HYDRO GROUP TWO PTY LTD
First Defendant
ENERGIS AUSTRALIA PTY LTD formerly known as PACIFIC HYDRO GROUP THREE PTY LTD
Second Defendant
NORTH WESTERN ENERGY PTY LTD formerly known as ORD ENERGY PTY LTD
Third Defendant

Catchwords:

Preliminary issues - Contract - Breach - Common law damages - Exclusive code of breach relief - Indirect and consequential loss and damage excluded - Limitation clause - Scope of exclusion clause - Direct loss - Foreseeability of damage - Economic loss

Legislation:

State Energy Commission Act 1979 (WA) (No 111 of 1979)

Result:

Preliminary issues answered

Category: A

Representation:

Counsel:

Plaintiff:     Mr S K Dharmananda SC & Mr L N Firios
First Defendant             :     Mr M Howard SC & Mr W C J Zappia
Second Defendant         :     Mr M Howard SC & Mr W C J Zappia
Third Defendant           :     Mr M Howard SC & Mr W C J Zappia

Solicitors:

Plaintiff:     Ashurst Australia
First Defendant             :     Lavan Legal
Second Defendant         :     Lavan Legal
Third Defendant           :     Lavan Legal

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

Allianz v Waterbrook [2009] NSWCA 224
Alstom v Yokogawa Australia (No 7) [2012] SASC 49
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468
Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 176 ALR 693
Croudace Construction Ltd v Carwoods Concrete Products Ltd [1978] 2 Lloyds Reports 55 (CA)
Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500
Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2013] WASCA 36
Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26; (2008) 19 VR 358
GEC Alsthom Australia Ltd v City of Sunshine (Unreported, FCA, Library No BC9600288, 20 February 1996)
Hadley v Baxendale (1854) 9 Exch 341; (1854) 156 ER 145
Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125
J‑Corp Pty Ltd v Mladenis [2009] WASCA 157
JR Marine Systems Pte Ltd v Wavemaster International Pty ltd (in liq) [2011] WASCA 16
Koufos v C Czarnikow Ltd [1969] 1 AC 350
Matthew Maxwell v Highway Hauliers Pty Ltd [2013] WASCA 115
Perth Airport Pty Ltd v Ridgepoint Corporation [2013] WASC 33
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
Regional Power Corporation v Pacific Hydro Two Pty Ltd [2013] WASC 46
SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138
Valentine Falls Estate Pty Ltd v SMEC Australia Pty Ltd [2010] WASC 319
Wavemaster International Pty Ltd (In liq) v JR Marine Systems Pte Ltd [2009] WASC 203

KENNETH MARTIN J: The plaintiff commenced this action on 21 August 2012. It seeks relief for breach of a contract, made between SECWA and Pacific Hydro Pty Ltd (Pacific Hydro) on 18 October 1994. The contract in question, a 'Power Purchase Agreement', is referred to by the parties as the PPA. I will retain that terminology in these reasons.
Earlier I decided that a trial of four preliminary issues should be determined (see Regional Power Corporation v Pacific Hydro Two Pty Ltd [2013] WASC 46). The matter subsequently proceeded to a one day trial of those issues.

Factual background

I advert to the generally uncontroversial underlying facts as set out in my previous reasons (see Regional Power Corporation v Pacific Hydro Two Pty Ltd [4] ‑ [9], [12]). Additionally, the parties provided a statement of agreed facts for the purposes of a determination of the preliminary issues. Hence, the background facts I briefly outline below, are not controversial.
By the PPA of 1994, Pacific Hydro agreed to construct, then afterwards supply, power (electricity) from the Ord Hydro Power Station (the Power Station) to SECWA. In 1994, SECWA was under a statutory duty to provide and maintain an 'efficient, coordinated and economical supply of electricity in the form of electricity or gas' (see State Energy Commission Act 1979 (WA) (No 111 of 1979)).
The PPA was thereafter novated to the first, second and third defendants, by a deed of novation entered by Horizon Power, Pacific Hydro and the defendants of 18 October 1994.
By statute, the present plaintiff holds and enjoys all the rights of SECWA. In these reasons generally I refer to the plaintiff as SECWA, although of course Regional Power Corporation is the entity that now sits in its place.
The Power Station was duly constructed by the defendants adjacent to Lake Argyle, near to the township of Kununurra in northern Western Australia. Pursuant to the PPA, the defendants were to sell and supply electricity generated from the operation of the Power Station to two customers, SECWA and Argyle Diamond Mines (ADM). The Power Station, as completed, was operated by two hydro generators, each driven by twin Francis turbines.
On 27 August 2006, the Power Station suffered an outage. This resulted in flooding (the parties refer to this as the Flooding Incident) which in turn led to the Power Station becoming inoperative for a two‑month period.
In due course, the defendants commissioned a report investigating the causes of the Flooding Incident. Details of the report remain confidential. The defendants accept, but only for the purposes of the trial and determination of these preliminary issues, that the information contained in the report is true. (I note, however, for the purposes of any future disputation, the defendants are not taken to admit any facts in the report.)
According to the report, the Flooding Incident transpired (par 14 of the further amended statement of claim dated 27 February 2013 (FASOC)) this way:
(a)there was a loss of load signal at the Power Station (the Load Loss);
(b)the Load Loss caused a trip in one of the Hydro Generators leading to a subsequent trip in the second Hydro Generator;
(c)as a result of the Hydro Generators losing power and going offline, the Power Station was de-energised;
(d)the emergency generator failed to start automatically; and
(e)as a result of the matters referred to in subparagraphs (a) to (d) above, no power supply was available to the pumping system.
The report concluded (pars 15 ‑ 16 of the FASOC; par 17 of agreed statement of facts):
(i)the emergency generator failed to start because the programmable logic controller used to start the emergency generator had been incorrectly wired, such that its batteries were not adequately charged at the time of the Flooding Incident; and
(ii)if the emergency generator's programmable logic controller had been correctly wired, such that it would have been operational on 27 August 2006, the pumping system installed to prevent a flooding of the Power Station would have been functional such that flooding would not have occurred.
The parties further agree that on 27 August 2006 the ADM generators were offline. If the ADM generators had been online 'the power outage would not have occurred as a constant and uninterrupted power supply would have been maintained' (par 18 of agreed statement of facts).
Also agreed is this important fact (par 19 of agreed statement of facts):
Also, in the absence of any power supply from the Power Station, Horizon Power was required to arrange an alternative source of power. By reason of the Flooding Incident, Horizon Power was required to, and did, construct, install, and operate requisite and necessary additional power generation facilities at a power station owned and operated by Horizon Power located in Kununurra. (my emphasis)
As will be seen the requirement under par 19 is a significant factor bearing particularly upon the fourth preliminary issue. The steps concerning arranging an alternative source of power were not implemented as a matter of discretion. Rather, it is accepted SECWA (Horizon, that is Regional Power) was required to arrange alternative power to meet its supply obligations subsequent to the Flooding Incident.
The parties also agree that the plaintiff has incurred economic expenses as a result of the need to generate replacement power in the aftermath of the Flooding Incident (at the Kununurra Power Station). These costs were (par 21 of the FASOC and par 20 of agreed statement of facts):
(a)$1,293,394 (excluding GST) for the delivering, commissioning, and hiring of diesel generators to generate the replacement electricity at Kununurra Power Station;
(b)$113,389 (excluding GST) for the travel, airfares and wages of the operators and employees required for the establishment of the Kununurra Power Station;
(c)$19,318 (excluding GST) for the accommodation and meal costs of the employees who Horizon Power was required to fly to the Kununurra Power Station to operate the power station;
(d)$6,443 (excluding GST) for the hire of cranes to mobilise and demobilise the Kununurra Power Station; and
(e)$2,727,287 (excluding GST) for the diesel fuel to run the extra generators required to produce the requisite electricity from the Kununurra Power Station for the relevant period.
Arithmetically, it can now be seen that $4,020,681(adding (a) and (e)) of the plaintiff's damages claimed outlay amounts (or 96.65%) relate either to a cost of procuring diesel generators for the Kununurra Power Station to generate replacement electricity, or the cost of diesel fuel that was needed to run these extra (hired) generators.

The plaintiff's PPA breach contentions against the defendants

The plaintiff's action complains the defendants breached the PPA by failing to operate the Power Station in compliance with cl 6.1, cl 10.1, or in accord with an implied term of the PPA.
Clause 6.1 and cl 10.1 of the PPA, provide:
6.1 Subject to Force Majeure, the Project Entity shall BOO the Power Station and Transmissions Facilities:
6.1.1in compliance with Good Engineering and Operating Practices;
6.1.2substantially in accordance with the description contained in the document entitled Technical Report on Hydrology and Electrical System Parameters and Performance dated 1 February 1994, which is incorporated into this agreement as Schedule I unless the parties otherwise agree; and
6.1.3to deliver Electricity Requirements in accordance with the terms and conditions of this Agreement, including the Operating Regime.
…
10.1In order to ensure the delivery of the Electricity Requirements to SECWA, the Project Entity shall operate and maintain the Power Station and Transmission Facilities, and SECWA shall operate and maintain SECWA's Electricity Supply System, in accordance with Good Engineering and Operating Practices and the Operating regime and the Project Entity shall use all reasonable endeavours to ensure that ADM operates and maintains its facilities in accordance with the provisions of this Clause 10.1.
(An acronym 'BOO', used in the PPA, refers to building, owning and operating the Power Station.)
The plaintiff further contends the defendants also breached an implied term of the PPA (par 36 the plaintiff's submissions and par 11 of the FASOC):
[T]o take reasonable care by failing:
(a)to operate the Power Station and Transmission Facilities in compliance with Good Engineering and Operating Practices; and
(b)to operate the Power Station and Transmission Facilities in accordance with Schedule I to the PPA.

Defendants' rejection of any breaches of the PPA

The defendants, by their further amended defence (FAD), filed 14 November 2012, reject any liability for the damages as presently claimed by the plaintiff.
Relevantly to these four preliminary issues, the defendants go further to contend the PPA displays a number of express terms which strictly constrain the plaintiff's rights recovery (against them) of PPA breach damages ‑ if such damages arise out of an 'event of default' (as defined by cl 3.1.20 of the PPA).
There is evidently a regime within the PPA setting down a mechanism through which notice may be given to the defendants of any alleged PPA 'event of default' on their part. The defendants contend the plaintiff has not provided requisite notice or written demand, as required under the PPA, where there has been an alleged 'event of default' (pars 10A and 10B of the FAD).
It is argued by the defendants, that had the plaintiff given them a notice of an event(s) of default as is envisaged by the PPA, the plaintiff would then have become contractually limited (according to the PPA's express terms) to only recovering very limited aspects of liquidated damages under cl 19, or to some other closely confined remedies, pursuant to cl 23 of the PPA (pars 19A and 20A of the FAD).
For the purposes of determining these preliminary issues, the defendants ask that I assume, as I do, that the plaintiff did not provide the defendants with notice of any PPA 'event of default' by cl 20 ‑ cl 23 of the PPA (par 7 of the defendants' submissions). I proceed on that basis.

The four preliminary issues

The four preliminary issues to be determined are:
On the proper construction of the PPA:
1.do clauses 19, 20, 21, 22 and 23 provide the only remedies for a breach of clauses 6.1, 10.1 or the implied term pleaded at paragraph 11 of the amended statement of claim, or is the plaintiff entitled to remedies available to it at common law for breaches of clauses 6.1, 10.1 or the implied term or any of them?
2.can the plaintiff recover damages at common law in the absence of an Event of Default (as defined in the PPA) triggering the remedial regime under clauses 19, 20, 21, 22 and 23 of the PPA?
3.can the plaintiff recover damages at common law for breach of the PPA by the defendants where there is no agreement between the plaintiff and the defendants that the breach did not have a material adverse affect on the plaintiff under clause 23.2?
4.if the answer to question 3 above is 'yes', are the heads of loss and damages claimed by the plaintiff at paragraph 21 of the amended statement of claim recoverable against the defendants in light of the exclusion for certain types of loss and damage at clause 26.1 of the PPA?
By the time of the trial of these four issues, they had distilled to two core questions.
Issues one to three were refined to asking and ascertaining whether or not, as a matter of the proper construction of the PPA, its express provisions set down an exclusive code of available breach relief for the plaintiff and so, precluded it from pursuing its present claims for common law damages, grounded upon alleged breaches of PPA cl 6.1, cl 10.1, or of a breach of the argued implied term.
The residual core question is the fourth preliminary issue. It only arises to be addressed in the event of an affirmative answer to issues one to three.
I move to consider the first core arena of contention (the first three preliminary issues).

Do the express terms and remedies as conferred by the PPA establish an exclusive code of PPA breach relief?

The defendants contend the PPA, as a matter of its proper construction, lays down an exclusive contractual code of relief applicable for any breaches of the PPA. As a result, it is argued the plaintiff does not hold further rights to pursue common law damages, over the presently pleaded breaches of the PPA (if established). All PPA breach relief, it is said, can only be accessed from within the four corners of the PPA itself (pars 11 ‑ 12 of the defendants' written submissions).
The plaintiff's opposing stance to the PPA's proper construction regarding available breach relief, is that the breach remedies afforded by the PPA (such as breach of cl 6.1, cl 10.1, or of the implied term) should be assessed as only being by way of contractual supplementation to the right to also pursue common law breach damages (see par 39 of the plaintiff's written submissions).
On my assessment, a party's PPA entitlement to claim liquidated damages, or pursue other relief for breach of the PPA, via the express provisions of the PPA are indeed comprehensive. Relief under the PPA is contingent upon showing the existence of an event of default (by the provision of express notice of a grievance to the defendants concerning alleged PPA defaults). PPA cl 18 to cl 23 address entitlements, with cl 19 providing redress by liquidated damages, following a performance default under cl 18 being established. Clause 23.3 (relevantly) reads:
[T]he non-defaulting party shall be entitled to damages or specific performance or any other remedy available to that party (other than termination) either under the Agreement, under any written law or at law or in equity, from the defaulting party.
The PPA provisions, assessed objectively, present as erecting a comprehensive internal breach relief regime. Nevertheless, the prevailing case law lays down a firm presumption that clear words are required to remove or curtail a party's common law rights to seek damages for a breach of contract.
In Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 176 ALR 693 the High Court of Australia, citing Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 observed that an express contractual provision 'may be regarded as designed to augment rather than to restrict or remove the rights at common law which a party otherwise would have had on breach' (700) (Gleeson CJ, Gaudron & Gummow JJ).
In J‑Corp Pty Ltd v Mladenis [2009] WASCA 157 [44], Newnes JA applied Concut Pty Ltd v Worrell. His Honour observed it was 'common ground that clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of contract arising by operation of law'.
That presumption was recently applied in Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2013] WASCA 36 [215] (Murphy JA). I also applied that presumption in Wavemaster International Pty Ltd (In liq) v JR Marine Systems Pte Ltd [2009] WASC 203 at [172], which was not challenged on the (unsuccessful) appeal, see JR Marine Systems Pte Ltd v Wavemaster International Pty ltd (In liq) [2011] WASCA 16.
The presumption is that a contracting party's breach remedies, including its rights to seek common law damages for breach of contract, can only be excluded by clear words. Here, the PPA's words are just not clear enough to achieve the defendant's desired end result.
The PPA was an agreement between commercially sophisticated parties. They were obviously assisted by legal representation towards perfecting the long‑term (1994) PPA contractual arrangements (see par 4 of statement of agreed facts). It would have been a straightforward task for sophisticated, well‑resourced parties to state unequivocally, by one clear short sentence in the PPA, that the parties' breach remedies under the agreement were the parties' only recourse in the event of a breach of the PPA. They did not. In my view, that omission carries the day.
In the absence of clear exclusionary words, the exclusive code outcome under the PPA, as contended for by the defendants under preliminary issues one to three simply cannot be achieved. The presumption is, in my view, determinative.
However, beyond that presumption, descending into a deeper scrutiny of the content of the PPA itself, there manifests some internal contra‑indications within the PPA. These are unhelpful to the defendants' overall exclusive code construction stance. Objectively assessed, these features go to support the conclusion that these contracting parties mutually accepted that they retained rights to pursue common law breach damages subsisting above the relief regime erected by the PPA. For instance, I mention cl 28.5 of the PPA, which allows each party to commence court proceedings or, if applicable, implement the remedies in Clause 23' (my emphasis). The words 'if applicable', when directed at cl 23 of the PPA, are better reconciled with a co‑existent regime of subsisting recourse to common law curial relief for breaches of the PPA.

Clause 20.3 of the PPA points the same way. That clause is seen to use permissive, rather than mandatory language, by its chosen terminology, 'wishes to exercise its rights under the PPA'. PPA cl 23.2 also manifests a permissive use of the word 'may', concerning events which may follow.
Permissive clauses of this character do not reconcile harmoniously with the defendants' exclusive PPA code of breach relief stance.
In the end, therefore, I conclude the PPA does not set down an exclusive code of breach relief for its participants. Rather, the PPA's contractually framed remedies and outcomes function to augment the PPA parties' subsisting common law remedies for breach (principally common law damages).
Preliminary issues one to three as identified above must, therefore, be answered in the negative.
In the circumstances, the fourth preliminary issue remains live.

Fourth preliminary issue: clause 26.1 PPA

A more difficult construction issue is posed under the fourth preliminary issue concerning the interpretation of PPA, cl 26.1. Issue 4 proceeds from the premise, now met, concerning potential sustainability of an action by the plaintiff seeking common law damages for alleged breaches of the PPA's express or implied terms. I repeat the fourth issue:
[A]re the heads of loss and damages claimed by the plaintiff at paragraph 21 of the amended statement of claim recoverable against the defendants in light of the exclusion for certain types of loss and damage at clause 26.1 of the PPA?
The actual heads of economic loss and damage claimed under par 21 of the plaintiff's FASOC were set out earlier: see [15]. They catalogue the plaintiff's outlays incurred in the generating of replacement electricity, by running hired diesel generators for about two months (at the Kununurra Power Station), all in the aftermath of the Flooding Incident that caused the Power Station at Lake Argyle to become dysfunctional over this period.
The defendants invoke cl 26.1 of the PPA as their ultimate shield, to resist this genre of economic damage as is pursued by the plaintiff.
PPA cl 26.1 reads:
Neither the Project Entity nor SECWA shall be liable to the other party in contract, tort, warranty, strict liability, or any other legal theory for any indirect, consequential, incidental, punitive or exemplary damages or loss of profits.
The defendants particularly invoke and seek protection from the force of the words 'indirect' and 'consequential' in cl 26.1 to ground their conceptual resistance to the plaintiff's claimed economic damages.

Rival construction arguments

The defendants contend the plaintiff's par 21 economic loss damages as pursued, must properly be characterised as 'indirect' or 'consequential' damages (or loss). Hence, they contend such losses are not open to be pursued, by reason of the express limitations carried under cl 26.1 of the PPA (par 67 of the defendants' submissions).
Against that, the plaintiff argues that at the time the parties consummated the PPA (1994), the terms 'consequential loss' or 'consequential damage' carried for lawyers a well understood meaning – a meaning not engaged by the character of these claimed economic outlays.
It is said, that 1994 legal meaning arises from a line of English case authority that drew upon the parameters of the second limb of Hadley v Baxendale (1854) 9 Exch 341; (1854) 156 ER 145 to govern what could or could not constitute 'consequential' damage (or loss), for the purposes of a contractual limitation or exclusion clause.
The plaintiff argues that even though the law may now have altered since 1994 on this issue - particularly for Australia - the current law is not the pertinent temporal consideration. What was, it is put by the plaintiff, the well‑understood and well‑accepted 1994 meaning (amongst lawyers and legal draftsmen involved with the PPA at the time) for the term 'consequential damage', when used in a contractual exclusion or limitation clause in the PPA of 1994, should apply.
It was explained for the plaintiff that at the time of entering the PPA (1994) an exclusion or limitation clause constraining recovery of consequential loss or damages was then viewed by common law courts as only applicable to the class of contractual losses which would be recoverable under the second limb of Hadley v Baxendale. Correlatively, if the damages sought for breach fell instead under the first Hadley v Baxendale limb (as damages arising in the ordinary course of things), then such damages were not to be assessed as caught by an exclusion or limitation clause that denied 'consequential damage'.
The limbs of Hadley v Baxendale as explained in the oft cited words of Alderson B, were these:
Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it (354).
I divert briefly to render two side observations. The first is as to what might be thought at any point in time to be damage arising 'naturally'. Arguably, if Hadley v Baxendale were to be decided in 2013 instead of in 1854, the plaintiff may well have succeeded in showing its claim for loss of profits as being within the first limb of the test, that is, damages arising in the ordinary course. In that case, the plaintiff suffered loss of profit as a result of the defendant carrier's delay in the delivery of a repaired mill shaft component. Arguably today, when contracting that defendant ought to have foreseen, in the ordinary course of things, that a failure to deliver the mill shaft on time would result in the plaintiff being unable to run its mill, produce flour and so suffer an economic loss of profit. Times change. What was not a natural loss in 1854, may well be today.
Second, I would observe that there can be difficulties seeking to draw a bright line distinction as between the character of contractual breach damages allowed under the first limb of Hadley v Baxendale (in the ordinary course of things), in contrast to damages via the second limb (foreseeable by reason of actual knowledge reposed in the breach party about a plaintiff's special circumstances). The border line between the two limbs may not always present as crystal clear in every case: see Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 [142], [149] (Mason CJ & Wilson J).
The object of the second limb of Hadley v Baxendale was explained by Mason CJ and Wilson J this way in Hungerfords v Walker [142]:
[T]o include loss arising from special circumstances of which the defendant had actual knowledge when that loss does not fall within the first limb because it does not arise from 'the ordinary course of things'.
In Koufos v C Czarnikow Ltd [1969] 1 AC 350, 205 Lord Reid said of the two limbs:
The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.
See also the recent reasons of McLure P in Matthew Maxwell v Highway Hauliers Pty Ltd [2013] WASCA 115 [89].
Returning to the fourth issue, the plaintiff contends that when the parties entered the PPA during 1994, a reasonable person in the defendants' position could have foreseen the plaintiff's subsequent monetary outlays of 2006 would be likely to arise upon a PPA breach ‑ in failing to supply power to the plaintiff at promised levels (see the plaintiff's claimed losses at par 21 of the FASOC at [15] above). The plaintiff's 2006 outlays arose from an incident that inhibited the PPA's Power Station generating the promised levels of hydro‑electricity for the plaintiff by reason a breach of the PPA by the defendants.
Supporting that position, the plaintiff points to cl 16.3 of the PPA. The clause affords the plaintiff a right to generate its own electricity, to cover any shortfall in supply by the Power Station. The plaintiff contends that this provision, assessed objectively, demonstrates a person in the position of the defendants in 1994, would surely have contemplated, in the ordinary course of things, the future potential need for the plaintiff to itself implement backup electricity generation measures (and thereby incur expense) to obtain replacement energy if the promised PPA levels of energy were not generated from the Power Station under the PPA and not supplied as promised to the plaintiff in the first instance as being necessary, at the time of entering the PPA.
Hence, the plaintiff argues its claimed economic outlays under par 21, properly arise in the ordinary course of this particular PPA relationship, thereby engaging the first limb of Hadley v Baxendale.
As its damages do fall under the first, not the second limb of Hadley v Baxendale, the plaintiff next says it fulfils the criteria under the formerly well‑understood case law which, at 1994, had assessed consequential loss or damages (for a purpose of assessing the scope of a contractual exclusion or limitation clause) as being confined to losses falling under second limb of Hadley v Baxendale.
It is finally argued by the plaintiff to be more appropriate to apply the case law as was said to have been widely understood by Australian lawyers at 1994, when construing cl 26.1.
Both parties accept that nowadays for Australia, when assessing the scope of a contractual limitation or exclusion clause, such as cl 26.1 of the PPA – that invoking what is a remoteness of contractual damage dichotomy taken from Hadley v Baxendale is no longer the correct constructional approach.
Both parties would accept that the proper approach nowadays towards interpreting an exclusion or limitation clause was settled by the High Court in Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500, 510. By that seminal decision the High Court established for Australia, that the meaning of an exclusion or limitation clause was to be:
determined by construing the clause according to its natural and ordinary meaning, read in light of the contract as a whole.
However, the plaintiffs say, as an ambit submission, that it is the 1994 state of the law as to limitation clauses concerning consequential loss or damage that should apply here for the PPA, even though the law may have changed since. I cannot accept that first submission. Darlington Futures Ltd v Delco Australia Pty Ltd clarified the law for Australia roughly eight years before the parties entered the PPA. But the plaintiff makes narrower submissions as to construction favouring its position, in any event.
Assessing cl 26.1 from the Darlington Futures Ltd v Delco Australia Pty Ltd perspective, the defendants contend that, irrespective of when the PPA was entered, the natural and ordinary meaning of its chosen words, 'indirect' and 'consequential' must be applied and that this approach ultimately favours the exclusion of the plaintiff's claimed economic damage.
The defendants argue the word 'consequential' (as regards loss), means being of the nature of a consequence or sequel; or of the nature of a consequence, and hence not direct or immediate. 'Indirect', means not directly aimed at or attained; or not immediately resulting from an action or cause (pars 70 ‑ 71 of the defendants' submissions). The ordinary meanings for these chosen words are said to be determinative, resulting in the shield of cl 26.1 of the PPA then being engaged for the benefit of the defendants, negating the plaintiff's presently claimed losses.
Mr Howard SC, for the defendants, referred to Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26; (2008) 19 VR 358, 386 ‑ 388. In this case, Nettle JA evaluated the former line of English case authority which had classified contractual exclusion or limitation clauses by reference to the remoteness of damage dichotomy established by the first and second limbs of Hadley v Baxendale. Acknowledging the force of Darlington Futures Ltd v Delco Australia Pty Ltd for Australia in this area, Nettle JA then observed:
[I]n my view, ordinary reasonable business persons would naturally conceive of 'consequential loss' in a contract as everything beyond the normal measure of damages (389). (my emphasis)
(See also, subsequently following that approach, Allianz v Waterbrook [2009] NSWCA 224 [126] ‑ [127] and Belby J in the South Australian Supreme Court in Alstom v Yokogawa Australia (No 7) [2012] SASC 49 [289], but compare Valentine Falls Estate Pty Ltd v SMEC Australia Pty Ltd [2010] WASC 319, affirmed in SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138).
Invoking Environmental Systems and a possible new classification touchstone of the 'normal measure of damages', Mr Howard SC for the defendants submitted ordinary reasonable parties in the position of parties to the PPA, would surely have viewed the plaintiff's monetary outlays incurred in 2006 in obtaining replacement electricity (by hired generators fuelled by diesel to run at the Kununurra Power Station) as falling outside a range of any 'normal measure of damages'. Hence, the plaintiff's claimed economic damages are caught by and barred by operation of cl 26.1 of the PPA. The amounts claimed are, it is argued by the defendants, properly characterised being either 'indirect' damages or loss, or 'consequential' damages or loss.
In effect then, the defendants contend that the normal, direct and immediate consequence of the defendants' PPA supply breach is merely the plaintiff does not have the levels of electricity supplied to it from the Power Station that the plaintiff was otherwise to take and pay for under the PPA's supply arrangements. The supply breach result may leave the plaintiff in a position of being unable to on‑sell electricity. It may then, as a result, lose the profit in these lost sales. Further, the defendants say the plaintiff may not be in a position to meet the local demands of its retail customers in the Kimberley region as a result of the defendants' PPA supply breach (par 75 of the defendants' submissions). Again the defendants argue that direct breach consequence is only a loss of profit for the plaintiff, arising from any PPA supply breaches of this kind. [I note, of course, that losses of profit under the PPA are of a genre loss or damage expressly addressed and excluded under PPA cl 26.1, in any event.]
The defendants say, in the end, the economic outlays of the plaintiff (towards hiring alternate generators or purchasing the diesel fuel needed to run them) to generate replacement electricity, must correctly be characterised as an 'indirect' or 'consequential' loss or damage. Hence, the result is that such economic losses are expressly excluded under cl 26.1.

Some contextual observations upon cl 26.1, operating within the PPA as a whole

On its express terms, the PPA is clearly a long term commercial relationship. The PPA's performance regime envisaged the defendants initially financing, then constructing a hydro‑electric power station at Lake Argyle, on the basis that once built, it would operate and supply energy to the plaintiff from the Power Station over a long period. That 'BOO' project was to be implemented in phases. The first phase dealt with construction of the power station. The second phase was the operation of the Power Station and correlative supply of its electricity to the plaintiff for eventual use in the Kimberley region of Western Australia.
It is trite law that a commercial instrument should be given a commercial interpretation. When interpreting a commercial instrument, a court should assess and construe the agreement as a whole. A court will attempt to ascribe a functional meaning to each provision if it can (see Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J); Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355, 382 [71] (McHugh, Gummow, Kirby & Hayne JJ); and my reasons in Perth Airport Pty Ltd v Ridgepoint Corporation [2013] WASC 33 [133]). These breach constructional principles are hardly controversial.
The construction of cl 26.1 of the PPA must commence with the text of the clause itself. The court then moves to assess the meaning for the clause within the context of the PPA as a whole.
For convenience, I again repeat cl 26.1, which provides:
Neither the project entity nor SECWA shall be liable to the other in contract, tort, warranty, strict liability or any other legal theory or any indirect, consequential, incidental, punitive or exemplary damages or loss of profits.
I render these initial preliminary observations concerning cl 26.1 of the PPA:
1.Clause 26.1 is to be assessed as a limitation clause, rather than a clause of complete exclusion. Direct losses for breach of the PPA are obviously not excluded by its terms. I arrive at that observation without any regard to the clause's heading 'Limitation of Liability', as required by cl 3.2.4 of the PPA. (Clause 3.2.4 provides 'headings shall not affect the construction or interpretation of [the PPA]'.)
2.It is clear the limitation against liability as contained in cl 26.1, has been assembled on a mutual basis, rather than to unilaterally favour a particular PPA contracting party over the other. Accordingly, there is potential on a case by case basis for limitation outcomes benefiting either side, depending on the presenting circumstances of an asserted PPA breach scenario.
3.Clause 26.1 mentions as being excluded not only 'consequential', but as well, 'indirect' damages or loss. The two key words of limitation are separated by a comma. 'Indirect' is mentioned before 'consequential'. On one view, 'indirect' and 'consequential' could be read as indicating only indirect or consequential damages, as cl 26.1 ends the sentence by the phrase 'loss of profits'. 'Loss of profits' looks to be a self‑contained term ‑ thereby suggesting earlier language in cl 26.1 refers to the noun, 'damages'. However, in all the circumstances, I would prefer to attribute that outcome to bad grammar and not the parties' objectively assessed intentions. I assess the words 'indirect' and 'consequential' in cl 25.1 at their widest ambit, so to encompass indirect or consequential damages, or indirect or consequential loss (if there be a relevant distinction).
4.There is an apparent, discernible breadth displayed as to the intended scope of this clause, by reason of its express recognition and embrace (by exclusion) not only of the notion of 'strict' liability, but also by an additional exclusion under the clauses dragnet reference to liability by 'any other legal theory'.
5.I detect the same breadth of intended ambit arising from the clauses use of the word 'any', seen to preface what follows to the end of the sentence within cl 26.1.
As it is important to conduct any interpretation exercise towards cl 26.1 in the context of its place within the PPA instrument as a whole, I now turn back briefly to that setting.
As earlier observed, the PPA contains what presents as a rather elaborate liquidated damages regime. Clause 19.2 stipulates for various potential algebraic damages outcomes, for circumstances where the project entity fails to supply what is nominated as 'the Minimum Provided Energy Percentage'. Should that happen, the project entity is to pay SECWA (and hence now, its statutory successor, the plaintiff) 'liquidated damages for any replacement energy related to the shortfall' (cl 19.2).

As seen earlier, PPA cl 23 deals extensively with parties' potential remedies.
Within PPA cl 25, dealing with aspects of insurance risk the project entity is required to insure against, the PPA reads (cl 25.4):
[L]egal liability for bodily injury and/or property damage and/or economic loss to third parties arising during the construction and/or operation of the Power Station and Transmission Facilities. (my emphasis)
By cl 25.5 SECWA (hence, the plaintiff) is to be endorsed as an additional insured upon an insurance policy entered into by the project entity and extending to the operation of the Power Station and Transmission Facilities. As a result, SECWA is to be indemnified against the risk of legal liability, upon the same risks as the defendants - including 'economic loss to third parties', during not only construction, but also, the period of 'operation' of the Power Station.
I assess these provisions as equivocal in the overall task of construction.

Alternative approaches to construction

In Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [38], [140]. At [140] Murphy JA said:
[I]n my view the nature and scope of cl 22.7(c) is to be determined by reference to its proper construction rather than by the application of the suggested general rule. The proper approach to construction is set out in Darlington v Delco.
I follow the same construction approach, assessing it as distracting and unhelpful to begin an assessment as to the meaning of the terminology of PPA cl 26.1, encumbered by some fettering predisposition towards reading words of its text ‑ namely 'consequential' (or 'indirect') loss or damages - as only embracing a head of loss that falls under the second limb of the rule in Hadley v Baxendale. Such a constructional fetter is conceptually inconsistent with the approach that commences with the words of the text itself, understood in the context of the written instrument and setting of the construed provision within the instrument.
Analysis of words like those seen in PPA cl 26.1 using a predisposition towards reading references to 'consequential' (loss or damage) as damages allowed under Hadley v Baxendale's second limb, would apply the line of English authority discussed by Nettle JA in Environmental Systems [89]. That construction approach, on that line of authority, has been referred to as the Croudace view (see Croudace Construction Ltd v Carwoods Concrete Products Ltd [1978] 2 Lloyds Reports 55 (CA)). (See also footnote 62 from [89] of Environmental Systems.) As stated above, the Croudace view violates the approach established by Darlington Futures Ltd v Delco Australia Pty Ltd.
In Environmental Systems Nettle JA rejected the Croudace view in Victoria. However, in lieu of that rejected approach, it is possible to read his Honour's observations at [93] as advocating a generically applicable replacement construction predisposition towards an interpretation of 'consequential loss' in an exclusion or limitation clause. I repeat the statement at [93]:
In my view, ordinary reasonable businesspersons would naturally conceive of 'consequential loss' in contract as everything beyond the normal measure of damages, such as profits lost or expenses incurred through breach. (my emphasis)
Given the earlier acknowledgement of the applicability of Darlington Futures Ltd v Delco Australia Pty Ltd, I would respectfully doubt that any generally applicable replacement predisposition was intended ‑ going beyond the natural and ordinary meaning of the relevant presenting text, assessed in context. Moreover, the observations at [93] do not explicitly identify what is a 'normal measure of damages'. Nor would they explain why, as the sentence at the end of [93] seems to suggest, 'profits lost or expenses incurred through breach' must invariably fall outside the scope of a 'normal measure of damages'.
In a 2009 article 'Exclusion of Liability for Consequential Loss' (2009) 25 Journal of Contract Law 118, Professor J W Carter assessed what he termed the Croudace view (120). He then measured it against the Environmental Systems reasons at [93]. Professor Carter termed the par [93] Environmental Systems approach, as the McGregor view (121 ‑ 123), in reflecting a position taken in McGregor H, McGregor on Damages (17th ed, 2003).
Professor Carter observed (121) towards Environmental Systems that of four heads of loss claimed, only the first head of loss had been allowed. Presumably, that head of loss fulfilled the par [93] description of a 'normal measure of damages'. The first head in Environmental Systems comprised 'the cost of purchasing, installing and commissioning a Regenerative Thermal Oxidiser, attempting to make the Regenerative Thermal Oxidiser functional and repairing the existing afterburner'. As to this, Professor Carter observed (133):
Although it seems clearly wrong to treat the scope of the expression 'consequential loss' as determined by the rule of remoteness (the Croudace view) there is no a priori reason for thinking that the expression is concerned with measure of damages (the McGregor view). From this perspective, both views are artificial. Each relies on a conceptual approach under which the expression 'consequential loss' is associated with a particular legal effect. Both are wrong because they approach the expression 'consequential loss' from particular legal perspectives rather than a commercial perspective which will vary from case to case. Neither view has been adopted by the highest tribunals. (my emphasis in bold)
The observations by Professor Carter in that article concerning the unhelpfulness of a rigid application of the Croudace view, or of the McGregor view, in the construction of bespoken exclusion or limitation clauses found in contracts, on my assessment, are compelling.
To reject the rigid construction approach towards the term 'consequential loss' predicated upon a conceptual inappropriateness of invoking the Hadley v Baxendale dichotomy as to remoteness of loss, only then to replace that approach by a rigid touchstone of the 'normal measure of damages' and which always automatically eliminates profits lost and expenses incurred, would pose equivalent conceptual difficulties. Accordingly, I doubt whether the [93] observations in Environmental Systems were intended to carry any general applicability towards establishing a rigid new construction principle for limitation clauses going much beyond the presenting circumstances of that case.

Analysis of cl 26.1 PPA

The natural and ordinary meaning of the words of cl 26.1, begins with these words themselves, assessed in their place within the context of the PPA as a whole. That, on my assessment, is the correct approach to a limitation or exclusion clause required by Darlington Futures Ltd v Delco Australia Pty Ltd, as recently applied by the Western Australia Court of Appeal in Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [38], [42] (McLure P), [138], [140] (Murphy JA).
Apart from matters I earlier mentioned at [81], there are some further unique features manifesting within cl 26.1. In the first place, liability for a 'loss of profits' is explicitly excluded. What other exclusionary work, therefore, remains live to be done under this clause?
Secondly, it is not merely a case of cl 26.1 invoking a sole excluding term, 'consequential'. The word 'consequential' is preceded by use of the word 'indirect', separated by a comma. So, PPA cl 26.1 not only limits liability for indirect losses, but also for consequential losses. Such unique terminology of itself would seem to call for a bespoken assessment, rather than any inflexible approach to construction which starts from pre‑designated outcomes.
Thirdly, within the PPA instrument as a whole there are a number of clauses dealing with the long‑term relationship character of the PPA's duration (see PPA cl 5.1, referring to the agreement determining on 1 July 2021 with capacity to extend that period) and the correlative long‑term supply obligations to SECWA for electricity in that period, on a take and pay basis.
A long contractual performance period envisaged not only the initial construction of a new hydro‑electricity power station at Lake Argyle (no doubt at considerable expense), but thereafter, the supply and purchase of the energy generated by the newly established power station to SECWA (and its statutory successors) over a long period. This is achieved by the take and pay relationship (cl 16.1.1 of the PPA). The long term electricity supply relationship is grounded upon stated assumptions as to future reliable operation of the new Power Station (cl 3.1.58 defines the term 'Reliable Operation' as used in cl 16). Plainly there is significance in what is envisaged (objectively) as the reliable ongoing future supply of what is an essential commodity (energy) supplied to SECWA. It is also clear enough from the PPA that SECWA is being supplied, so it in turn may then meet the needs of local energy consumers for the essential commodity in the Kimberley region of Western Australia.
Fourth, by cl 16.3 the PPA parties clearly (objectively) recognise that SECWA 'may need to generate its own electricity to make up [a] shortfall or obtain the shortfall from any other source'. In other words, any departure from the envisaged future supply electricity status quo to SECWA is recognised as giving rise to SECWA necessarily taking steps to obtain that commodity by other means.
Fifth, PPA cl 16.4 renders it plain that the PPA's generated electricity is being acquired in circumstances where SECWA may have to maintain a 'reliable supply of electricity to its customers during the period that Reliable Operation is lost'. None of this is surprising, given the nature of what is being supplied - an essential commodity, loss of which will usually carry some problematic outcomes for those deprived of it, manifesting at many levels of any community, let alone in a remote community.
Sixth, the PPA take and pay arrangements for the electricity to be generated by the hydro‑electric power station and then supplied to SECWA, were conceived in a PPA environment that acknowledges the public character of SECWA's wider statutory responsibilities as a supplier of energy to people of the Kimberley region of Western Australia. SECWA is thus recognised in the PPA to be in a more elevated, but also more vulnerable, position than a mere commodity trader, who simply buys a commodity to on‑trade at a profit. SECWA's public obligations run deeper than just returning profits. So does any failure by it to meet SECWA's supply responsibilities to a community dependent on SECWA for energy needs.
Profits lost after a supply breach towards the hypothetical electricity commodity trader wrongly not supplied with its promised level of the commodity are one thing. The hypothetical commodity trader may not then be in a position to on‑trade the commodity at a profit. But the PPA scenario of breach by failure to supply SECWA manifests as a more complex breach situation. SECWA is demonstrably known under the PPA to carry statutory obligations where it is 'required' (as is accepted under par 19 of the agreed statement of facts) to supply this essential commodity to its customers.
Here, the sophisticated commercial PPA entities, assessed objectively, surely can be taken to have likely appreciated that if the defendants' hydro‑electric power station failed to operate as promised, thereby not generating a supply of electricity to SECWA sufficient to enable it to meet its own supply requirements to Kimberley customers, that fall‑back or replacement steps by SECWA to secure some level of replacement energy for its customers, would follow. So much was, in effect, agreed between the parties (see par 19 of the agreed statement of facts as quoted at [13]). There was a well understood requirement by the parties to the PPA for SECWA to continue to supply its Kimberley customers with electricity.
Assessing the PPA objectively, it is inconceivable, in my view, that its parties did not appreciate all these future potentialities in 1994. Failure by the defendants to supply and deliver the promised levels of energy to SECWA is not simply a case of SECWA suffering some bare potential loss of profit, by not receiving the promised electricity and thereby not being able to on‑sell at profit to customers. (As previously mentioned, in any event, loss of profit is caught and excluded cl 26.1.) The failure by the defendants' to supply SECWA with anticipated levels of electricity rendered SECWA in a position of being unable to meet wider public energy supply obligations to Kimberley consumers. SECWA's well understood, ongoing public responsibility to supply energy to consumers cannot simply be dismissed as being an indirect outcome of a PPA non‑supply breach.
SECWA is not to be assessed under the PPA as a party akin to a commodity trader in electricity. On my assessment, SECWA suffered direct loss by its exposures to well appreciated replacement (energy) requirement obligations, faced in the circumstances of the defendants' supply failure breach. SECWA then had to implement, at its cost, other measures towards the generating of replacement energy for customers in the Kimberley region.
Each case and each contract obviously needs to be evaluated by reference to its own unique presenting circumstances. However, I would, with respect, mention the assistance I have been afforded from the viewing approach of Ryan J in GEC Alsthom Australia Ltd v City of Sunshine (Unreported, FCA, Library No BC9600288, 20 February 1996) 53 ‑ 55. In evaluating a not altogether dissimilar scenario, Ryan J observed:
It has been submitted on behalf of GEC that the clause evinces an intention that direct loss should cover the whole loss which would flow directly from a breach of the obligations imposed. In reply, Sunshine has submitted that direct losses are limited to items of expense to the extent that they exceed actual income. No element of profit is recoverable, so it is contended, nor can account be taken of indirect losses being amounts not received from sales of electricity which would have been made had the gas been supplied.
I have concluded that I should not give the phrase 'direct loss' the narrow construction suggested by Sunshine. Rather, I regard the indemnity clause in its context as sufficient to provide an indemnity to GEC in respect of damage directly flowing from the breach of obligation and as wide enough to include lost revenue. I shall briefly state my reasons for coming to the conclusion which I have just indicated.
…
… I do not regard loss of revenue as constituting consequential loss. True it is that Sunshine covenanted only to supply gas and the generation of electricity by GEC and the derivation of revenue therefrom is a consequence of that sale. However, the term 'consequential loss' connotes a loss at a step removed from the transaction and its immediate effects. The relationship embodied in the transaction documents between GEC and BNP and between GEC and Sunshine and the importance of revenue to defray the capital cost for the benefit of Sunshine makes the generation of revenue vital to the Gas Supply Agreement.
I have not found assistance in the authorities which analyse consequential loss in the context of exclusion clauses in policies of insurance. The transaction documents embody a complicated financing structure in which the relationship between GEC and Sunshine is interdependent and there can be imputed to each party a high degree of knowledge of the factors upon which the amount of revenue will depend. In that context, I regard consequential loss as confined to that loss which GEC might incur as a result of using or being unable to use its plant or capital investment for a purpose extraneous to that directly contemplated by the transaction documents. (my emphasis)
For the present case, a provision of energy to Kimberley region customers was a vital component of the PPA. A failure to supply energy to Kimberley customers could generate even wider adverse repercussions against SECWA from its local customers. A local business that was energy deprived or interrupted in the Kimberley may itself suffer unique economic loss to a business, or some general inconvenience associated with the anticipated supply of energy from SECWA being interrupted or not being available as expected. More removed consequential customer type losses, arising out of the possible wider customer disappointments would deliver as against any claims made against SECWA and the defendants for interruption ‑ a more plausible scope for the exclusionary work and viable operation in that context of cl 26.1's words, 'indirect' or 'consequential' (loss or damages).
But the required need, well appreciated and understood by the defendants, for SECWA to outlay its own funds to secure back‑up replacement electricity for customers in the Kimberley ‑ otherwise deprived of the essential commodity - is manifest from the express terms of the PPA. SECWA's monetary outlays in 2006 to that end must then, in my view, be assessed as fully direct damages or losses.
For present circumstances, SECWA's replacement energy expenditures for hired diesel generators, diesel fuel, labour to run the generators and associated expenses, on my assessment, are properly viewed as direct losses. They are not an indirect loss (or damages) when assessed in this bespoken context of a long term supply relationship under PPA's supply arrangements to an entity carrying its own local community electricity supply obligations.
Equally, I do not assess the 2006 expenditures of SECWA as being 'consequential'. At its widest, the word 'consequential' might always be read as being somehow responsive to something, and thereby encapsulating almost every economic outlay, following upon a breach (see again, Ryan J in GEC Authority Australia Ltd v City of Sunshine (55) cited above). But that is not a sensible meaning to attribute to the word 'consequential' when used within cl 26.1, in overall context. Having assessed the economic outlays as direct, that leads to a correlative conclusion that the expenditure amounts are also not to be viewed as being consequential.
In the end, the character of the economic losses or damages claimed here by the plaintiff are properly assessed as direct in nature. There is a relationship within cl 26.1 as between the deployed words 'indirect' and 'consequential'. The chosen terminology in its overall consequence needs to be assessed rationally, in a context of limitation and in the PPA, as a whole. As I assess the relevant claimed loss of the plaintiff as direct, equally I do not assess it as being a consequential loss.

Conclusion

The flooding incident which caused the hydro‑electric Power Station at Lake Argyle to cease operating for a period of two months in 2006 created an emergency situation in relation to the loss of an essential commodity in the Kimberly region of Western Australia. The plaintiff, as a statutory authority, carried a responsibility to consumers of electricity in the Kimberley region. It then needed to, as the parties to the PPA had envisaged by cl 16.3 in 1994, take urgent steps to access and to provide replacement electricity for its own consumers. The steps taken were not discretionary. Rather, this plaintiff was effectively required to undertake them.
Construing cl 26.1 within the PPA as a whole, the court should not be artificially fettered towards assessing the character of an economic loss by the rather vague criteria of whether or not the loss arose 'in the ordinary course of things'. Nor should the court be orientated from the start towards trying to determine if a claimed loss falls under the equally porous concept of a 'normal measure of damage'.
For this case, a provision of replacement power by SECWA, and its associated outlays in that exercise, constituted for it a direct economic loss at the time.

Accordingly, the losses claimed under par 21 of the FASOC, in my view, are not to be in the end excluded by cl 26.1 of the PPA.
Preliminary issue four is accordingly answered in the affirmative.
The plaintiff should now provide a minute of proposed orders giving effect to these reasons within 14 days. In the adverse result, the defendants should prima facie bear the costs of and incidental to the one day trial of these issues, to be taxed, if not agreed.