Wilmar Sugar Australia Limited v Queensland Sugar Limited - [2019] QSC 116

SUPREME COURT OF QUEENSLAND

CITATION: Wilmar Sugar Australia Limited v Queensland Sugar Limited
[2019] QSC 116
PARTIES: WILMAR SUGAR AUSTRALIA LIMITED
ACN 098 999 985
(plaintiff)
v
QUEENSLAND SUGAR LIMITED
ACN 090 152 211
(defendant)
FILE NO/S: BS No 6197 of 2015
DIVISION: Trial Division
PROCEEDING: Trial
DELIVERED ON: 10 May 2019
DELIVERED AT: Brisbane
HEARING DATE: 12 to 16 February 2018; 19 to 23 February 2018; 26 February
2018
JUDGE: Davis J
ORDER:

1. The claim is dismissed.
2. The counterclaim is dismissed.

3. Parties shall be heard on the question of costs.
CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL

PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – GENERALLY – where the plaintiff entered into an
agreement to supply sugar to the defendant and the defendant
was responsible for marketing and selling that sugar – where

the plaintiff brought an action against the defendant for breach of contract for failing to take reasonable care in managing
production risk – where the plaintiff sought to imply an
obligation to take reasonable care to manage production risk
into the contract – whether an obligation to take reasonable
care to manage production risk could be implied into the
contract

TORTS – NEGLIGENCE – ESSENTIALS OF ACTION FOR NEGLIGENCE – WHERE ECONOMIC OR FINANCIAL LOSS – CARELESS ACTS OR OMISSIONS – where the
plaintiff brought an action against the defendant for negligence

arising out of a duty to take reasonable care – where the plaintiff’s claim was one for pure economic loss – where the
defendant asserted that no such duty of care arose – whether
the plaintiff was sufficiently vulnerable to loss or damage
arising out of acts or omissions by the defendant

DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR TORT – REMOTENESS AND CAUSATION – FORESEEABILITY OF DAMAGE – IN GENERAL – where the risk of loss to the plaintiff was foreseeable – where the defendant admitted that the risk of loss to the plaintiff due to the defendant’s management of the
Seasonal Pool was foreseeable – whether the failure to plan for
the risk of production fall due to the weather produced a proved
loss

EVIDENCE – ADMISSIBILITY – CREDIBILITY EVIDENCE – WITNESSES – EXPERT EVIDENCE – where the parties relied upon evidence of expert witnesses – where the evidence of an expert witness was objected to – whether
the expert witness was relevantly independent and the facts
relied upon by the expert were proved
Civil Liability Act 2003 (Qld), s 9, s 10, s 32(1)
Corporations Act 2001 (Cth), s 140
Astley v Austrust Ltd (1999) 197 CLR 1, cited
BP Refinery (Westernport) Pty Ltd v The Shire of Hastings
(1977) 180 CLR 266, followed
Brookfield Multiplex Limited v Owners Corporation Strata
Plan 61288 & Anor (2014) 254 CLR 185, followed
Bryan v Maloney (1995) 182 CLR 609, followed
Byrne v Australian Airlines Ltd (1995) 185 CLR 410, cited
Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad”
(1976) 136 CLR 529, cited
Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR
649, followed
Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd
(1987) 10 NSWLR 468, cited
Causer v Brown [1952] VLR 1, cited
CGU Workers Compensation (NSW) Ltd v Garcia (2007) 69
NSWLR 680 , cited
Clark v Ryan (1960) 103 CLR 486, cited
Codelfa Construction Pty Ltd v State Rail Authority NSW
(1982) 149 CLR 337, cited
Colchester Borough Council v Smith [1991] Ch 448, cited
Commonwealth Bank of Australia v Barker (2014) 253 CLR
169, followed
Crestsign Limited v National Westminster Bank PLC [2014]
EWHC 3043, cited
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588, cited
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty
Ltd (2017) 261 CLR 544, cited
Electricity Generation Corporation v Woodside Energy Ltd
& Ors (2014) 251 CLR 640, followed
Esso Australia Resources Ltd v Plowman (1995) 183 CLR
10, cited
Fox v Percy (2003) 214 CLR 118, followed
Hawley Partners Pty Ltd v Commissioner of Stamp Duties
(1996) 96 ATC 4847, not followed
Hospital Product Ltd v United States Surgical Corporation
(1984) 156 CLR 41, followed
JP Morgan Chase Bank v Springwell Navigation Corporation
[2008] EWHC 1186, not followed
Masters v Cameron (1954) 91 CLR 353, cited
McBride v ASK Funding Ltd [2013] QCA 130, cited
Metal Roofing and Cladding Pty Ltd v Amcor Trading Pty
Ltd [1999] QCA 472, cited
Niesmann v Collingridge (1921) 29 CLR 177, cited
Palmer Bruyn & Parker Pty Ltd v Parsons (2001) 208 CLR
388, cited
Parker v South Eastern Railway Co (1877) 2 CPD 416, cited
Peekay Intermark Ltd v Australia and New Zealand Banking
Group Ltd [2006] 2 Li R 511, not followed
Precision Products (NSW) Pty Ltd v Hawkesbury City
Council (2008) 74 NSWLR 102, followed
R v Butler [2010] 1 Qd R 325, cited
Raiffeisen Zentralbank Osterreich AG v The Royal Bank of
Scotland [2011] 1 Lloyd’s Rep 123, cited
Reed v Warburton [2011] NSWCA 98, followed
Sullivan v Moody (2001) 207 CLR 562, cited
Ted Brown Quarries Pty Ltd v General Quarries (Gilston)
Pty Ltd (1977) 16 ALR 23, cited
Thornton v Shoelane Parking Pty Ltd [1971] 2 QB 163, cited
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR
165, cited
Voli v Inglewood Shire Council (1963) 110 CLR 74, cited
Woolcock Street Investments v CDG Pty Ltd (2004) 216 CLR
515, followed
COUNSEL: M Stewart QC with D E Chesterman for the plaintiff
A Pomerenke QC with L P Clark for the defendant
SOLICITORS: Russells for the plaintiff
Allens Linklaters for the defendant
Table of Contents

The facts ..................................................................................................................................... 5

The dispute ............................................................................................................................... 20

The terms of the Raw Sugar Supply Agreement and the Financial Risk Management

Policy ........................................................................................................................................

Pleadings in the breach of contract case ................................................................................... 40

Consideration of the contractual claim ..................................................................................... 48

The status of the FRMP ........................................................................................................ 49
What is said to give rise to the implication? ........................................................................ 51
Term implied by law ............................................................................................................ 51

Term implied in fact ............................................................................................................. 55

Pleadings in the negligence case .............................................................................................. 55

Consideration of the negligence case ....................................................................................... 61

Basis clauses ......................................................................................................................... 72

Consideration of breach, causation and loss ............................................................................ 73

QSL’s contributory negligence claim ...................................................................................... 90

QSL’s counterclaim .................................................................................................................. 91

Orders ....................................................................................................................................... 92

The 2010 sugar season was a difficult one for producers of sugar because of heavy and persistent rainfall at a critical time of year. Wilmar Sugar Australia Ltd (Wilmar) is a miller of sugar, and produces raw sugar. Queensland Sugar Ltd (QSL) is a corporation which markets and sells raw sugar. As a result of the weather conditions production fell dramatically leaving Wilmar exposed to meet supply arrangements[1] that had been entered into by QSL. By the terms of a contract between them, QSL passed the losses to Wilmar. Wilmar seeks damages against QSL in both contract and tort as compensation for the losses it suffered.
[1] A deliberately neutral term.
The facts
QSL is a company limited by guarantee. It is what can be described as an “industry owned” corporation. Its members are sugar millers and representatives of sugar cane
growers.[2]
[2] QSL constitution, trial bundle tab 75, cl 4.
QSL has both a constitution and a charter.
QSL’s constitution[3] relevantly, provided:
[3] At the time of the 2010 season.
“6. Objects

(a) The principal object of the company, without limiting its powers under the Law, is to promote the development of the sugar industry, assisted by the following objects:

(i) to enhance the efficiency and competitiveness of the Queensland sugar industry;
(ii) to provide access to markets for the Queensland sugar industry or the sugar industry elsewhere;
(iii) to enhance the long term economy of the Queensland sugar industry and the benefits flowing from it to Growers and Mill Owners;
(iv) to encourage initiative, innovation and value adding within the Queensland sugar industry or the sugar industry elsewhere and downstream processing of sugar;
(v) to provide timely and relevant sugar market information to Growers and Mill Owners;
(vi) to market raw sugar in the best interests of Growers and Mill Owners; and
(vii) to act commercially in the discharge of its functions.
(b) In carrying out its objects, and without limiting its powers under the Law, the company will seek to pursue the matters provided in
the Charter.”[4]
[4] QSL constitution, trial bundle tab 75.

By QSL’s charter:[5]
[5] QSL constitution, trial bundle tab 75.
“The company will seek to maximise the net returns in dollars per tonne of
sugar to milling companies supplying it with sugar for export, and through
such milling companies to their growers.
To achieve this the company will seek to:

•

enter into rolling long term supply agreements to ensure continuing access to sugar for export;

•

minimise supply chain costs through economies of scale, operational efficiency and without duplicated management functions;

•

optimise the returns for export sugar to suppliers through the use of physical sales and derivative instruments;
• optimise the net regional premium achieved each season;

•

provide flexible, innovative, transparent and/or independent pricing mechanisms for suppliers based on effective close out mechanisms for derivative instruments;

•

ensure long term access (by lease or other arrangements), and manage and operate the bulk sugar terminals;

•

operate in the forward freight market with a view to providing certainty of shipping availability for annual export programs and achieve preferential logistics arrangement and costs; and

•

foster export market relationships with refinery buyers and the international trade.
The charter is intended to reflect the current view of the company’s
Members as to how the company’s objects can best be achieved, and can be
amended by an ordinary resolution of Members in general meeting under
Article 19(a) if that view changes over time.”[6]
[6] QSL constitution, trial bundle tab 75, Schedule 1.

As is obvious from the raw sugar supply agreement,[7] QSL operates as a “not for profit”
[7] Identified and explained later; trial bundle tab 27, cl 22.
body. Its role is to price and sell the sugar supplied to it by the millers.
Wilmar mills sugar cane to produce raw sugar. About 1,600 cane farmers supply sugar cane to Wilmar for that purpose.
Wilmar has had various names over the years. Prior to 27 November 2009, it was called
“CSR Sugar Pty Ltd”. Between 27 November 2009 and 4 March 2010, it was “CSR
Sugar Ltd”. Between 4 March 2010 and 19 May 2013, it was “Sucrogen Ltd”, before it
changed on 19 May 2013 to “Wilmar Sugar Australia Ltd”. The company is referred to consistently in these reasons as “Wilmar” even though it is described by its other various
names in documents depending upon their vintage.
Wilmar is not the only miller who supplies sugar cane to QSL. As will be explained, QSL entered into a number of agreements with other millers so that the raw sugar produced by all of them was pooled for export.
Much of the raw sugar which is produced by the mills is exported to various overseas markets. QSL markets that raw sugar for export. Indeed, as will be seen, Wilmar, and the other millers who entered into agreements with QSL committed to QSL all the raw sugar they intended to export.
Until 1 January 2006, the Sugar Industry Act 1999 (Qld) provided for all raw sugar produced in Queensland to be the property of QSL. QSL had the responsibility for pricing and selling the sugar and then distributing the proceeds to millers.[8]
[8] CSR-Sugar-mills financial risk management policy, 16 December 2009, exhibit 4 at 4.
In 2006, the sugar industry was deregulated so that millers had a commercial choice to either enter into marketing contracts with QSL or market the sugar for themselves.

[13] Following upon the legislative changes, QSL developed “voluntary marketing
agreements” with sugar millers.[9] An agreement was signed between QSL and Wilmar on
[9] Statement of Bryce Wenham filed 16 June 2016, CFI 33 at [11(a)].
23 December 2005.[10] Similar agreements were made with other millers. Those agreements took effect from around 2006 and allowed sugar millers to undertake their own pricing for some of their sugar on the futures market.[11]
[10] Wilmar-QSL VMA, trial bundle tab 43 page 14.
[11] Transcript at 6-32 ll 1-10.

In 2007, a working group met on three occasions to discuss new pricing options to be offered for supplies in the 2008 season.[12] The working group endorsed a particular model of pricing option by which the suppliers would have a fixed known level of exposure in the futures market.[13] This model was incorporated into the Wilmar/QSL voluntary marketing agreement in 2007.[14] By these agreements,[15] the sugar was divided into various pools and each pool was priced and sold separately to the other pools. One of the
[12] Working group discussion paper February 2007, trial bundle tab 51 at 1; see also trial bundle tabs 54 and 56.
[13] Working group discussion paper April 2007, trial bundle tab 54 at [6].
[14] Trial bundle tab 70.
[15] With Wilmar and other millers.
pools, the “Queensland discretionary pool” was the subject of a financial risk

management policy promulgated by QSL. The effect of that policy was communicated
to Wilmar in September 2007.[16]
[16] Email from QSL to Wilmar regarding the financial risk management policy, trial bundle tab 65; the financial

From 2008 onwards, the voluntary marketing agreements were replaced with “Raw Sugar
Supply Agreements” (RSSAs).[17] The RSSA between Wilmar and QSL was signed on 25
[17] Wenham statement, CFI 33 at [11(c)].
September 2008 (the Wilmar RSSA).[18] The Wilmar RSSA was amended by written agreements on 19 March 2010,[19] and twice on 17 December 2010.[20]
[18] Wilmar-QSL RSSA, trial bundle tab 27.
[19] Amendment Deed, trial bundle tab 29.
[20] Amendment Deed, trial bundle tab 30; Second Amendment Deed, trial bundle tab 30; Third Amending
As is clear from the terms of the Wilmar RSSA, Wilmar is not the only miller to enter
into such an agreement. The Wilmar RSSA refers to “participants” in the marketing
scheme, those participants being Wilmar and the other millers. By these agreements, raw sugar was to be allocated to various pools which were to be dealt with in different ways. The dispute here concerns the Seasonal Pool.
Before the RSSAs were entered into, a discussion paper was issued by QSL on 8 February 2007.[21] Some important points from the discussion paper are as follows:
[21] Trial bundle tab 51.

(i) “Initial production estimates are provided in late September in the year preceding
the crushing season and monthly thereafter. The initial estimates provided by the storage equation. It can be seen on Chart 1 below, in the period covering the
seasons from 2000 up until 2006 that there have been significant variances from
the initial estimates compared to the quantity finally produced”;[22] (emphasis
[22] Section 6.1.
added)
(ii) Various charts attached to the discussion paper show variations between production estimates and actual production in various seasons between 2000 and 2006;
(iii) The discussion paper refers to various matters concerning exposure to futures markets.[23]
[23] Trial bundle tab 51, see ss 3, 4.3.1 and 5.

Bryce Wenham is the Finance Manager - Supplier Relations at QSL. He began working in the sugar industry in 1986. He worked for Wilmar until 2010 when he joined QSL. He was involved in the development of the various schemes that ultimately resulted in the RSSAs. It is clear that the scheme which is underpinned by the RSSAs resulted from extensive industry consultation.[24]
[24] Wenham statement, CFI 33 at [51] and following.
The discussion paper further provides:
“It is not only the total amount of [ICE 11[25]] exposure that has been volatile,
[25] A futures exchange.
but also the portion against each futures position that is subject to change. A
Supplier’s exposure to each futures position is drawn from the expected
shipment position of each sale in the marketing plan.
It can be seen in Chart 4 below, the actual tonnage available against each
futures position at the start of crush in June can vary substantially from initial
estimates in January preceding the crush. The July position has the greatest variability and the March and May positions continue to vary until crushing has finished and all of the sugar is sold to customers.”[26] (emphasis added)
[26] Section 6.3.
On 14 May 2009, QSL’s Audit & Risk Committee met. An extract from the minutes of
that meeting is:
“Since the 2008 season, the QSL pricing platform has been introduced, which
provides fixed futures exposures of 1:2:2:1 over each season and allows Suppliers to manage up to 70% of their price risk, without the complexity of having to manage production risk and marketing plan risk. The Seasonal
Pool under this arrangement has become a residual Pool which absorbs all production risk and marketing exposure movements.
The above changes increased the degree of risk that the Seasonal Pool is managing. However, our stakeholders still have the expectation that QSL will use its discretion to add value in this Pool. This expectation is reflected
in the new Raw Sugar Supply Agreements.”[27] (emphasis added)
[27] Trial bundle tab 95, page 3.
The differing pricing pools and the pricing scheme were notified to the millers by email on 8 October 2009.[28] In relation to the 2010 Seasonal Pool, that document provided:
[28] Trial bundle tab 104.

“What is it?

The volume - in this pool is the balance of sugar not allocated to other pools or pricing schemes. It will be priced progressively by QSL against a defined average benchmark.
This pool operates 2010 season only and absorbs
all seasonal variations in production, sales and
shipping.
All suppliers are to have at least 30% of their sugar
tonnage allocated to this pool.

How does it work? The pool aims to achieve the optimal $A return for
the current season.

QSL aims to outperform the average benchmark within the constraints of volume and time. Pricing is undertaken over a 19 month period from 1st December 2009 until 30th June 2011.

The amount of sugar tonnage allocated to this pool is not fixed.

QSL undertakes the physical export marketing for sugar in this pool and all other pools and pricing
schemes.
When will I receive Suppliers will receive advance payments from

payment?

QSL in the season the sugar is delivered. The pattern of payments will include an initial delivery payment and periodic top-up payments. The final
payment will be made in early July 2011.
What is QSL’s starting QSL adopts a measured approach in pricing the
strategy for this product? Seasonal Pool to accommodate production
variations. Tonnages are priced progressively over
a 19 month period.

Expected Return

Broad market average return reflecting the inherent risk of production, shipping and marketing variations.
What are the potential This pool absorbs all risks associated with
risks associated with production, shipping and marketing variations and
this product? is operated with a measured pricing profile to
accommodate these inherent risks.

The measured approach to pricing limits the ability of the Seasonal Pool to respond quickly to
rapidly moving market situations.
How will these risks be Pool performance is reviewed against a defined
managed? average benchmark on a weekly basis and the
pricing strategy refined accordingly.
Past Performance Indicative $A per tonne IPS:

2006: A$368 2007: A$276 2008: A$334

2009: A$490 - 510

Comparing the Seasonal Pool with other pools is not meaningful. The Seasonal Pool is designed to

address risks associated with production, sales & shipping so it has a variable futures exposure and outcome.
SUPPLIER
REQUIREMENTS
Min. Tonnage All suppliers will have a minimum of 30% of
forecast production tonnage in this pool.
Max. Tonnage No maximum tonnage.

‘Default Pool’

Any tonnage not elected to other pools or pricing schemes by 30th November 2009 will be allocated to this pool. If no pricing election is made, this
pool is considered to be the ‘default pricing
pool’.”[29]
(emphasis added)

[29] Trial bundle tab 104, under the heading ‘2010 Seasonal Pool’.

QSL kept a risk register. In December 2009, that was updated as follows:

Risk Existing Consequences Likelihood Risk Risk Treatments

Action

Description

Controls

($)*

(1:y)*

($/y)*

(Treatments or

(What could

‘M’=Million

(eg 1 in 100

Studies,

possibly ‘B’=Billion years)

Recommendations,

happen)

ideas for

Consideration)

Production size

- Information

(1) $260M

1:10

$26,000,000

- Seek independent

and timing	from mills and	crop estimates
other sources

Scenario 1:

- Review

on crop

Changes in

maximum level of

tonnage.

client forecast

sales and pricing

- Education of during periods of

causes hedging

mills:

Risk Existing Consequences Likelihood Risk Risk Treatments

Action

Description

Controls

($)*

(1:y)*

($/y)*

(Treatments or

(What could

‘M’=Million

(eg 1 in 100

Studies,

possibly ‘B’=Billion years)

Recommendations,

happen)

ideas for

Consideration)

and sales in

greatest delivery

(a) Working

excess of

uncertainty

with mills on

deliveries for a	crop estimates
season (eg	to ensure they
forecast moves	understand the
down by 1Mt	importance
due to natural	and
disaster, start up	consequences
delays etc)	of incorrect

(2) $1M 1:5 $200,000

Scenario 2:	forecasts.
Changes in the	(b) Assist mills
forecast timing	in
and quality of	understanding
deliveries to	their
QSL resulting in	contractual
misalignment	obligations.
with sales
program
(cancellation of
contract,
demurrage costs etc - $1M)

(emphasis added)

By the terms of the Wilmar RSSA, Wilmar was required to provide its estimates of supply of raw sugar for the 2010 season by 30 November 2009. This is called in the agreement
the “initial SPE” which is shorthand for “supply of production estimate”.[31] Wilmar,
[31] Wilmar-QSL RSSA, trial bundle tab 27at [6.2].
through its employee, David Burgess, provided an initial SPE of 1,710,107 tonnes.[32]
[32] In its Further Amended Defence and Counterclaim read and filed 15 February 2018, (referred to as “Defence
On 14 December 2009, QSL delivered a presentation to the millers, including Wilmar, about its sales and pricing strategy for the 2010 season.[33] In that presentation, this appeared:
[33] Presentation-supplier customer meeting, 14 December 2009, trial bundle tab 118.
“ICE NO 11 Strategy

 Fundamental picture for Q1 2010 remains strong
 ICE No 11 July 10 strategy:

o Track benchmark until Q12010
o Move 10 - 15% overweight should values climb to US 24.00 c/lb
o Combination of fixed and participating structures
 Strong emphasis on ICR No 11 July 10 given it is 2/3 volume of Seasonal
pool
 Optionality important to manage crop risk” (emphasis added)

On 16 December 2009, QSL adopted a financial risk management policy (the FRMP). There is dispute as to the legal status of the FRMP, which is canvassed later.
QSL planned to price and sell sugar over the season in accordance with the FRMP. In the scheme of trading, there are three species of contract that are relevant: futures contracts, physical supply contracts and currency hedge contracts.
The currency hedge contracts are not particularly relevant to the present proceeding. Commodities such as sugar are traded in US dollars. Domestic costs and prices occur in Australian dollars. Currency hedge contracts are entered into for protection against changing relative values of Australian and American currency.
Futures contracts are, obviously enough, contracts entered into on a particular day for the delivery of sugar which has not yet been produced until sometime in the future. By these contracts, there are set delivery periods which, for the 2010 season were:

“(a) the ‘May 2010 Delivery Period’, for physical shipments of raw sugar
to be delivered between 1 May 2010 and 15 July 2010;
(b) the ‘July 2010 Delivery Period’, for physical shipments of raw sugar
to be delivered between 1 July 2010 and 15 September 2010;
(c) the ‘October 2010 Delivery Period’, for physical shipments of raw
sugar to be delivered between 1 October 2010 and 15 December 2010;
(d) the ‘March 2011 Delivery Period’, for physical shipments of raw
sugar to be delivered between 1 January 2011 and 15 May 2011; and
(e) the ‘May 2011 Delivery Period’, for physical shipments of raw sugar
to be delivered between 1 May 2011 and 15 July 2011.
(May, July, October, March and May above are each known as a ‘Pricing
Month’)”[34]
[34] Summarised in this fashion in Wilmar’s submissions at [96]; see also Beashel statement, CFI 32 at [72].

Physical supply contracts are, perhaps also obviously, contracts for the supply of raw sugar. The ICE 11 price potentially moves constantly in response to market forces. The physical supply contracts, as a matter of practice, specify a price which equates to the ICE price.
If an ICE futures contract is entered into and the value of the sugar rises so that the price which can be secured for it rises, then a physical sale contract can be entered into for the sale at the higher price and the futures contract is then bought out in a system known as
“closing out” the futures contract. The aim of the exercise is to enter into futures contracts
through the ICE to secure prices and then enter into currency hedging contracts to protect the value of the futures contracts against currency fluctuations. The price is secured by that strategy; if the price rises the extra profit can be taken.
If futures contracts are entered into and production of the overall sugar is insufficient to meet the contracts then there is a problem; in the 2010 season it was a huge problem. In those circumstances, sugar has to be acquired in order to fulfil the obligations under the futures contracts.
Australia, and Queensland in particular, is a major world producer of raw sugar. In the event of a major adverse episode (such as abnormally wet weather) which results in a significant fall in production in Queensland, that shortage will affect the international market and cause the price to rise as a result of the usual forces of supply and demand.[35] Consequently, if the fall in production results in a necessity to purchase sugar elsewhere to meet the futures contracts, there is a significant likelihood that the price at which the replacement sugar will have to be purchased will exceed the price achieved through the earlier ICE futures contracts. By that mechanism then, a loss will be suffered.
[35] Gray report, exhibit 50, paragraph [131].
QSL began pricing and selling raw sugar early in the season. This was done in accordance with the FRMP.[36] Wilmar and other suppliers from time to time lodged new production estimates. None of these anticipated the drastic fall in production which was ultimately experienced.
[36] Although Wilmar disputes that the FRMP was followed, as there was departure from it as production was under threat.
In January 2010, the Wilmar estimate remained the same as the Wilmar Initial SPE,[37] and the aggregate estimate for all suppliers was the same as the Initial SPE.[38] By the end of January, QSL had entered into physical supply contracts in respect of 1,337,000 out of 2,937,020 estimated tonnes[39] (44 per cent) and had priced 206,522 out of 986,020 estimated tonnes in the Seasonal Pool[40] (21 per cent). The estimated supply and physical supply contracts progressed as follows:
[37] Defence and Counterclaim at [15(b)(iii)]; Reply at [12]; Beashel statement at [102(c)]; Email from CSR to
[38] Further Amended Statement of Claim, CFI 68 (referred to as “Statement of Claim” throughout these reasons)
[39] Statement of Claim at Annexure A.
[40] Defence and Counterclaim at [17(b)(i)]; Reply at [13A].

Production estimates QSL contracting activity

Wilmar Aggregate Physical supply Pricing of
estimate estimate (all contracts Seasonal Pool
suppliers)

February	Same as Initial	Increased to	1,591,000 of	286,145 of
2010	SPE[41]	3,009,575	3,010,000 est.	1,045,468 est.
tonnes[42]	tonnes[43] (53%)	tonnes[44] (27%)

[41] Defence and Counterclaim at [15(b)(iv)]; Reply at [12]; Beashel statement at [102(d)]; Email from CSR to

[42] Forecast 2010 Season RSSA Supply.

[43] Statement of Claim at Annexure A.

[44] Defence and Counterclaim at [17(b)(ii)]; Reply at [13A].

Production estimates QSL contracting activity

Wilmar Aggregate Physical supply Pricing of
estimate estimate (all contracts Seasonal Pool
suppliers)

March 2010	Same as Initial	Decreased to	1,700,000 of	442,587 of
SPE[45]	2,985,175	2,985,175 est.	1,031,127 est.
tonnes[46]	tonnes[47] (57%)	tonnes[48] (43%)
April 2010	No estimate	Decreased to	1,831,000 of	564,001 of
provided[49]	2,963,798	2,964,000 est.	1,009,750 est.
tonnes[50]	tonnes[51] (62%)	tonnes[52] (56%)
May 2010	Increased to	Increased to	2,088,000 of	646,175 of
1,711,358	2,979,677	2,980,000 est.	1,025,629 est.
tonnes[53]	tonnes[54]	tonnes[55] (70%)	tonnes[56] (63%)
June 2010	Increased to	Decreased to	2,238,000 of	746,738 of
1,777,575	2,976,014	2,976,000 est.	1,001,731 est.
tonnes[57]	tonnes[58]	tonnes[59] (75%)	tonnes[60] (74.5%)
July 2010	Decreased to	Deceased to	2,547,000 of	778,711 of
1,714,700	2,881,652	2,882,000 est.	877,682 est.
tonnes[61]	tonnes[62] (under	tonnes[63] (88%)	tonnes[64] (88.7%)
initial SPE)
August 2010	Increased to	Increased to	2,554,000 of	804,208 of
1,729,068	2,891,408	2,877,000 est.	868,880 est.
tonnes[65]	tonnes[66] (under	tonnes[67] (89%)	tonnes[68] (92.5%)
initial SPE)

[45] Defence and Counterclaim at [15(b)(v)]; Reply at [12]; Beashel statement at [102(e)]; Email from CSR to QSL

[46] Forecast 2010 Season RSSA Supply.

[47] Statement of Claim at Annexure A.

[48] Defence and Counterclaim at [17(b)(iii)]; Reply at [13A].

[49] Defence and Counterclaim at [15(b)(vi)]; Reply at [12]; Beashel statement at [102(f)].

[50] Forecast 2010 Season RSSA Supply.

[51] Statement of Claim at [27(a)] and Annexure A; Defence and Counterclaim at [18(a)].

[52] Defence and Counterclaim at [17(b)(iv)]; Reply at [13A].

[53] Defence and Counterclaim at [15(b)(vii)]; Reply at [12]; Beashel statement at [102(g)]; Email from CSR to

[54] Forecast 2010 Season RSSA Supply.

[55] Statement of Claim at [27(b)] and Annexure A; Defence and Counterclaim at [18(a)].

[56] Statement of Claim at [26(a)]; Defence and Counterclaim at [17(a)].

[57] Defence and Counterclaim at [15(b)(viii)]; Reply at [12]; Beashel statement at [102(h)]; Email from CSR to

[58] Forecast 2010 Season RSSA Supply.

[59] Statement of Claim at [27(c)] and Annexure A; Defence and Counterclaim at [18(a)].

[60] Statement of Claim at [26(b)]; Defence and Counterclaim at [17(a)].

[61] Defence and Counterclaim at [15(b)(ix)]; Reply at [12]; Beashel statement at [102(i)]; Email from CSR to QSL

[62] Forecast 2010 Season RSSA Supply.

[63] Statement of Claim at [27(d)] and Annexure A; Defence and Counterclaim at [18(a)].

[64] Statement of Claim at [26(c)]; Defence and Counterclaim at [17(a)].

[65] Defence and Counterclaim at [15(b)(x)]; Reply at [12]; Email from CSR to QSL – Re Supply Agreement

[66] Forecast 2010 Season RSSA Supply.

[67] Statement of Claim at [27(e)] and Annexure A; Defence and Counterclaim at [18(a)].

[68] Statement of Claim at [26(d)]; Defence and Counterclaim at [17(a)].

Production estimates QSL contracting activity

Wilmar Aggregate Physical supply Pricing of
estimate estimate (all contracts Seasonal Pool
suppliers)

September	Increased to	Increased to	2,595,000 of	844,167 of
2010	1,749,068	2,908,923	2,909,000 est.	900,763 est.
tonnes[69]	tonnes[70] (under	tonnes[71] (89%)	tonnes[72] (93.7%)
initial SPE)
October	Reduced to	Decreased to	2,595,000 (no	781,388
2010	1,700,321	2,718,499	change) of	compared to
tonnes[73] (under	tonnes[74] (under	2718,000 est.	759,437 est.
initial SPE)	initial SPE)	tonnes[75] (95%)	tonnes[76]
(102.89%)

[69] Defence and Counterclaim at [15(b)(xi)]; Reply at [12]; Beashel statement as amended by Exhibit 43:

[70] Forecast 2010 Season RSSA Supply.

[71] Statement of Claim at [27(f)] and Annexure A; Defence and Counterclaim at [18(a)].

[72] Statement of Claim at [26(e)]; Defence and Counterclaim at [17(a)].

[73] Defence and Counterclaim at [15(b)(xii)]; Reply at [12]; Beashel statement at [102(l)]; Email from CSR to

[74] Forecast 2010 Season RSSA Supply.

[75] Statement of Claim at Annexure A.

[76] Statement of Claim at Annexure A.

November	Reduced to	Decreased to	Some futures contracts and physical
2010	1,404,141	2,317,563	supply contracts closed out.
tonnes[77] (under	tonnes[78] (under
initial SPE)	initial SPE)

[77] Defence and Counterclaim at [15(b)(xiii)]; Reply at [12]; Beashel statement at [102(m)]; Email from CSR to

[78] Forecast 2010 Season RSSA Supply.

In February 2010, QSL provided suppliers, including Wilmar,[79] with a Monthly Supplier Customers’ Report,[80] which included details of the Sugar Price Strategy[81] and Marketing
[79] Transcript at 1-73 ll 15 to 18.
[80] Trial bundle tab 161.
[81] At 11.
Strategy[82] to be undertaken by QSL. During the season, monthly reports were provided to Wilmar and the other millers concerning the Seasonal Pool. These showed (apart from information relevant to currency hedging) the lots priced, the price achieved and the lots unpriced.
[82] At 16.
The 2010 harvesting and crushing season ran from late May or early June to around 24 December 2010.[83]
[83] Statement of Claim at [19]; Defence and Counterclaim at [14].
On 24 June 2010, the Bureau of Meteorology published a media release that stated that
that a La Niña event was “more likely than not” to occur in 2010.[84]
There is a QSL board meeting minute made on 22 July 2010 at which this was noted:
“There has been considerable modelling done around how crop reductions
(due to weather, disease or other events) would affect QSL - the modelling shows that there would need to be a reduction of 25 per cent across the whole market to impact on QSL, individual mill losses are sheeted home to the
pools.”[85]
Mr Wenham, speaking after the RSSAs were first introduced, said in his statement:
[84] Statement of Claim at [30]; Defence and Counterclaim at [21(a)].
[85] Trial bundle tab 235, page 7, s 6.1.

“73. As mills were carrying out their own pricing, the pool of sugar being
priced by QSL had significantly reduced in volume. Further, the mills’
share of the seasonal pool was to be the first point of recourse if there
was any variation in production. This meant there was expected to be more volatility in the seasonal pool tonnages. As a result, it was decided by the Audit and Risk Committee that in order to create a more conservative approach to pricing the seasonal pool, three main changes were required:

(a) pricing factors, which allowed an acceleration of pricing when market prices were strong, were removed;
(b) there was a requirement to price the seasonal pool over a longer period (9 months from 6 months);
(c) a value at risk concept was introduced.
74. The background and rationale for these changes is set out in two papers delivered to the QSL Audit and Risk Committee, dated 3 March 2009 and 14 May 2009, [QSL.500.004.0307] [QSL.500.004.0357] which I saw at the time.
75. These concepts were included in the updated 2009 season financial risk management policy. The 2009 season financial risk management policy is [QSL.500.016.0003].”[86] (Emphasis added)
[86] Statement, CFI 33.

There was persistent and heavy rainfall from around September 2010 to the end of the harvesting and crushing season (around 24 December 2010).[87]
[87] Statement of Claim at [31]; Defence and Counterclaim at [22].
It can be seen from the table set out above that notwithstanding the La Niña forecast by
the Bureau of Meteorology on 24 June 2010, Wilmar’s estimates, although decreasing in
July, were increased in both August and September, but falling then in October 2010 only
after the rain had set in. Wilmar’s production estimate then fell again in November 2010
to 1,404,141 tonnes which was still well in excess of what Wilmar actually supplied which was 1,238,151 tonnes of raw sugar. The aggregate supply by all millers was 2,213,154 tonnes. Wilmar had produced and supplied about 72% of what it initially forecast and all millers together had produced and supplied about 75% of what was estimated.
Reductions in estimates began to arrive from millers in October and November 2010.[88]
[88] Wenham statement, CFI 33, paragraph [155] and following.
By October 2010 before, it seems, the revised estimates were received from the millers, it had been obvious to QSL that it could not meet the commitments it had made to supply raw sugar. From October 2010[89] QSL began closing out futures contracts and some physical sale contracts.
[89] Wenham statement, CFI 33, paragraph [162].
Wilmar’s case is that QSL’s responsibility was to manage the Seasonal Pool as a “buffer”

to protect against a fall in actual production as against estimates. It points to various
statements and actions by QSL to support this case:

(i) Mr Gregory Beashel, Managing Director and Chief Executive Officer of QSL,
swore to QSL performing “sense checking”:
“95. QSL did sense check the forecasts it received from millers. Of
course, the main source of information was the mills themselves.
96. QSL did this because QSL was managing the customer relationship (including sales and logistics) and QSL wanted to be comfortable that it was proceeding to make those arrangements on a reasonable basis.
97. Sense checking the forecast estimates provided by millers was done in a very high level way because QSL did not have the extensive information available to it that millers did (for example, acres of cane, the maturity of cane, cut-out percentages etc). Rather, QSL just looked at the following:

(a)

the price of sugar - in years with low prices growers tend to reduce their costs by spending less on fertiliser and
irrigation. Accordingly, if the previous season’s sugar price
was low, then there might be a smaller forecast estimate or
reduced quality of cane for the coming season;

(b)

current/expected climatic influences such as rain, drought, temperature and cloud free days. QSL merely looked at the climatic influences affecting Northern Queensland, Central Queensland and Southern Queensland. It did not look at each specific growing region in detail;
(c) any mention of suspected or known disease and/or pests;
(d) the amount of tonnes the mills could crush;

(e)

once crushing commenced, mill performances (for example, amount of tonnes crushed and the quality of sugar produced);

(f)

discussions with millers about their crop forecasts and growers about their crops during the season. As well as the formal monthly forecast updates from millers, QSL occasionally had informal telephone conversations with mill staff as well; and

(g)

other publicly available data, such as news and industry updates.

98. QSL would balance all of these factors to form its own view as to whether the total forecast estimate by the millers was
reasonable.”[90]
[90] Beashel statement, CFI 32.

(ii) At its meeting on 22 April 2010, QSL’s board papers included the following:

“6 Marketing and Risk Management
6.1 Monthly Report

 The Board noted the report. More information was provided on
the following items.
 NT advised that QSL is not rushing to make sales at present, given the current market situation, which appears to be caused by speculation in the market about the European Union unexpectedly providing sugar onto the market, with the possibility of a further 1-2mmt being made available.
 The Board noted that at this time of the year any adverse weather could cause a swing to a deficit of sugar and increased volatility,
prices should be watched closely.”[91]
[91] Trial bundle tab 186.

(iii) Mr Beashel provided a memorandum to the QSL board in these terms:
“2.4 What can QSL do if it thinks the crop forecasts are not
accurate?
QSL relies on a number of external sources to give it confidence that the tonnage it is planning to place into the export market is as accurate as possible, as early as possible in the cycle. The main source of information is, of course, the mills themselves. Discussions are regularly had with milling staff over the weather conditions/forecasts for the region and the effect of this on their crop, cut-out percentages (i.e. actual verses (sic) forecast tonnes cane harvested) and CCS trends against forecast. Other sources include news and weather reports, internet, local people (contacts in different areas) and organisations such as Bureau of Sugar Experimentation Station (BSES) extension services and canegrower organisations.
From all the available information a view is formed as to whether the forecast supply is sound and what risks are associated with achieving that tonnage. It was this process that led QSL to the conclusion soon after the 2010 Season crushing commenced, that the mill forecasts should be marked down. It was acknowledged at that time that a wet season would not only reduce the supply but could also lead to an abrupt, early finish if flooding occurred late in the season.
The table below details the markdowns that were made. Despite the markdowns being significant, the actual delivered tonnage was significantly lower than even our marked-down tonnages.

QSL Internal

Forecast Month End Mill Forecast

Forecast

November ‘09 2,937,020 same
December ‘09 2,937,020 same
January ‘10 2,937,020 same
February ‘10 3,009,575 same
March ‘10 2,985,175 same
April ‘10 2,963,798 same
May ‘10 2,979,677 same
June ‘10 2,976,014 same

July ‘10 2,881,652 2,700,000
August ‘10 2,891,408 2,500,000
September ‘10 2,908,923 2,500,000
October ‘10 2,718,499 2,300,000
November ‘10 2,317,563 2,300,000
December ‘10 2,213,292 2,213,000
January ‘11 2,213,154
The inverse of the above situation has occurred in previous years where the supply has been thought to be higher than forecast. In those years, the focus has been on ensuring QSL maximises the tonnage being stored into the first half of the following year (to capture higher prices) without allowing the supply to exceed available storage capacity. Sometimes the crop has continued to grow on to a greater extent than anticipated and/or QSL has had the view that mills are factoring in too great an effect from prevailing drought conditions to arrive at their forecast supply. Whatever the case, through close monitoring of conditions along the coastline, QSL forms a view of supply and factors any perceived risks/benefits into its marketing, shipping and storage plans.
In determining the possible effect of the risks on the final outcome,
QSL runs a series of ‘what if’ scenarios to see the position it is in
should such conditions arise. This is especially important at the beginning of the season where delayed mill starts may mean insufficient supply to meet commitments. The scenarios continue to
be run throughout the season.”[92]
[92] Trial bundle tab 436, page 70.

The shortfall, being the losses incurred in having to meet the supplier’s contracts and to close out the ICE contracts, was $105,544,126, of which Wilmar’s share of the loss was

$60,860,546.65. There is no dispute as to that figure. The question is whether QSL is
liable to Wilmar for the loss.

After the heavy losses of the 2010 season, QSL revised its approach. In the 2011 season, QSL did not sell the Seasonal Pool sugar until it was produced. For the 2012 season, the
Seasonal Pool was replaced by the “Harvest Pool”. A proportion of the Harvest Pool,
which like the Seasonal Pool represented about 30% of the expected harvest, was not priced until 70% of the estimated sugar production for the season had in fact been delivered.[93]
[93] Transcript 6-41 ll 10-31; see also exhibit 44.
The dispute
Wilmar claims[94] that:
[94] Statement of Claim.

1.

there was an implied term in the Wilmar RSSA which can be broadly described as an obligation to take reasonable care in the management of the Seasonal Pool;[95]

2.

a duty arose which can be broadly described as one to take reasonable care in the management of the Seasonal Pool;[96]

3.

the FRMP was not an appropriate policy to discharge the contractual obligation or the tortious duty;
4. Wilmar’s loss was caused by the breach of the implied term, and, or, the breach of
[95] The pleadings in their exact terms of the alleged implied terms are discussed in detail later.
[96] Again, the exact terms of this as pleaded are considered in detail later.
duty.

QSL, in essence, says:

1. no term as alleged ought to be implied into the Wilmar RSSA;
2. no duty of care as alleged arose;
3. QSL complied with its contractual obligations by marketing the raw sugar pursuant to the Wilmar RSSA and the FRMP;
4. Wilmar contributed to its own loss by negligently preparing production estimates;
5. if all else fails, any losses suffered constitute a “cost” under the terms of the Wilmar
RSSA which can be passed back to Wilmar. Declarations to that effect are sought by counterclaim.

Against that very broad description of the dispute, which belies its complexity, it is necessary to consider the following:

1. the terms of the Wilmar RSSA and the FRMP;
2. the pleadings in the breach of contract case;
3. consideration of the contractual claim;
4. the pleadings in the negligence case;
5. consideration of the negligence case;
6. consideration of breach, causation and loss;
7. consideration of QSL’s contributory negligence claim;
8. consideration of QSL’s counterclaim.
The terms of the Raw Sugar Supply Agreement and the Financial Risk
Management Policy
[50] Before turning to the particular provisions, it is necessary to make some general observations about the structure of the Wilmar RSSA. Wilmar and other millers entered
into RSSAs with QSL to supply raw sugar to QSL for export. QSL’s function was to
market and sell the raw sugar for export. That is achieved by the sugar being sold and delivered to QSL to whom title in the sugar passes. QSL, though, as will be explained in some detail later, is intended neither to make a profit nor suffer a loss. All revenues and costs are passed back to Wilmar.[97]
[97] Wilmar RSSA cl 22.

The Wilmar RSSA consists of a set of provisions in what could be regarded as the body of the agreement and there are then four schedules:

(i) Schedule 1 concerns the quality of sugar to be produced by Wilmar to QSL.[98] There is no complaint here by QSL;
(ii) Schedule 2 concerns the pooling and payment for sugar supplied. Schedule 2 contains various provisions concerning the various pools and of particular importance here, provisions concerning the Queensland Seasonal Pool;
(iii)
[98] See cl 11.1.
Schedule 3 concerns reports to be delivered by QSL. Schedule 3 actually deliver information to the other during the term of the contract assumes some importance and various versions of the reports were received into evidence;
(iv) Schedule 4 concerns a draft operational improvement plan. The draft operational improvement plan describes targets and key performance indicators. What was proposed by cl 5.3 of the Wilmar RSSA was for the draft operational improvement plan to be in operation until a more permanent operational improvement plan was developed. The draft operational improvement plan is of
some significance to the QSL in particular. The plaintiff’s case is that given that
QSL had notice of the impending adverse weather conditions it should not have sold any of the Queensland Seasonal Pool sugar until the sugar had been physically produced. QSL on the other hand says that the Wilmar RSSA contemplates progressive sale of the sugar across the season. The defendant points to the draft operational improvement plan as containing indications in support of that argument. As will be seen, then, Schedule 4 does have some importance.

A major plank in QSL’s defence of the claim is that, on a proper construction of the
Wilmar RSSA, it was Wilmar that took the production risk and QSL marketed the Queensland Seasonal Pool within strict criteria primarily governed by the FRMP. A starting point is the recitals to the Wilmar RSSA.
The recitals are as follows:
“Recitals

A. Queensland Sugar[99] currently markets the majority of raw sugar manufactured by Queensland mills to export markets, which it acquires pursuant to a number of supply agreements with Queensland mill owners.
B. The Supplier[100] carries on the business of manufacturing raw sugar in Queensland.
C. The Supplier and other Queensland mill owners who currently supply sugar to Queensland Sugar have requested Queensland Sugar restructure its board of directors and director selection process to put it in the best position to continue to be the body responsible for marketing
[99] A reference to QSL.
[100] Under the Wilmar RSSA, this is Wilmar.
the majority of Queensland’s export sugar.

D. In conjunction with that restructure, the Supplier and Participants[101] have also undertaken to provide the growers who supply them with access to long term pricing agreements by September 2008.
E. The Supplier and Queensland Sugar have negotiated the terms on which the Supplier will sell raw sugar to Queensland Sugar for marketing and sale for export following the restructure.
F. Queensland Sugar will manage the export of raw sugar under a pooling arrangement where sales revenues, and the associated costs and risks, are allocated on a shared basis between all participants which have entered Supply Contracts, as detailed in the attached terms and conditions.
G. In carrying out this Agreement, Queensland Sugar will actively promote contact and market signals between the Suppler and existing and potential export customers; and consult with the Supplier in relation to export marketing strategy setting, tonnage allocations to markets and other key marketing decisions.
H. Queensland Sugar will work together with the Supplier with the objective of optimising returns to the Supplier.
[101] Wilmar and other millers who have entered into RSSAs.
I. The Supplier will supply bulk raw sugar and regular advice to Queensland Sugar, such as tonnage estimates, in order to support
Queensland Sugar’s marketing efforts.”

Several things should be noted about the recitals.
Firstly, the recitals assume that the Wilmar RSSA is not the only agreement between a
miller and QSL. Reference to “Participants” is seen in recital F. The term “Participants”
and the term “Supply Contracts” are defined as follows:
“Participant(s) means those milling companies contracted with Queensland
Sugar via the Supply Contracts.
Supply Contracts means the supply agreements for the supply of Queensland bulk raw sugar to Queensland Sugar by contracted milling
companies.”[102]
[102] Clause 2.
Secondly, while the role of QSL is to market the sugar, this is done by QSL purchasing and obtaining title to the sugar. This is hinted at in recital A which refers to sugar which
QSL “acquires” and is made clear by cll 1.1 and 10 which are as follows:

“1.1 The Supplier agrees to supply bulk raw sugar to Queensland Sugar in
accordance with the attached terms and conditions.
…
10.1 Title and risk for raw sugar supplied under this Agreement will pass on completion of weighing at the receival station of the bulk sugar terminal or such other facility nominated in Clause 9.
10.2 Queensland Sugar will insure the product from the point where it takes
title.”

Thirdly, the pooling arrangement is designed to share revenues “and the associated costs
and risks” between the “participants” namely the millers, including Wilmar. This is made
clear by Recital F.
Fourthly, although in much of the evidence the pools were spoken about as if they were pools of sugar, in reality the pools are not collections of physical sugar but are money sums being the net proceeds of the sale of the sugar notionally allocated to the pool. The
term “pool” is defined as follows:
“Pool means an aggregation of revenue and costs that are attributed to a
quantity of sugar under rules established in Schedule 2.”
Fifthly, recital H records that the objective of the Wilmar RSSA is to “optimis[e] returns to the Supplier”. Although that might seem innocuous enough, as will be later explained
the case largely developed into an argument as to whether the obligation upon QSL was
to manage only what was called “price risk”, namely fluctuations in the market, or whether the obligation included managing “production risk”, being variations between the volume of sugar estimated and that actually produced. The essential theme in QSL’s

defence of the claim is that it was to manage price risk, but any risk that production might
fall was a risk borne by the millers, here Wilmar.

Clauses relevant to the supply of information or advice by Wilmar to QSL, and vice versa, include cll 6 and 20.[103] They are as follows:
[103] And also cl 5 referred to later.

“6.1

The Supplier agrees to supply 100% of its production (and that of any of its Subsidiaries operating a mill in Queensland) intended for bulk export, during any Season while this Agreement remains in force, to Queensland Sugar for delivery to the Lucinda, Townsville and Mackay bulk sugar terminals or such other facility nominated in Clause 9. For the avoidance of doubt, if the Supplier intends to sell production to a trader or other intermediary and has reason to believe that trader or intermediary may intend to supply the sugar by way of bulk export that production will be deemed to be intended for bulk export.

6.2

The Supplier will advise by 30 November, in the calendar year preceding delivery the quantity which it is estimated will be supplied under this Agreement in that Season by way of a schedule specifying weekly deliveries to each bulk sugar terminal (the Initial SPE).
6.3 The Supplier’s advice in relation to the quantity of sugar to be supplied
is not binding on the Supplier, although a departure from that amount
may result in a price change pursuant to Clause 6.6.
6.4 The Supplier will then advise Queensland Sugar of:

(a)

any change of quantity to be supplied under this Agreement; and
(b) the reasons for that change (including the extent to which it was
due to natural seasonal variations, or due to the Supplier’s using
sugar for other commercial purposes);
by a written declaration on the Wednesday preceding the last Friday of each calendar month; or on the prior working day if the Wednesday is a public holiday, or more regularly if requested by Queensland Sugar or if there is a significant change from the quantity previously advised.

6.5

The Supplier will not make any change to the quantity notified under Clause 6.2, other than to the extent the variation relates to natural seasonal variations in crop size, without the prior consent of
Queensland Sugar. Queensland Sugar’s consent is not to be
unreasonably withheld.

6.6

If consent is given pursuant to clause 6.5 and the Supplier proceeds with the change in quantity from that notified, Queensland Sugar will determine the financial effect in accordance with the procedure set out
in Schedule 5. The financial effect will be for the Supplier’s
account.[104]
…
[104] Amended by Amendment Deed cl 2(d).
20.1 The Supplier and Queensland Sugar warrant to each other that they are respectively duly formed under the laws of its places of formation and have power and authority to enter into and perform their obligations under this Agreement, and each person executing this on their behalf has full power and authority to execute it on behalf of the Supplier or Queensland Sugar as the case may be.
20.2 The Supplier acknowledges that:

(a) Queensland Sugar has not and does not intend to provide advice (including financial advice) to the Supplier as to participation in this Agreement or otherwise;
(b) it has sought and obtained advice (including financial advice) about its decision to participate in the pricing and payment options in this Agreement and to otherwise manage the financial and other risks associated with their participation in this Agreement and more generally its business activities with respect to sugar;
(c) participation in the pricing and payment options (and for that matter, other means of seeking to manage commodity price and foreign exchange volatility) each involve risks and that the decision as to whether and as to how to manage those risks are those of the Supplier and not of Queensland Sugar;
(d) it has not relied upon anything that Queensland Sugar (or its directors, officers, employees or agents) have represented (whether by words, conduct, silence or otherwise) in relation to the pricing and payment options or any other matter in deciding whether to participate in this Agreement or other activities; and
(e) in the absence of any manifest error, any certificate given by Queensland Sugar with respect to a matter under this Agreement is taken to be prima facie evidence of the matter
certified.”

Also relevant in identifying the nature of the relationship between the parties is cl 22. That clause provides:

“22. Queensland Sugar Not Intended to Make Profit or Loss

22.1

The parties intend that Queensland Sugar is to make no profit or loss in performing its obligations under this Agreement or the other Supply Contracts. To achieve that intention this Agreement enables Queensland Sugar to pass on to all Participants all costs and revenues of any nature that it incurs or receives in performing its obligations under the Supply Contracts, including overhead and administrative costs.

22.2 To the extent that provisions of the Schedules to this Agreement would otherwise result in a situation where in performing its obligations under the Supply Contracts:

(a)

Queensland Sugar would incur a cost it was not entitled to recover from Participants; or

(b)

Queensland Sugar would receive revenue that Participants were not entitled to receive a share in;

Queensland Sugar can allocate that cost or revenue to the Participants to which, in the reasonable opinion of Queensland Sugar, that cost or
revenue is attributable.”

Clause 4, which I needn’t set out, makes it clear that the Wilmar RSSA applied to the
2010 sugar season. Clause 5 assumes some importance as it is the clause which deals with the draft operational improvement plan which appears in Schedule 4 and which has already been mentioned. Clause 5 is in these terms:

“5. Service and Liaison

5.1

Queensland Sugar will maintain good communication with the Supplier, particularly in terms of issues related to sugar marketing.

5.2 Queensland Sugar will maintain regular written (at least monthly), face to face or phone contact with the Supplier regarding market developments in all aspects of the sugar market of interest to the Supplier, including, but not limited to:

(a) customer by customer updates;
(b) pricing issues;
(c) competitor behaviour;
(d) futures market activity;

(e)

operational issues including changes in shipping market and vessel availability, sugar quality and logistical matters; and

(f)

other aspects of the sugar market as reasonably requested by the Supplier.

5.3 Queensland Sugar in consultation with the Supplier and other Participants will develop an operational improvement plan by 31 March 2009 to cover the period until 30 June 2012. Pending the development of the operational improvement plan as required by this Clause 5.3, the draft operational improvement plan included in Schedule 4 will apply and Queensland Sugar agrees to seek to operate in accordance with its terms. It is acknowledged that the draft operational improvement plan in Schedule 4 will be further developed and will change as a result of consultation with the Supplier and other Participants, and additional analysis and input from the Queensland Sugar board of directors.
5.4 The operational improvement plan will involve Queensland Sugar reviewing its operations and developing business improvement strategies. Those strategies will be measured by KPIs, which will be reported to the Supplier and other Participants on a monthly basis in the reporting format identified in Schedule 3.
5.5 Queensland Sugar will meet with the Supplier and other Participants on a quarterly basis. During the term of the operational improvement plan, at each such quarterly meeting Queensland Sugar and the participants will discuss and consult in relation to the progress Queensland Sugar is making against the operational improvement plan.
5.6 Queensland Sugar will consult with the Supplier and other
Participants:

(a)

at each quarterly meeting - about its marketing strategy for the Season including tonnage allocations to markets, competitive issues and other key market planning decisions; and

(b)

at the March quarterly meeting - about its operating and capital budget for the following financial year;

(c)

at the June quarterly meeting - regarding the suitability of this Agreement to future market and industry structural circumstances.
and agreed to give proper consideration to any changes requested
by the Supplier and other Participants.”

Clause 7 provides for special arrangements if the supplier (here Wilmar) nominates to supply less than 25,000 tonnes of sugar in the season. Wilmar did not so nominate. Clause 8 contains a warranty by Wilmar as to the origin of the sugar, namely that it was the product of a Queensland raw sugar mill and cl 9 concerns the obligation of delivery. Clause 9 has to be read in conjunction with cll 1, 6 and 10[105] which have already been set out. Clause 9 is as follows:
[105] Clauses 1 and 10 are, relevantly at paragraph [56] and cl 6 is at paragraph [60] of these reasons.
“9. Delivery

9.1

The quantity of raw sugar defined at Clause 6, above, will be delivered by and at the expense of the Supplier, to the Lucinda, Townsville and Mackay bulk sugar terminals or, subject to Clause 9.2, to another facility as nominated by Queensland Sugar from time to time. The weight of sugar delivered by a mill shall be determined by a certified weigher at the Lucinda, Townsville and Mackay bulk sugar terminals or a certified weigher at such other facility as nominated by Queensland Sugar. Deliveries are to be completed within 7 days of the Supplier ceasing crushing operations for the Season.

9.2

Where Queensland Sugar nominates an alternative facility for delivery and weighing, Queensland Sugar will reimburse the Supplier for any transport and port charges costs that the Supplier may incur that are in excess of those which would have been incurred had the delivery been made to the bulk sugar terminal specified in Clause 9.1. At the time of nomination of the other facility, Queensland Sugar and the Supplier will agree as to the
additional costs to be reimbursed.”

Clause 13 concerns payment by QSL to Wilmar but must be considered in light of cl 12
and the definition of “pool” in cl 2. [106] Clauses 12 and 13 are as follows:
[106] The definition of “pool” appears at paragraph [58] of these reasons.
“12. Price

12.1 The Supplier’s production supplied under this Agreement will be
allocated to Pools for the purposes of pricing in accordance with
Schedule 2.
13. Payment

13.1

Queensland Sugar will determine a scheme for advance payments under this Agreement, which will be communicated in the format set out in Report 2 in Schedule 3. Queensland Sugar will review the advance payments schedule each month.
13.2 The initial advance rate will not exceed 60% of Queensland
Sugar’s weighted average forecast final price of all pools at the
time of setting the initial advance rate.

13.3 The final payment for each Season will be made within 30 days of the completion of that Season.”

Clause 14 deals with GST and is of no moment here. Clause 15 concerns termination of the Wilmar RSSA. While neither party alleged that they had terminated the contract under cl 15, cl 15 is relevant to the construction of the Wilmar RSSA which QSL presses. The clause is as follows:
“15. Termination
15.1 This Agreement shall have a rolling term of three years, with automatic extensions of a further 12 months on each 30 June in accordance with Clause 4, until terminated in accordance with the provisions of Clauses 4 or 15.
15.2 If either party is in breach of the provisions of this Agreement, the other party may give notice in writing of the breach to the party in breach requesting that such breach be remedied within 28 days of the date of receipt of the notice. If such breach is not remedied within 28 days from the date of receipt of such notice, or if other arrangements satisfactory to the party giving notice are not made in such time, the party giving the notice may (but shall not be obliged to) terminate this Agreement; provided that this Agreement shall remain in full force and effect until:

(a) if notice of termination was given prior to the Supplier’s
notification of quantity for the next Season being given
pursuant to Clause 6.2, the next 30 June; or
(b) if notice of termination was given after the Supplier’s
notification of quantity for the next Season being given pursuant to Clause 6.2 the 30 June constituting the end of that Season;

in recognition of the fact that once the notification of quantity is given Queensland Sugar will contract for the sale of the sugar to
be supplied by the Supplier during that Season in advance, and that a termination part way through the Season would cause significant disruption to the pooling arrangement.

15.3 If a majority of Grower Representative Members vote in favour
of appointing a selection panel for election of Grower Directors
in accordance with Article 29B of Queensland Sugar’s
constitution (other than in response to a prior appointment of Mill Owner Directors, or a vote by Mill Owner Members in favour of considering a nomination for election of Mill Owner Directors in accordance with Article 29B), Queensland Sugar will notify the Supplier, and either party may (but is not obliged to) terminate this Agreement by providing written notice to the other party of
such termination within 10 days of Queensland Sugar’s initial
notification; provided that this Agreement shall remain in full
force and effect until:

(a) if notice of termination was given prior to the Supplier’s
notification of quantity for the next Season being given
pursuant to Clause 6.2, the next 30 June; or
(b) if notice of termination was given after the Supplier’s
notification of quantity for the next Season being given pursuant to Clause 6.2, the next 30 June constituting the end of that Season;

in recognition of the fact that once the notification of quantity is given Queensland Sugar will contract for the sale of the sugar to
be supplied by the Supplier during that Season in advance, and that a termination part way through the Season would cause significant disruption to the pooling arrangements.

15.4 A party may terminate this Agreement immediately by written notice to the other party if the other party:

(a)

stops or suspends or threatens to stop or suspend payment of all or a class of its debts;

(b)

is insolvent within the meaning of section 95A of the Corporations Act;

(c)

is presumed insolvent by a court by reason of section 459C(2) of the Corporations Act;

(d)

fails to comply with a statutory demand (within the meaning of section 459F(1) of the Corporations Act);

(e)

has an administrator appointed over all or any of its assets or undertaking or any step preliminary to the appointment of an administrator is taken;

(f)

has a controller within the meaning of section 9 of the Corporations Act or similar officer appointed to all or any of its assets or undertaking; or

(g)

has an application or order made, proceedings commenced, a resolution passed or proposed in a notice of meeting or an application to a court or other steps taken for its winding up or dissolution or for it to enter an arrangement, compromise or composition with or assignment for the benefit of its creditors, a class of them or any of them.
In the event of termination pursuant to this Clause 15.4, Queensland Sugar will have a right to off-set any losses incurred as a result of the early termination, including losses incurred as a result of closing out sugar future trades entered on the basis of future production contracted to be supplied by the Supplier, against any money owed to the Supplier under this Agreement at
the time of termination. Any gains on closing out such sugar futures trades will be deducted from any other losses incurred as a result of the early termination or other amounts owing to Queensland Sugar, and to the extent such gain is greater than any such losses or amounts owing, the excess will be payable to the
Supplier.” (emphasis added).

Clause 16, 17, 18 and 19 deal with confidentiality, the nominated governing law, the method of giving notices and assignment respectively. They are of no direct relevance to the present dispute.
Schedule 2 deals with the pooling arrangements and it is critical. The pools are
categorised into either “ICE 11 Pools” or “Non ICE 11 Pools”. They are defined as:
“ICE 11 Pools means Pools where the Pricing Mechanism is directly related
to the ICE 11 Contract.
Non ICE 11 Pools means Pools where the Pricing Mechanism is not directly
related to the ICE 11 Conract.”
The terms “ICE” and “ICE 11 Contract” are defined as:
“ICE means ICE Futures US, Inc (formerly the New York Board of Trade).
ICE 11 Contract means a sugar futures contract (known as a world sugar
No 11) offered for sale or purchase by ICE.”
Clause 2 of Schedule 2 identifies three pools as “Non ICE 11 Pools”. These are the pools called the “US Quota Pool”, the “EU Quota Pool” and the “LTC Pool”. “LTC” is defined
as:
“LTC means long term contract.”

[70] Two pools are “ICE 11 Pools”. These are the “Pricing Platform Pool” and the
“Queensland Seasonal Pool”. The “Pricing Platform” is defined as:
“Pricing Platform has the meaning given in Clause 2.4.1 of Schedule 2.”

Clause 2.4.1 of Schedule 2 concerns the Pricing Platform Pool. It provides, relevantly:

“2.4.1.1 General
The Pricing Platform is a mechanism to provide a simple framework within which Pool Participants can manage a significant portion of their sugar price risk.
The Pricing Platform will consist of a number of Pools which are managed by a Risk Manager whose basic responsibility is to price the ICE 11 price component and the AUD USD exposure represented by that ICE 11 price component committed to the Pool. The Risk Manager will be either Queensland Sugar, the Supplier or with the approval of both Queensland Sugar and the Supplier, an external Risk Manager.
Currently the costs and benefits of variations from the Pricing Platform 1:2:2:1 fixed pricing month allocations are for the account of the Seasonal Pool. Should the total tonnage allocated by all Participants to the Pricing Platform pools at the Pricing Declaration Date be greater than 50% of the total tonnage allocated to all ICE 11 pools, Queensland Sugar and Participants will determine whether it would be fairer to distribute these costs and benefits to the Shared Pool.
In the interim, to mitigate any conflict in marketing strategy between Seasonal Pool and Pricing Platform pool tonnages, in the event that the total long futures position generated from Queensland Sugar sales is less than the total short futures position arising from all Pricing Platform pools for any pricing month, the identifiable cost or benefit in remedying this situation will be distributed equally, based on tonnage, to the pricing Platform pools.

2.4.1.2 A Pricing Platform Pool can be established in three ways
1. By Queensland Sugar. Examples of Pricing Platform Pools likely to be

offered by Queensland Sugar are the Aggressive Pool and the Long Term
Target Pool.

2. By the Supplier. Examples of Pricing Platform Pools likely to be

established by the Supplier are Pools under which the Supplier manages its
price risk.

3. By an external Risk Manager. With the approval of both Queensland Sugar and the Supplier, an agreement may be entered into under which an external Risk Manger is authorised to act as the Risk Manager of a Pricing Platform Pool. Examples of a Pool likely to be offered by an external Risk Manager is a Pool comprising a number of Suppliers but with a common specialist Risk Manager.

2.4.1.3 Requirements for Queensland Sugar Pricing Platform Pools
offered to Growers
If a product that Queensland Sugar is offering under its own name on the Pricing Platform is offered by the Supplier to Growers (for the purpose of managing price risk involved with their cane supply), then Queensland
Sugar’s description of that product will be given to those Growers at the time
the offer is made.

2.4.1.4 Pricing Declaration Date
In order that Queensland Sugar can determine the sugar that it is responsible for pricing and what sugar other Risk Managers are responsible for pricing, it is necessary to establish a Pricing Declaration Date. The Pricing Declaration Date for any Season is 30 November prior to the year of that Season. For example, for the 2009 Season the Pricing Declaration Date is 30 November 2008. The Pricing Declaration Date for a Season may be changed by Queensland Sugar to a maximum of 3 months either side of 30 November, but only after consultation with Participants.

2.4.1.5 Commitment to Pricing Platform
Applications to commit tonnage to a Pricing Platform Pool must be made by the Supplier as per Form A to this Agreement. Applications can be made at any time up to the Pricing Declaration Date. Queensland Sugar must confirm each Application and once confirmed it becomes Committed Sugar.
The only grounds that Queensland Sugar has to refuse an Application are
1.     That acceptance of the Application would result in the Supplier exceeding its limit of Committee Sugar as determined by Clause 2.4.1.6 of this Schedule.
2.      That acceptance of the Application is likely to result in the Supplier exceeding its Credit Limit as established through Clause 3 of this Schedule.
3.      That the Pool will not meet the minimum tonnage requirement specified in Clause 2.4.1.9 of this Schedule.

2.4.1.6 Limit on Committed Sugar
In order to minimise the risk of Participants not supplying sufficient sugar to meet their obligations and to restrict the financial impact on Queensland Sugar of the commitment of sugar by Participants to the Pricing Platform, there will be a Commitment Limit on the amount of Committed Sugar.
The Commitment Limit will be 70% of SPE for the current Season and 50%
of the Supplier’s supply estimate for two Seasons forward and 30% of the
Supplier’s supply estimate for three Seasons forward.
Should the Supplier elect to participate in the Long Term Target Pool, they will provide a non binding supply estimate for those Seasons beyond the current Season for which they wish to use the Long Term Target Pool. The Supplier has an obligation to inform Queensland Sugar of changes of more than 10% of these future Seasons estimates. Where Queensland Sugar is
concerned that the Supplier’s estimate of future Seasons supply is
overestimated, the Supplier’s actual delivered tonnage under this agreement
for the latest completed crushing will be used as the estimate of future
Seasons supply for the purpose of setting these limits.
These limits may be changed by Queensland Sugar at its absolute discretion
but only after consultation with all Participants. …”

The definition of “Queensland Seasonal Pool” has been referred to earlier but the full
definition is:
“Queensland Seasonal Pool is a Pool operated by Queensland Sugar to
which the balance of all Supplier’s sugar not allocated to other Pools will be
allocated and priced in accordance with Queensland Sugar’s board-approved
risk management policy.”
Of some importance is the definition of “Committed Sugar”. That is:
“Committed Sugar means the tonnage of sugar that the Supplier must supply
under this Agreement. It is the total of the Supplier’s Pricing Platform
tonnages and Non ICE 11 tonnages.”
In essence then, the Queensland Seasonal Pool represents sugar not committed to the other pools. By cl 2.4 Wilmar may allocate sugar to other pools up to a limit of 70% of its raw sugar export production. A participant such as Wilmar may therefore price up to 70% of its production itself with a minimum of 30% falling to the Queensland Seasonal Pool. Wilmar or any other miller may of course elect not to allocate sugar to the other pools or may allocate less than 70%. Whatever is not allocated falls to the Seasonal Pool.[107]
[107] An explanation is provided by Mr Wenham, CFI 33, paragraph [71].
Schedule 2 of the RSSA only contains a couple of provisions which deal exclusively with the Queensland Seasonal Pool. These are contained within cl 2.6 which is as follows:

“2.6 Queensland Seasonal Pool
2.6.1 Queensland Seasonal Pool Tonnage
The total tonnage of sugar allocated to this Pool will be the total of all Participants sugar less the total of all Participants sugar allocated to all other Pools.
The Supplier’s tonnage allocated to this Pool will be the Supplier’s total
tonnage less the total of the Supplier’s sugar allocated to all other Pools.
The Supplier’s Tonnes IPS sugar allocated to this Pool will be the Supplier’s
total Tonnes IPS sugar less Tonnes IPS sugar allocated to all other Pools.

2.6.2 Queensland Seasonal Pool Price
The Queensland Seasonal Pool will be allocated with the balance of returns of all ICE 11 sales not allocated to other Pricing Platform Pools. The futures gain or loss will be based on the residual ICE 11 exposure which is
Queensland Sugar’s bought futures from all ICE 11 sales less the exposure
managed by Platform Pricing Pools. Seasonal Pool pricing will not
commence until the day after the Pricing Declaration Date.
Any foreign currency net returns for Queensland Seasonal pool sales for a Season will be converted to AUD at the rate hedged by Queensland Sugar for Queensland Seasonal pool sugar in accordance with the guidelines provided in the Queensland Sugar board-approved financial risk management policy. Queensland Sugar will not commence pricing and risk management activities of this Pool for the Season until after the Pricing Declaration Date.

87. Moreover, the behaviour of the ICE No.11 futures price signaled that QSL should have reduced its hedge in the Seasonal Pool months before it received the revised production estimates from its suppliers. Static application of the Rolfo (1980) framework would have resulted in a massive reduction in the losses generated by QSL; however, the approach is relatively simplistic and ignores the ever-changing dynamics of the marketplace. As discussed above and shown in Figure 4, volatility in the ICE No.11 futures price was increasing rapidly at the time QSL was acquiring futures positions. By 30 May 2010, the four-week volatility in ICE No.11 futures price for July delivery was 69.5%. A prudent hedger would have adjusted its futures position to account for this increased volatility. Figure 8 shows how the increased volatility would have affected the optimal hedging
strategy for QSL’s total expected supply.
88. The volatility in the ICE No.11 price on 30 May reduces the optimal pre-commitment
Figure 8: Price Volatility and the Dynamics of Optimal Hedging
Information on price volatility taken from the ICE No.11 price data underlying Figure 4.
from 51% of total expected production to just 19%. If QSL had accounted for the evolving dynamics of the ICE No.11 market in its trading strategy, it would have reversed its positions in light of the substantial volatility and reduced or even eliminated its losses in the 2010 Season. This dynamic trading strategy would have likely resulted in positive revenue when QSL sold un-hedged sugar for the
higher prices reached during the end of harvest.”[212]
[212] His report, exhibit 21, Part 5.2.2, paragraphs [76]-[88].

Professor Carter’s view was not that no sale should occur until the entire harvest was
complete. His view was that raw sugar, once produced, could be sold but that no part of the crop should be sold until that part was actually produced. Therefore, there would be various sales across the season. This point was made clear by him in cross-examination:
“Yes, I can. Your view ultimately is that there should have been no hedging
of sugar allocated to the seasonal pool until the harvest was complete?---Not necessarily not until the harvest was complete. Until there was some production that was allocated to the seasonal pool.
I’m sorry. Say that again?---I don’t agree with the last part of your question.
Yes?---You said ‘until the harvest was complete’.
Yes?---That’s - that’s not my argument. It’s once the sugar is in the shed.
Then it could be sold, and the harvest continues over several months.
And if we’re looking at paragraph 2(c) then - I’m just looking at your
sentence which commences:
Once harvest was complete in the physical market, QSL could have sold the seasonal pool sugar in equal monthly increments.
I had read that as you suggesting that it was only once harvest was complete,
that QSL would go and sell the sugar in the physical market?---It wasn’t my
intention, to imply the - the entire harvest. If you read the rest of the
paragraph, I think you’ll see that it comes through, that my argument is they
could sell sugar throughout the harvest season.
Throughout the harvest season?---Yes.
So you would not commence selling until after the harvest had started, but
perhaps at the point that sugar started to hit the sheds?---Correct.”[213]
[213] Transcript 3-6 to 3-7.
Professor Carter’s opinion can be simply summarised. He says that application of the
Rolfo model results in an optimum hedge of 51%. As the Seasonal Pool constitutes only 30% of the total market, it follows that by force of the RSSA and the structure of the various pools, up to 70% would be committed with the result that none of the Seasonal Pool should be hedged; that is, committed before the sugar to be committed is physically produced.
As explained in Professor Carter’s report,[214] the model he adopted was formulated by an
[214] Exhibit 21, paragraph 80, set out at paragraph [204] of these reasons.
economist (Jacques Rolfo) in a paper published in 1980. The paper was admitted as exhibit 29. The paper hypothesises that by application of a mathematical formula, optimum hedging rates can be calculated.
Professor Gray is an economist who has worked for Fountain Economics. That firm has no particular practice in agricultural economics. Professor Gray has been Professor of Finance at the University of Queensland since 2000 but his particular expertise is not in
agricultural economics.[215] It is obvious that Professor Carter’s experience in agricultural
[215] Transcript 8-13 to 8-16.
economics is superior to that of Professor Gray.
However, Professor Gray has studied and published in the field of futures contracts and
has been involved in agricultural projects.[216] I accept Professor Gray’s expertise to give
[216] Transcript 8-19.
the evidence he did.
Professor Carter and Professor Gray approached the preparation of their reports from different starting positions. Professor Carter assumed that the role of QSL was to manage
production risk by use of the Seasonal Pool as a “buffer”. Professor Gray approached the problem on the basis that QSL’s function was to manage price risk not production risk.
Indeed, that assumption led Wilmar to object to the evidence of Professor Gray as his evidence, it was submitted, proceeded on what they submitted was an erroneous assumption.
In my judgement of course, the assumption of Professor Gray is correct at least to the
extent that QSL’s obligation did not extend to allocating sugar upon a consideration that

production might fall below that estimated by the millers pursuant to the terms of the
RSSA.

There was objection to Professor Gray’s evidence on other grounds. Those objections
were made late in the trial and were the subject of written submissions. The central objection was that QSL had failed to call evidence from a number of witnesses, the effect
of such failure being that no factual basis was established for Professor Gray’s opinions.
Professor Gray gave evidence about the appropriateness of the Rolfo model. Those opinions were not based on the factual assumptions which Wilmar says were not proved by QSL. The only basis upon which Professor Carter opines that none of the Seasonal Pool sugar should have been allocated until being physically produced is upon the
application of the Rolfo model.[217] Professor Gray’s evidence on that topic is clearly
[217] Carter report, exhibit 21, paragraph [80].
admissible.
There was also objection taken to Mr Lee’s evidence. That was also dealt with in the

written submissions. However, for the reasons I have given, I have not relied on his
evidence so there is no utility in considering those objections.

The real issue is whether in the contest between Professor Carter’s opinion and Professor
Gray’s, it is found that the Rolfo model ought to have been applied so that no sugar (from
the Seasonal Pool) should have been allocated until it was physically produced. If so, then, assuming either a contractual obligation or tortious duty to manage production risk, QSL has failed to do so and has caused the loss claimed.
Of course there is nothing in the RSSA which suggests that no part of the Seasonal Pool should be sold until it is physically produced. For instance, various terms of the RSSA contemplated there would be communication from Wilmar (and other millers) to QSL about what will be produced and that is what is to be marketed.[218]
[218] See recitals G and H and cll 5.6 and 6.
If the correct approach or expectation was to price no part of the Seasonal Pool until it was physically produced, then that is a position that was not understood by either party during the 2010 season. Marketing meetings were contemplated pursuant to cl 5.6 of the RSSA.[219] There were monthly reports produced showing the contracts entered into by QSL and there was no objection raised by Wilmar or any of the millers.[220]
[219] QSL’s submissions at [37(d)]
[220] Burgess statement, CFI 21, at [16]; transcript 1-67 to 1-69 and 1-71 to 1-75.
Professors Carter and Gray conferred before trial and a joint report was prepared.[221] While there was agreement about various things, there is also substantial disagreement. However, much of the disagreement stems from differences of opinion as to the legal obligations of QSL in managing the Seasonal Pool. It is only necessary to consider the evidence of the two experts as it pertains to the central question, namely whether the application of the Rolfo model is appropriate.
[221] Exhibit 24.
There was dispute between Professors Carter and Gray as to the application of the Rolfo model. This arose in a number of ways including:

(i)

whether the data of the 1975 and 1981 seasons, where there were extraordinary conditions, should be included in any Rolfo consideration;

(ii)

a risk aversion coefficient had to be decided upon for the purposes of the Rolfo model. Professor Carter settled on the risk aversion coefficient of 1. Professor Gray opined that there was no evidence upon which such a coefficient could be settled upon given that the relevant risk was the risk of a group of individual
millers;
(iii)    whether in calculating price variance, inflation ought to be considered;
(iv)     whether the Rolfo model, assessing as it does the selling of futures at a particular point in time, applies where there are various allocations across a season;
(v)      whether the Rolfo model was appropriate for application to a body like QSL.

In the end, the issue as to whether the 1975 and 1981 years ought to be included in the
calculation makes no difference to the result of Professor Carter’s opinion. This is
because if the 1975 and 1981 years are removed from the calculations, the optimum hedge ratio rises to 63%. That is below the 70% which is the maximum which can be allocated by millers to the other pools. Professor Carter would say that 37% must be retained which is more than the 30% constituting the Seasonal Pool.
To my mind though, the debate about whether or not to include the data from the years 1975 and 1981 somewhat demonstrates the subjective nature of the Rolfo model. Professor Carter was prepared to concede that it was reasonable to discount the data from those two years thus leading to a very significant alteration in the optimal hedge ratio.[222]
[222] Transcript 3-43 to 3-45.
Wilmar’s case though is that QSL were effectively obliged to apply the model
notwithstanding its vulnerability to disagreements about its application.
Professor Carter applied a risk aversion coefficient of 1. The risk aversion coefficient ought to reflect a value that is representative of the millers as a group.[223] That must logically be so because the RSSA is one of a number of sugar supply agreements and the object of the exercise is the pooling of sugar. Under cross-examination Professor Carter said this:
[223] Transcript 3-53.
“I see. So if QSL is sitting down and applying this Rolfo formula, it should
adopt a value of M that’s representative of the millers as a group?---Yes.
And what if the different millers have different risk aversion?---That
wouldn’t change my opinion.
But I’m just interested in the value of M, you understand, not the outcome,
just the value of M. If different millers within the group have different risk aversion, how does QSL come up with a value for M?---Well, their focus should be on what - what their job is, and their job is to manage the revenue from the sugar in the seasonal pool, and as far as I understand it, that pretty much comprises their portfolio. So that would be the decision-making steps
that they would take. And that would be their focus. They wouldn’t be
focused on certain aspects of individual mills.
Well, if we’re trying to replicate the risk aversion of the millers as a group, we do have to look at the millers; don’t we?---Well, the millers have turned the sugar over to QSL. So that’s when I say ‘as a group’. So it’s - if there’s
certain unique characteristics of a certain mill - that would not play a role.
All right. If QSL is not trying to replicate the risk aversion of any particular mill but, rather, trying to come up with a figure loosely based on all the mills together - is there some sort of formula or equation they could apply to do
that?---Well, I think it would be reasonable, for them to establish that they’re
averse to risk, that they have risk aversion, and proceed accordingly. And if
- following up on your question - if they’re using the Rolfo framework or
something similar, they could then see how a change in that assumption
affected the optimal hedge ratio.
Sure. So if I’m following you, you’re saying they should make an
assumption that the millers in the group are risk-averse?---Yes.
And how risk-averse?---That would be their choice. They could be highly risk-averse or less risk-averse.
Sorry?---As they said - - -
When you say it would be their choice -whose choice?---QSL.
Right. And how is QSL to choose?---As I said - - -
What criteria does it apply to choose?---Yes. As I said, they could make that decision and then conduct some sensitivity analysis to see how that choice
affected the outcome, and given the nature of the sugar market, it’s not going
to have a huge effect on the optimal hedge ratio, because the contribution of Rolfo is to show that, when you have output variability and price variability, the optimal hedge is going to be less than one.
Now, did you undertake an exercise like that yourself when you were applying the Rolfo model?---I did comment on alternative values for the risk-aversion parameter.
In the sense that you said that the risk-aversion value didn’t make any
difference to the result that was - - -?---In the end, it did not make a huge
difference. That’s right.
Did you seek to replicate the risk aversion for the millers as a group?---No.
I assumed a risk-aversion co-efficient of one.”[224]
[224] Transcript 3-53 to 3-54.
In the end, as Professor Carter explained, the risk aversion coefficient had no real impact on the application of the formula. That is because the value of some of the other integers were such as to render the risk aversion figure as having little impact in the application of the mathematical formula. The fact remains though that the selection of the appropriate risk aversion coefficient became arbitrary. In my view, this highlights the problems with applying the Rolfo model in a complicated structure such as that established by the RSSA and similar agreements entered into by other millers.
Professor Gray thought that inflation ought to be taken into account. Professor Gray
plotted a “trend line” which he said would give a better indication of increase in prices
including reflecting inflation. Under cross-examination Professor Carter said this:
“What Professor Gray has done in figure 5 is plot out the price data and
identified the mean, which is, in effect, the mean that you have adopted without fitting a trend line; is that right?---Without fitting a trend line for the purpose of calculating the variance?
Yes?---Yes. That’s correct.
So if we don’t fit the trend line, that’s what the figure looks like?---Yes.
And Professor Gray’s point is that, if we look at the actual prices, we can
actually see a trend over the long term of the average increase in price?---
Right.
And that’s in accordance with expectations, if for nothing else, because of
inflation?---I think that’s part of his argument. Yes.
Yes. And do you agree that at least we can discern that trend, just from
looking at the prices themselves? It’s observable; isn’t it?---Yes. Yes.
So there is that trend. There’s no doubt about that?---Correct.
And the debate between you and Professor Gray is, really, whether when
you’re assessing the variance from the mean you should fit a trend line to
the mean?---That was his suggestion.
Yes?---It’s not something that’s in Rolfo, but - yes. Yes. That was his
suggestion.
Yes. And we can see it makes a difference, if we look over on page 31- - -?-
--Correct.
- - - because what we’ve got in figure 6 is Professor Gray having fitted a
trend line, and the variance is, obviously, less, should you fit the trend line;
do you agree?---That’s correct. And It’s addressed in our joint report.
Yes?---It does change the hedge ratio from 51 to 63 per cent.
And do you suggest that it’s inappropriate, to fit a trend line?---1 think it’s a
reasonable suggestion by Professor Gray.
Yes.
HIS HONOUR: How do you reflect inflation, if you don’t?---You don’t,
your Honour.
MR POMERENKE: And just while we’re on that figure, figure 6, we can
see the influence of these two data points for ‘75 and ‘81. They’re very high;
aren’t they?---Yes.
So is the upshot of this trend line that you agree that it’s reasonable, to fit one, and that’s, probably, better because it reflects inflation?---I agree it’s reasonable, and that’s why I recalculated the optimal hedge ratio and found
that it did increase slightly to 63 per cent.
So - - -?---It’s not an unreasonable suggestion.
Yes. So what is your opinion now as to the optimal hedge ratio?---Fifty-one per cent.
So you adhere to the 51 per cent without fitting the trend line?---Right, because I followed Rolfo.
Right, except - we’ll come back to this in a moment. Except in relation to
the difference between expectation and actual?---And that was a data issue.
Yes.
Yes. So you thought it’s, probably, reasonable, to fit a trend line, but because Rolfo didn’t do it, you didn’t do it; is that right?---I didn’t say that. I followed
the Rolfo methodology the best I could.
Yes?---And that’s the result I obtained. Professor Gray suggested a
modification of that, and I looked into that and found it did change the ratio
somewhat, but still didn’t affect the bottom line with regard to the optimal
ratio for the seasonal pool.
Which is the preferable approach, in your opinion, to fit the trend line or
not?---1 think it’s reasonable, to give a range. So you could - you could
provide a range, and - then that would be up to the hedger to decide.
I’m sorry. I don’t understand. Do you fit the trend line or not?---You could
do both.
And no preference as between the two?---That would be up to the hedging
organisation.
Which is likely to give you a more accurate estimate of variance?---It
depends on the future. Right? So we’re using historical data. So it’s hard to
say.
But if there’s an observable trend as to history and it’s reasonable, to reflect
that trend across history - isn’t that going to give you a more reliable
prediction as to the future?---You could take that view. Yes.
Do you agree with it?---I wouldn’t dispute it.
So - - -
HIS HONOUR: Sorry. Did you say you would or would not dispute it?---1 would not dispute it.
MR POMERENKE: So I think where that ends up is it’s preferable, to fit the trend line?---My answer was it’s - it’s fine, to fit the trend line, if you want to modify the Rolfo approach. I don’t have a problem with that. As I
said, I was trying to follow Rolfo the best I could.
HIS HONOUR: Does that mean that Rolfo doesn’t - or - the Rolfo method doesn’t take into account inflation?---Essentially, yes.
Do you think that’s a flaw in the method?---It could be a minor flaw,
depending on how it changes the optimal hedge ratio. And obviously- it
depends on the length of time and the market as well.”[225]
[225] Transcript 3-43 to 3-45.
Professor Carter’s point, which was made a little later in his cross-examination,[226] is that
[226] Transcript 3-45 ll 25-35. 227 Transcript 3-20 to 3-21.
this issue, in the end, made no difference to his conclusion that the full 30% of the crop represented by the seasonal pool ought not to have been allocated until it was physically produced. That is because when the figures are calculated the optimum hedge ratio still
sits under 70%. While that might be so, Professor Carter’s concessions in my view

undermine the appropriateness of the use of the Rolfo model in circumstances of the QSL
marketing structure.

Professor Gray’s opinion was that the Rolfo model assumes that the futures are sold at
one point in time and that is the beginning of the season and the crop is sold at one point in time and that is the end of the season. Professor Carter was cross-examined about this:
“And the way the equation works - the futures are sold only at the beginning
of the season?---That’s how the - the model applies it. Yes.
Yes. So it’s all sold at one point in time. And the way the equation works - the crop itself is sold only at the end of the season?---When it’s harvested,
yes.
Yes. And if things change during the course of the season - let’s assume for
the moment that three months into the season the volume had gone up by 30 per cent. The Rolfo model will still have you selling the same fixed number
of tonnes; won’t it?---Which volume are you referring to?
Let’s assume that in the real world - let’s - assume you’ve done your Rolfo
calculation at the start of the season and you’ve set your fixed number of
tonnes and you’ve set your optimal hedge ratio and that’s what you do for
the season, later turns out, that the volume’s going to be higher, you’ve set
your optimal hedge ratio according to Rolfo and, according to Rolfo, you’ve done all your pricing, that’s done, you’ve priced the fixed tonnes produced
by the Rolfo model. What I’m really putting to you is that those fixed tonnes
are the fixed tonnes priced according to Rolfo irrespective of the change in
volume that comes later?---That’s how the Rolfo model works, but I might
add that your example of a 30 per cent increase is not very realistic. As I explain in my report, the change in the volatility of the harvest is very
asymmetric. There’s low probability of a big increase compared to a
decrease, but you’re right. That’s how the model works.
Yeah. All similarly, if the volume were to go down, you would have priced
your fixed tonnage according to the Rolfo model already - - -?---That’s right, because you’re accounting for the possibility of volatility in the volume.”227
Whether or not the Rolfo model is appropriate to apply, perhaps as adapted, in a season where there are multiple sale points, need not be decided. Professor Carter here applies the Rolfo model on the basis of a single allocation of the crop through the sale of futures and the single sale of the physical actual crop. That, however, is simply not what is contemplated by the RSSA. What is contemplated by the RSSA is a continual cooperative approach between the parties during the season leading to multiple entries into the futures market and sales of the crop.[228]
[228] See cl 5 for instance.
Professor Carter insisted that the Rolfo model could be applied in the context of the arrangement set up under the RSSA. Professor Gray on the other hand opined that the Rolfo model was inappropriate for application in such circumstances.
Professor Carter was cross-examined on this issue as follows:
“Yes, yes. I’m just interested in the value for M, though. You said ‘a value
that represents the group’. Who do you include in the group?---The - the
millers who are supplying the seasonal pool sugar.
I see. So if QSL is sitting down and applying this Rolfo formula, it should
adopt a value of M that’s representative of the millers as a group?---Yes.
And what if the different millers have different risk aversion?---That
wouldn’t change my opinion.
But I’m just interested in the value of M, you understand, not the outcome,
just the value of M. If different millers within the group have different risk aversion, how does QSL come up with a value for M?---Well, their focus should be on what - what their job is, and their job is to manage the revenue from the sugar in the seasonal pool, and as far as I understand it, that pretty much comprises their portfolio. So that would be the decision-making steps
that they would take. And that would be their focus. They wouldn’t be
focused on certain aspects of individual mills.
Well, if we’re trying to replicate the risk aversion of the millers as a group,
we do have to look at the millers; don’t we?---Well, the millers have turned
the sugar over to QSL. So that’s when I say ‘as a group’. So it’s - if there’s
certain unique characteristics of a certain mill - that would not play a role.
All right. If QSL is not trying to replicate the risk aversion of any particular mill but, rather, trying to come up with a figure loosely based on all the mills together - is there some sort of formula or equation they could apply to do
that?---Well, I think it would be reasonable, for them to establish that they’re
averse to risk, that they have risk aversion, and proceed accordingly. And if
- following up on your question - if they’re using the Rolfo framework or
something similar, they could then see how a change in that assumption
affected the optimal hedge ratio.
Sure. So if I’m following you, you’re saying they should make an
assumption that the millers in the group are risk-averse?---Yes.
And how risk-averse?---That would be their choice. They could be highly risk-averse or less risk-averse.
Sorry?---As they said - - -
When you say it would be their choice -whose choice?---QSL.
Right. And how is QS to choose?---As I said - - -
What criteria does it apply to choose?---Yes. As I said, they could make that decision and then conduct some sensitivity analysis to see how that choice
affected the outcome, and given the nature of the sugar market, it’s not going
to have a huge effect on the optimal hedge ratio, because the contribution of Rolfo is to show that, when you have output variability and price variability, the optimal hedge is going to be less than one.
Now, did you undertake an exercise like that yourself when you were applying the Rolfo model?---I did comment on alternative values for the risk-aversion parameter.
In the sense that you said that the risk-aversion value didn’t make any
difference to the result that was - - -?---In the end, it did not make a huge
difference. That’s right.
Did you seek to replicate the risk aversion for the millers as a group?---No.
I assumed a risk-aversion co-efficient of one.
Right?---And then I looked at whether something different would have an impact and determined that it would not.
So you didn’t consider the risk-aversion co-efficient that was appropriate for
the millers as a group or, I take it, any individual miller either; is that right?- --Well, essentially I was doing a - providing estimation as a group, because
that was QSL.”[229]
[229] Transcript 3-53 to 3-54.
Professor Carter’s later answers in the passage set out above are a reference to the fact
(observed earlier) that the risk aversion coefficient, in the particular circumstances of the 2010 season, will not make any difference to the outcome because the effect of that factor
is “swamped” by other factors. However, there are clearly special features of the
arrangement set up under the various RSSAs which cast doubt on whether the Rolfo model is applicable. For instance, QSL is the party to whom the Rolfo model is to be applied but QSL is nothing more than a pass-through entity. The relevant risk is being
taken by the millers. The millers have not in fact entrusted the entire crop to QSL’s
management under the Seasonal Pool. The millers make their own decision in relation to up to 70% of production. The different mills are of different sizes, representing in turn different growers of different sizes all no doubt with different risk appetites. Such features are well divorced from the Rolfo assumptions.
Despite Professor Carter’s superior experience in agricultural economics, I favour the
evidence of Professor Gray. Professor Carter seems set in his views that Rolfo could be applied even though the scheme underpinned by the RSSA is very much a unique one and even though there were obvious other difficulties in the application of the model as explained above. I thought Professor Carter often appeared uncomfortable in cross- examination and rather resorted to reliance upon the Rolfo model rather than properly dealing with the issues raised by counsel. Professor Gray on the other hand seemed assured during cross-examination which I took as reflecting his confidence in the economic principles about which he was giving evidence. I found Professor Gray to be a very impressive witness.
Wilmar’s case is in effect that QSL had no alternative but to allocate the raw sugar
consistently with the Rolfo model. I reject that case.
Once the Rolfo model is found not to apply, there is no evidence upon which it can be concluded that the entirety of the crop allotted to the Seasonal Pool ought not to have been allocated except as it was physically produced. As that is the only case advanced by Wilmar, it has failed to prove loss.
QSL’s contributory negligence claim
QSL raises contributory negligence. Its submission is that the loss which was ultimately sustained was a result of the estimates lodged pursuant to cl 6.2 of the RSSA and the failure to lodge revised estimates pursuant to cl 6.4 of the RSSA. The counterclaim is put on the basis that if QSL was expected to react to the evolving weather conditions then so were the millers and therefore any loss is attributable to a failure to give proper estimates.
There are obviously difficulties in assessing contributory negligence in circumstances where I have found that no relevant duty fell upon QSL and I have found that Wilmar has not established the loss which it claims.
In my view though, assuming that a duty as pleaded fell upon QSL, QSL has failed to properly quantify any contribution to that loss by Wilmar.
The structure of the scheme is such that, on any version, Wilmar could not have contributed to its loss to the tune of 100%. This is because the RSSA was part of a pooling arrangement and other millers were also required to lodge estimates.
It necessarily follows that any consideration of the contribution of Wilmar to its loss must involve an inquiry into the actions (or lack of action) of the other millers. If the other millers had been negligent then Wilmar should have joined them in the proceedings.[230] Alternatively, the other millers are not negligent. Even if the other millers are not
[230] Civil Liability Act 2003 (Qld), s 32(1).
negligent, it doesn’t follow that Wilmar is solely to blame for its own loss. The fall in
production by the other millers may have been contributed to partially by the foreseeable weather conditions or may have been contributed to by other factors not foreseeable. There is simply no evidence upon which those types of assessments can be made.
Further, it is obvious that QSL has, to a point, acted independently of the estimates
provided pursuant to the RSSA.[231] This raises issues as to the extent to which Wilmar’s loss is attributable to those decisions as opposed to reliance upon the millers’ estimates.
[231] See the memorandum by Mr Beashel set out at paragraph [44] of these reasons; the fact that QSL began closing
That case has not been litigated by either party.
QSL’s counterclaim
QSL, by its counterclaim, asserts that any award of damages constitutes a “cost” for the

purposes of cl 22 of the RSSA and so can be passed back to the millers, relevantly here,
Wilmar. QSL seeks declarations to that effect.

In Electricity Generation Corporation v Woodside Energy Ltd & Ors,[232] the High Court described the appropriate approach to the construction of a commercial contract in these terms:
[232] (2014) 251 CLR 640.
“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’.
As Arden LJ observed in Re Golden Key Ltd, unless 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.”[233]
[233] At [35], citations omitted. Followed in Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017)
QSL’s proposition amounts to this; the intention of the contracting parties objectively
ascertained from the terms of the RSSA is that any loss which flows from a contractual obligation imposed under the RSSA, or a tortious duty which is not inconsistent with the contract, is to be borne by one of the parties, Wilmar, regardless of who is in breach. The consequence of acceptance of such a proposition would be to effectively relieve one of the parties to the contract (QSL) from all consequences of any failure to perform its obligations under the contract. I would not construe the contract in that way unless the express terms of the contract make such a construction inevitable. They do not.
The RSSA is part of a broader scheme whereby all participating millers pool the sugar for sale by QSL. While it is anticipated by the RSSA that QSL will not profit or suffer loss from the commercial enterprise envisaged by the RSSA, it remains the case that the RSSA contains covenants for the performance by Wilmar and covenants for the performance by QSL. It is against that background that cl 22 must be considered.
Clause 22.1[234] can be seen to contain two parts. The first sentence is a declaration of
[234] Set out at paragraph [61] of these reasons.
intention and the second sentence creates rights, one of which is a right in QSL “to pass on [to Wilmar] all costs … of any nature that it incurs … in performing its obligations under the supply contracts”.
The reference to “costs and revenues” in the second sentence colours the words “profit or
loss” in the first sentence. Those words “profit or loss” in the first sentence are also
limited and qualified by the words which follow them, namely “in performing its
obligations under this agreement or the other supply contracts”. It also imposes an
obligation upon QSL to pass on all revenues.
What is intended by cl 22.1 is that the position of QSL should be trading neutral. While
cl 22.1 protects QSL against a “loss in performing its obligations under [the RSSA]”,

there is nothing in cl 22 which protects QSL against a loss incurred as a result of breaching
its obligations under the RSSA or breaching any tortious duty.

An award of damages for breach of the RSSA or for breach of QSL’s tortious duty is not,
relevantly to cl 22, a “loss” which QSL may pass on to Wilmar.
The declaration sought should not be made and the counterclaim should be dismissed.
Orders
It is ordered that:

1. The claim is dismissed.
2. The counterclaim is dismissed.
3. The parties shall be heard on the question of costs.

risk management policy, trial bundle tab 66.

Agreement, trial bundle tab 31.

30 Trial bundle tab 122, at page 2.

and Counterclaim” throughout these reasons) at [15(b)(i)]; Amended Reply and Answer, CFI 30, (referred to

as “Reply” throughout these reasons) at [12]; transcript 1-61, ll 31-32; Statement of Gregory John Beashel,

exhibit 42, CFI 32 at [102(a)]; email from David Burgess to QSL-CSR sugars supply agreement estimate-2010

season, trial bundle tab 110.

QSL – Supply estimate, 28 January 2010, trial bundle tab 132.

at Annexure A. This figure is inconsistent with the figure at Forecast 2010 Season RSSA Supply, trial bundle

tab 479.

QSL – Supply estimate, 1 March 2010, trial bundle tab 162.

– Supply estimate, 26 March 2010, trial bundle tab 172.

QSL – Re Production Forecast, 27 May 2010, trial bundle tab 202.

QSL – Re Supply Agreement Estimate, 25 June 2010, trial bundle tab 220.

– Re Supply Agreement Estimate, 2 August 2010, trial bundle tab 241.

Estimate, 2 August 2010, trial bundle tab 241. This figure is inconsistent with the figure in Beashel statement at [102(i)].

Corrigenda to statement of Gregory John Beashel, 19 February 2018 at [102(k)]; Email from CSR to QSL –

Re Sugar Australia Tonnage return, 15 September 2010, trial bundle tab 286.

QSL – Sucrogen Production Estimates, 27 October 2010, trial bundle tab 307.

QSL – 2010 Crop Estimate, 24 November 2010, trial bundle tab 339.

paragraphs [137]-[158].

[134].

Breweries Ltd (1987) 10 NSWLR 468, 490-493.

337, 347.

Honour then was).

then was) at 555 and Stephen J at 574 and 576; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; Bryan v Maloney (1995) 182 CLR 609; Brookfield Multiplex Limited v Owners Corporation Strata Plan 61288 & Anor (2014) 254 CLR 185.

Allsop P and Basten JA at [241].

(j) and (m).

316 and Hill v Van Erp (1997) 188 CLR 159 at 179, 223, 231-234.

AG v The Royal Bank of Scotland [2011] 1 Lloyd’s Rep 123 at [313]-[318] Crestsign Limited v National

Westminster Bank PLC [2014] EWHC 3043 at [99]-[117].

Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 at [66].

[56].

his Honour then was) with Aickin J agreeing at 38.

out futures contracts on 15 October 2010, before any millers lodged adjusted estimates; Wenham statement,

CFI 33, paragraph 162(a).

261 CLR 544 at [17].

•	enter into rolling long term supply agreements to ensure continuing access to sugar for export;
•	minimise supply chain costs through economies of scale, operational efficiency and without duplicated management functions;
•	optimise the returns for export sugar to suppliers through the use of physical sales and derivative instruments;
•	optimise the net regional premium achieved each season;
•	provide flexible, innovative, transparent and/or independent pricing mechanisms for suppliers based on effective close out mechanisms for derivative instruments;
•	ensure long term access (by lease or other arrangements), and manage and operate the bulk sugar terminals;
•	operate in the forward freight market with a view to providing certainty of shipping availability for annual export programs and achieve preferential logistics arrangement and costs; and
•	foster export market relationships with refinery buyers and the international trade.

“(a)	the ‘May 2010 Delivery Period’, for physical shipments of raw sugar
to be delivered between 1 May 2010 and 15 July 2010;
(b)	the ‘July 2010 Delivery Period’, for physical shipments of raw sugar
to be delivered between 1 July 2010 and 15 September 2010;
(c)	the ‘October 2010 Delivery Period’, for physical shipments of raw
sugar to be delivered between 1 October 2010 and 15 December 2010;
(d)	the ‘March 2011 Delivery Period’, for physical shipments of raw
sugar to be delivered between 1 January 2011 and 15 May 2011; and
(e)	the ‘May 2011 Delivery Period’, for physical shipments of raw sugar
to be delivered between 1 May 2011 and 15 July 2011.

Wilmar	Aggregate	Physical supply	Pricing of
estimate	estimate (all	contracts	Seasonal Pool
suppliers)

(b)	current/expected climatic influences such as rain, drought, temperature and cloud free days. QSL merely looked at the climatic influences affecting Northern Queensland, Central Queensland and Southern Queensland. It did not look at each specific growing region in detail;
(c)	any mention of suspected or known disease and/or pests;
(d)	the amount of tonnes the mills could crush;
(e)	once crushing commenced, mill performances (for example, amount of tonnes crushed and the quality of sugar produced);
(f)	discussions with millers about their crop forecasts and growers about their crops during the season. As well as the formal monthly forecast updates from millers, QSL occasionally had informal telephone conversations with mill staff as well; and
(g)	other publicly available data, such as news and industry updates.

	The Board noted the report. More information was provided on the following items.
	NT advised that QSL is not rushing to make sales at present, given the current market situation, which appears to be caused by speculation in the market about the European Union unexpectedly providing sugar onto the market, with the possibility of a further 1-2mmt being made available.
	The Board noted that at this time of the year any adverse weather could cause a swing to a deficit of sugar and increased volatility,
prices should be watched closely.”[91]

November ‘09	2,937,020	same
December ‘09	2,937,020	same
January ‘10	2,937,020	same
February ‘10	3,009,575	same
March ‘10	2,985,175	same
April ‘10	2,963,798	same
May ‘10	2,979,677	same
June ‘10	2,976,014	same
July ‘10	2,881,652	2,700,000
August ‘10	2,891,408	2,500,000
September ‘10	2,908,923	2,500,000
October ‘10	2,718,499	2,300,000
November ‘10	2,317,563	2,300,000
December ‘10	2,213,292	2,213,000
January ‘11	2,213,154

A.	Queensland Sugar[99] currently markets the majority of raw sugar manufactured by Queensland mills to export markets, which it acquires pursuant to a number of supply agreements with Queensland mill owners.
B.	The Supplier[100] carries on the business of manufacturing raw sugar in Queensland.
C.	The Supplier and other Queensland mill owners who currently supply sugar to Queensland Sugar have requested Queensland Sugar restructure its board of directors and director selection process to put it in the best position to continue to be the body responsible for marketing

D.	In conjunction with that restructure, the Supplier and Participants[101] have also undertaken to provide the growers who supply them with access to long term pricing agreements by September 2008.
E.	The Supplier and Queensland Sugar have negotiated the terms on which the Supplier will sell raw sugar to Queensland Sugar for marketing and sale for export following the restructure.
F.	Queensland Sugar will manage the export of raw sugar under a pooling arrangement where sales revenues, and the associated costs and risks, are allocated on a shared basis between all participants which have entered Supply Contracts, as detailed in the attached terms and conditions.
G.	In carrying out this Agreement, Queensland Sugar will actively promote contact and market signals between the Suppler and existing and potential export customers; and consult with the Supplier in relation to export marketing strategy setting, tonnage allocations to markets and other key marketing decisions.
H.	Queensland Sugar will work together with the Supplier with the objective of optimising returns to the Supplier.

“1.1	The Supplier agrees to supply bulk raw sugar to Queensland Sugar in accordance with the attached terms and conditions.
…
10.1	Title and risk for raw sugar supplied under this Agreement will pass on completion of weighing at the receival station of the bulk sugar terminal or such other facility nominated in Clause 9.
10.2	Queensland Sugar will insure the product from the point where it takes
title.”

6.5	The Supplier will not make any change to the quantity notified under Clause 6.2, other than to the extent the variation relates to natural seasonal variations in crop size, without the prior consent of
Queensland Sugar. Queensland Sugar’s consent is not to be
unreasonably withheld.
6.6	If consent is given pursuant to clause 6.5 and the Supplier proceeds with the change in quantity from that notified, Queensland Sugar will determine the financial effect in accordance with the procedure set out
in Schedule 5. The financial effect will be for the Supplier’s
account.[104]
…

(a)	Queensland Sugar has not and does not intend to provide advice (including financial advice) to the Supplier as to participation in this Agreement or otherwise;
(b)	it has sought and obtained advice (including financial advice) about its decision to participate in the pricing and payment options in this Agreement and to otherwise manage the financial and other risks associated with their participation in this Agreement and more generally its business activities with respect to sugar;
(c)	participation in the pricing and payment options (and for that matter, other means of seeking to manage commodity price and foreign exchange volatility) each involve risks and that the decision as to whether and as to how to manage those risks are those of the Supplier and not of Queensland Sugar;
(d)	it has not relied upon anything that Queensland Sugar (or its directors, officers, employees or agents) have represented (whether by words, conduct, silence or otherwise) in relation to the pricing and payment options or any other matter in deciding whether to participate in this Agreement or other activities; and
(e)	in the absence of any manifest error, any certificate given by Queensland Sugar with respect to a matter under this Agreement is taken to be prima facie evidence of the matter

(a)	Queensland Sugar would incur a cost it was not entitled to recover from Participants; or
(b)	Queensland Sugar would receive revenue that Participants were not entitled to receive a share in;

(a)	customer by customer updates;
(b)	pricing issues;
(c)	competitor behaviour;
(d)	futures market activity;
(e)	operational issues including changes in shipping market and vessel availability, sugar quality and logistical matters; and
(f)	other aspects of the sugar market as reasonably requested by the Supplier.

(a)	at each quarterly meeting - about its marketing strategy for the Season including tonnage allocations to markets, competitive issues and other key market planning decisions; and
(b)	at the March quarterly meeting - about its operating and capital budget for the following financial year;
(c)	at the June quarterly meeting - regarding the suitability of this Agreement to future market and industry structural circumstances.

9.1	The quantity of raw sugar defined at Clause 6, above, will be delivered by and at the expense of the Supplier, to the Lucinda, Townsville and Mackay bulk sugar terminals or, subject to Clause 9.2, to another facility as nominated by Queensland Sugar from time to time. The weight of sugar delivered by a mill shall be determined by a certified weigher at the Lucinda, Townsville and Mackay bulk sugar terminals or a certified weigher at such other facility as nominated by Queensland Sugar. Deliveries are to be completed within 7 days of the Supplier ceasing crushing operations for the Season.
9.2	Where Queensland Sugar nominates an alternative facility for delivery and weighing, Queensland Sugar will reimburse the Supplier for any transport and port charges costs that the Supplier may incur that are in excess of those which would have been incurred had the delivery been made to the bulk sugar terminal specified in Clause 9.1. At the time of nomination of the other facility, Queensland Sugar and the Supplier will agree as to the
additional costs to be reimbursed.”

12.1	The Supplier’s production supplied under this Agreement will be
allocated to Pools for the purposes of pricing in accordance with Schedule 2.

(a)	if notice of termination was given prior to the Supplier’s
notification of quantity for the next Season being given pursuant to Clause 6.2, the next 30 June; or
(b)	if notice of termination was given after the Supplier’s

(a)	stops or suspends or threatens to stop or suspend payment of all or a class of its debts;
(b)	is insolvent within the meaning of section 95A of the Corporations Act;
(c)	is presumed insolvent by a court by reason of section 459C(2) of the Corporations Act;
(d)	fails to comply with a statutory demand (within the meaning of section 459F(1) of the Corporations Act);
(e)	has an administrator appointed over all or any of its assets or undertaking or any step preliminary to the appointment of an administrator is taken;
(f)	has a controller within the meaning of section 9 of the Corporations Act or similar officer appointed to all or any of its assets or undertaking; or
(g)	has an application or order made, proceedings commenced, a resolution passed or proposed in a notice of meeting or an application to a court or other steps taken for its winding up or dissolution or for it to enter an arrangement, compromise or composition with or assignment for the benefit of its creditors, a class of them or any of them.

“2.6	Queensland Seasonal Pool
2.6.1	Queensland Seasonal Pool Tonnage