WMC Resources Ltd v Roche Mining Pty Ltd - [2004] WASC 76

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: WMC RESOURCES LTD -v- ROCHE MINING PTY LTD [2004] WASC 76

CORAM: MASTER NEWNES

HEARD: 22 MARCH 2004

DELIVERED : 30 APRIL 2004

FILE NO/S: CIV 2268 of 2003

BETWEEN: WMC RESOURCES LTD (ACN 004 184 598)
Plaintiff
AND
ROCHE MINING PTY LTD (ACN 004 142 223)
Defendant

Catchwords:

Practice and procedure - Defendant's application for summary judgment - Turns on own facts

Legislation:

Rules of the Supreme Court1971 (WA), O 16

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff: Mr W S Martin QC & Mr N P Gentilli
Defendant: Mr J Gilmour QC & Mr S M Davies

Solicitors:

Plaintiff: Jackson McDonald
Defendant: Minter Ellison

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

Day v Victorian Railways Commissioners (1949) 78 CLR 62

Case(s) also cited:

Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
Carter v Hyde (1923) 33 CLR 115
Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674
Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57
McDonald v Robins (1954) 90 CLR 515

MASTER NEWNES: This is an application by the defendant for summary judgment under O 16 of the Rules of the Supreme Court1971 (WA), alternatively for an order striking out the statement of claim on the ground that it discloses no reasonable cause of action or parts of it on the ground they are embarrassing.
It was acknowledged by the defendant's counsel that the matter is complicated. In support of the application, the defendant filed an affidavit of Scott McConnell, sworn 25 November 2003, which, with exhibits, ran to 378 pages. The plaintiff filed in response an affidavit of David Berrie which, with exhibits, comprised 113 pages and the defendant replied with a further affidavit of Mr McConnell which, with exhibits, comprised 156 pages. Most of the exhibits consist of agreements relating to complicated multi‑party financing transactions. It is the financing transactions that lie at the heart of the plaintiff's claim in the present proceedings and of the present application. The defendant contends that the contractual documents demonstrate that the plaintiff's claim is untenable.
The relevant parts of the statement of claim are as follows:
"The Parties
1.The plaintiff is a duly incorporated company and at all material times carried on mining operations at a site at Mt Keith, in Western Australia.
2.The defendant is a duly incorporated company, was formerly called Roche Bros Pty Ltd, and at all material times carried on business as a mining contractor.
3.Downer Group Finance Pty Limited ('Downer') is a duly incorporated company, was formerly called Downer Group Limited and at all material times was the parent company of the defendant.
4.At all material times, each of Pacatus Pty Ltd ('Pacatus'), MTK Equipment Pty Ltd ('MTK'), Keith Rentals Pty Ltd ('Keith Rentals'), Kingston Factors Pty Ltd ('Kingston'), Caterpillar Financial Australia Ltd ('CFAL'), Meridian International Capital Ltd ('Meridian') and Gwynvill Finance Pty Ltd ('Gwynvill') was a duly incorporated company.
The Mining Contract
5.By a contract in writing dated 7 November 1997 made between the plaintiff and the defendant, the defendant agreed to carry out certain mining work for the plaintiff at Mt Keith for the consideration and upon the terms therein contained ('the Mining Contract').
6.There were express terms of the Mining Contract, upon its proper construction, in effect, that:
(a)the defendant proposed, for the purposes of the contract and the performance of the works thereunder, purchasing or by arrangement obtaining the supply and use of certain specified plant, referred to in the contract as 'Major Plant' (cl.14.1 Special Conditions, Schedules O, P);
(b)in consideration of the plaintiff entering into the contract and the payment by the plaintiff of $5, the defendant irrevocably granted to the plaintiff an option, inter alia, to assume, by assignment, novation or such other method chosen by the plaintiff, the position, obligations and related entitlements of the defendant, under any lease or other arrangement entered into in respect of Major Plant, such option being exercisable by the plaintiff prior to termination of the contract (cl.14.2 Special Conditions);
(c)if the plaintiff exercised the option then in respect of any Major Plant the subject of any lease or other arrangement, no further consideration was payable by the plaintiff for the assumption (by whatever means) by the plaintiff of the position, obligations and related entitlements of the defendant under that lease or arrangement (cl.14.2 Special Conditions);
(d)the defendant would only enter into a lease or other arrangement, to obtain the supply and use of items of Major Plant, with a third party or parties who provided an irrevocable written undertaking to the plaintiff to be bound by certain provisions of the contract, including cl.14 of the Special Conditions and the provisions of Schedules O and P (cl.14 Special Conditions, cl.21.5 General Conditions);
(e)the defendant would perform mining work from 8 November 1997 to 28 February 2003 (cl.6 Agreement).
7.The defendant commenced work under the Mining Contract on or about 8 November 1997 and continued to perform work under that contract until 28 February 2003.
The Financing Arrangements
8.By an agreement in writing made on or about 27 February 1998 between the plaintiff, the defendant, CFAL, Pacatus and Downer, the Mining Contract was varied in that, inter alia, instead of requiring fulfilment of the term pleaded in paragraph 6(d) above, the plaintiff and the defendant agreed, in effect, that Downer would obtain financial accommodation from CFAL, in accordance with an arrangement described in the agreement, in respect of certain of the Major Plant ('Stage 1 Financing Arrangement'), upon the terms contained in that agreement.
9.The Stage 1 Financing Arrangement involved agreements pursuant to which, inter alia, in effect:
(a)CFAL provided to Downer and Downer provided to Pacatus financial accommodation, in the sum of $43m, in relation to the acquisition of certain of the Major Plant (Loan Agreements dated 17 February 1998 between CFAL and Downer, and between Downer and Pacatus);
(b)Pacatus acquired that Major Plant from the defendant (Sale Agreement dated 17 February 1998 between Pacatus and the defendant).
10.By a further agreement in writing made on or about 22 July 1998 between the plaintiff, the defendant, CFAL, MTK, Downer, Keith Rentals and Gwynvill, the Mining Contract was varied in that, inter alia, instead of requiring fulfilment of the term pleaded in paragraph 6(d) above, the plaintiff and the defendant agreed, in effect, that:
(a)the defendant and Downer would obtain, and would continue to obtain, financial accommodation from Gwynvill and Keith Rentals and from CFAL, in accordance with an arrangement described in the agreement, in respect of certain of the Major Plant ('Stage 2 Financing Arrangement'), namely 10 Caterpillar 793C trucks and certain truck tyres, on the terms and conditions therein contained, and
(b)that Major Plant would no longer be subject to the agreement pleaded in paragraph 8 or the Stage 1 Financing Arrangement.
11.The Stage 2 Financing Arrangement involved agreements by and pursuant to which, inter alia, in effect:
(a)Gwynvill provided financial accommodation in the sum of $6.3m, by capital contribution to a partnership between Gwynvill and Keith Rentals, and authorised Keith Rentals to use that accommodation to acquire certain items of Major Plant, being the trucks and tyres pleaded in paragraph 10(a) (Participation Agreement and Equity Participants' Agreement);
(b)Keith Rentals agreed to acquire that Major Plant from MTK, (Conditional Sale Agreement);
(c)MTK acquired that Major Plant from Pacatus (Sale Agreement);
(d)the defendant agreed to lease that Major Plant from Keith Rentals (Lease);
(e)the defendant was entitled to terminate the lease of that Major Plant on or after termination of the Mining Contract, and upon such termination of the lease the defendant was obliged to pay Keith Rentals no more than the amount of the lease termination value, as provided in the lease, (cll 13, 14.1 Lease);
(f)the defendant's obligation, on such termination of the lease, to pay the amount of the lease termination value would be satisfied upon payment of a net termination amount, as provided in the lease, which did not exceed $5,947,705 (cll 1.2, 13, 14.1, Sch 3 Lease, cl 16 Participation Agreement, Roche Loan Agreement);
(g)upon such termination of the lease, Keith Rentals was obliged to endeavour to arrange for the sale of that Major Plant and was entitled to retain only so much of the sale price as exceeded the lease termination value, as provided in the lease (cl.13 Lease);
(h)at the end of the 5 year term of the lease, in lieu of termination of the lease, the defendant was entitled to renew the lease, subject to certain conditions and upon certain terms (cl.13 Lease);
(i)the defendant was entitled to sub‑lease that Major Plant to the plaintiff (cl.7.1 Lease);
(j)upon destruction of an item of Major Plant included within the Stage 2 Financing Arrangement, Meridian was entitled to make an adjustment to the net lease termination value and the termination amount, for the purpose of the terms of the lease pleaded in sub‑paragraphs (e) and (f) above (cl.1.2 Lease, cll.4, 5, 6 Participation Agreement).
Particulars of Stage 2 Financing Arrangement Agreements
See the annexure hereto.
12.As at 13 January 2003:
(a)the items of Major Plant which were the subject of the Stage 2 Financing Arrangement were 9 Caterpillar 793C trucks and certain truck tyres;
(b)in consequence of the destruction of 1 Caterpillar 793C truck, which was originally the subject of the Stage 2 Financing Arrangement, Meridian, by certificate dated 31 December 2002, in exercise of the entitlement pleaded in paragraph 11(j), had adjusted:
(i)the net termination amount, for the purpose of the term of the lease pleaded in paragraph 11(f), to $4,450,889, as at 31 March 2003;
(ii)the lease termination value, for the purpose of the terms of the lease pleaded in paragraph 11(e) and (g), to $19,452,539, as at 31 March 2003;
(c)the items of Major Plant pleaded in sub‑paragraph (a) were worth less than $19,452,539.
13.By reason of the agreements and terms pleaded in paragraph 11(b) - (h) and the matters pleaded in paragraph 12, as at 13 January 2003, the defendant's position and entitlement was that it was able to exercise control over the sale of the Major Plant the subject of that lease and to procure Keith Rentals to sell that Major Plant at the defendant's direction, upon termination of the lease and payment of the net termination amount, without further payment to Keith Rentals.
Exercise of Option
14.By letter dated 6 December 2002 sent by the plaintiff to the defendant on 13 January 2003, the plaintiff exercised its option, inter alia, under the terms of the Mining Contract pleaded in paragraph 6(b), in relation to certain of the Major Plant.
15.It was a term of the contract constituted by the plaintiff's exercise of option ('the Acquisition Contract'), upon its proper construction, in effect, inter alia, that:
(a)the plaintiff would assume the defendant's position, obligations and entitlements, under the Stage 2 Financing Arrangement, in respect of all of the Major Plant then the subject of that arrangement in order to acquire that Major Plant, by the method of requiring the defendant to terminate the Stage 2 Financing Arrangement and cause the Major Plant then the subject of that arrangement to be sold to the plaintiff;
(b)the plaintiff would pay for that Major Plant, an amount equal to the lowest sum required to be paid by the defendant to the lessor to discharge the defendant's obligations under, and upon termination of, the lease by which it held possession of that Major Plant, according to the terms of the Stage 2 Financing Arrangement, to which the plaintiff had agreed, as pleaded in paragraphs 10 and 11 above;
(c)the defendant would arrange and effect such a termination of the lease and would procure the sale of that Major Plant to the plaintiff.
16.By virtue of the terms pleaded in paragraph 11(e) and (f) and the matter pleaded in paragraph 12(b)(i), the lowest sum required to be paid by the defendant to Keith Rentals upon termination of the lease, to discharge the defendant's obligations thereunder, according to the terms of the Stage 2 Financing Arrangement to which the plaintiff had agreed and to procure Keith Rentals to sell the Major Plant then the subject of the Stage 2 Financing Arrangement at the direction of the defendant, as at 17 March 2003, including a payment on account of certain expenses of Meridian, was $4,654,587.
Breach of Contract and Damage
17.Wrongfully and in breach of the terms of the Acquisition Contract pleaded in paragraph 15, the defendant refused to perform that agreement unless the plaintiff paid an additional sum of approximately $15.8m, which was not payable under that agreement but which the defendant wrongfully contended was required to be paid to Keith Rentals to terminate the lease pleaded in paragraph 11(d) and to procure Keith Rentals to sell the Major Plant then the subject of the Stage 2 Financing Arrangement at the direction of the defendant.
Particulars
(a)The defendant's refusal was expressed in letters to the plaintiff dated 14, 17 and 26 February 2003.
(b)The defendant never withdrew that refusal.
18.By an agreement in writing dated 17 March 2003 made between the plaintiff, the defendant and Keith Rentals, the plaintiff bought and Keith Rentals sold the Major Plant which had been the subject of Stage 2 Financing Arrangement for which the plaintiff paid Keith Rentals the sums of $4,654,587 and $15,846,514.
19.The agreement pleaded in paragraph 18 was made pursuant to and in fulfilment of the terms of the Acquisition Contract pleaded in paragraph 15, save that the plaintiff's agreement to pay, and payment of, the amount of $15,846,514 under the agreement pleaded in paragraph 18, were caused by the defendant's breach of the Acquisition Contract as pleaded in paragraph 17.
20.The plaintiff, under protest of the defendant's breach of the Acquisition Contract as pleaded in paragraph 17, and while reserving all its rights against the defendant under that agreement, agreed to pay to Keith Rentals and so paid the demanded sum of $15,846,514 in respect of the Major Plant then the subject of the Stage 2 Financing Arrangement, in order to obtain possession thereof to enable mining operations at Mt Keith to continue therewith after 28 February 2003.
21.In the premises pleaded in paragraphs 18 - 20, by reason of the defendant's breach of the Acquisition Contract as pleaded in paragraph 17, the plaintiff has suffered loss and damage, being the additional amount of $15,846,514 wrongfully demanded by the defendant and agreed to be paid and paid by the plaintiff under protest.
AND THE PLAINTIFF CLAIMS:
(a)Damages pursuant to paragraph 21.
(b)Interest on damages at the rate of 8% pa from 17 March 2003 until judgment pursuant to s.32 Supreme Court Act."
The defendant took five principal objections to the statement of claim. They relate to pars 6(b), 11(f), 13, 15(b) and 15(c).
It is convenient to take each in turn.
Senior counsel for the defendant submitted in relation to par 6(b) that the allegation that, upon exercise of the option provided for in cl 14.2 of the Special Conditions of the Mining Contract, the plaintiff was to assume the defendant's "position" and "related entitlements" under any lease or other arrangement entered into in respect of the Major Plant, is not maintainable in the light of the terms of the Mining Contract.
The relevant parts of cl 14 of the Special Conditions are as follows:
"14.1The [defendant] proposes, for the purposes of this Contract and the performance of the Work, purchasing or by arrangement obtaining the supply and use of the Plant listed in Schedule P of the Schedule (the 'Major Plant').
14.2In consideration of the [plaintiff] entering into the Contract, and the payment by the [plaintiff] of $5 (receipt of which is acknowledged by the [defendant]), the [defendant] irrevocably grants to the [plaintiff] an option to:
14.2.1purchase all Major Plant owned by the [defendant] or any of its Related Bodies Corporate or associates; and
14.2.2assume (by assignment, novation or such other method chosen by the [plaintiff]) the obligations of the [defendant] (or any of its Related Bodies Corporate or associates) under any leases or other arrangements entered into in respect of Major Plant.
This option is exercisable by the [plaintiff] not earlier than 30 days before, and not later than, the Date of Practical Completion or the date of effective termination (for whatever reason) of the Contract (whichever is the earlier) and this clause 14.2 shall survive any termination or expiration of the Contract. If the [plaintiff] exercises the option in respect of any or all of the Major Plant, then
…
14.2.4in respect of any Major Plant the subject of any lease or other arrangement, no further consideration is payable for the assumption (by whatever means) by the [plaintiff] of that lease or arrangement and the [defendant] must promptly do all things and sign all documents necessary to effect and complete that assumption. The property in the Major Plant shall remain held in accordance with the lease or arrangement."
Senior counsel for the defendant noted that neither the word "position" nor the expression "related entitlements", as pleaded in par 6(b) of the statement of claim, were to be found in cl 14. Clause 14.2.2 enabled the plaintiff to assume the "obligations" of the defendant under any lease or other arrangements. Nevertheless, the defendant accepted, for the purposes of this application, that on its proper construction it is arguable that cl 14.2.2 entitled the plaintiff to assume the defendant's "related entitlements". Counsel argued, however, that it was unclear what was meant by the plea that the plaintiff was entitled to assume the defendant's "position" under such a lease or other arrangement. If it simply referred to the sum of the obligations and related entitlements assumed by the plaintiff it was unnecessary. On the other hand, if, as it appeared to be the case, it was intended to mean more than that then it went beyond cl 14.2. In any event, it was embarrassing because it was unclear what was meant.
The next objection concerned par 11(f). It was submitted that there was no basis for the allegation that on termination of the lease the obligation of the defendant to pay the Lease Termination Value would be satisfied by payment of a "net termination amount", being an amount which did not exceed $5,947,707.
The relevant lease was one made between Keith Rentals Pty Ltd and the defendant dated 22 July 1998. Senior Counsel for the defendant referred to par 13 of that lease which, by cl 13.1, applied when the lease was terminated in, among others, the circumstances in which it was terminated in this case. Clause 13 goes on, relevantly, to provide:
"13.2Arrangement for Equipment Sale
(a)the Lessor must endeavour to arrange for the sale of the Equipment by private treaty, tender or public auction on the Termination Date or within 180 days after that Termination Date;
(b)any sale of the Equipment by the Lessor shall be made on an arm's length basis and without warranty as to title (other than that the Lessor has such title as may have been passed to it under the Conditional Sale Agreement by the Vendor or otherwise and that it has not created any Encumbrance over or affecting the Equipment) or condition and on an 'as is, where is' basis.
13.3Moneys payable following sale
If the Equipment has been sold on or prior to the Termination Date and the Net Sale Proceeds from that sale are less than the Lease Termination Value, the Lessee must pay to the Lessor on the Termination Date:
(a)the amount by which the Lease Termination Value exceeds the Net Sale Proceeds; and
(b)any other moneys then due and owing by the Lessee top the Lessor under this agreement and the other Transaction Documents.
13.4Position if no sale
If the Equipment has not been sold by the Termination Date, the Lessee must pay to the Lessor on the Termination Date:
(a)an amount equal to the amount of the Lease Termination Value as at the Termination Date;
(b)any other moneys then due and owing by the Lessee to the Lessor under this agreement and the other Transaction Documents."

Schedule 3 of the lease provided that the Lease Termination Value was the aggregate of the amounts set out in columns 2 and 3 of the schedule which coincided with the relevant date set out in column 1 of the schedule. It was not in dispute that the relevant termination date in column 1 was 15 March 2003. Against that date, the amount in column 2 was $15,184,374 and the amount in column 3 was $5,947,705, a total of $21,132,079. It was, however, common ground that, in fact, the correct figure was somewhat less than that amount because one of the trucks the subject of the lease had been destroyed in an accident.
It was therefore submitted on behalf of the defendant that the alleged "net termination amount" pleaded in subpar 11(f) of the statement of claim bore no relation to the obligations of the defendant under the lease. Under the lease the obligation of the defendant was to pay the Lease Termination Value of some $21,000,000 specified in Sch 3 of the lease.
It was also submitted that the inclusion in parenthesis at the end of subpar 11(f) of reference to various provisions of various agreements as an apparent explanation of the plea was embarrassing. That complaint was also made in respect of the other places in the statement of claim where reference to the provisions of agreements was added at the end of substantive pleas.
It was next submitted that there was no basis for the allegation in par 13 of the statement of claim that the defendant's "position and entitlement" was that, as at the date upon which the plaintiff exercised its option under cl 14.2 of the Special Conditions, the defendant was able to exercise control over the sale of the Major Plant and to procure Keith Rentals to sell it at the defendant's direction. The obligations and entitlements of the defendant in relation to the sale of the Major Plant on termination of the lease were those expressly set out in cl 13 of the lease. Clause 13 provided what was to be done in respect of the Major Plant upon termination of the lease. It conferred on the defendant no entitlement to procure Keith Rentals to sell the plant at the defendant's direction. No such entitlement of the defendant could arise as an implied term of the lease as that would conflict with the express terms. There was, it was submitted, accordingly no basis for the allegation in par 13 of the statement of claim.
The defendant submitted that the allegations in par 15, as to the terms of the contract constituted by the exercise of the plaintiff's option under the contract, were also untenable. It was argued that the plaintiff's rights on exercise of the option were to be found in cl 14.2 of the Special Conditions. There was therefore no basis for the allegation in par 15(a) of the statement of claim that the plaintiff assumed the defendant's "position" under the lease, whatever that might mean.
Objection was also taken to par 15(b) on the basis that it was not clear whether it was simply a paraphrase of cl 14.2.2 of the Special Conditions or if it was meant to mean something different and, if the latter, what it was intended to mean.
A more substantive objection was taken to the plea in par 15(c), that the defendant would arrange and effect a termination of the lease and would procure a sale of the Major Plant to the plaintiff. It was submitted that it was plain from the provisions of the lease that the defendant had no entitlement to procure such a sale.
The plaintiff submitted, in essence, that upon termination of the lease the defendant was entitled, or had the ability, in accordance with the usual or customary arrangement under leases of this nature, to procure the lessor to sell the Major Plant at the defendant's direction. It was also contended that, upon an analysis of the overall financing arrangements entered into by the defendant, it was apparent that the amount actually payable by the defendant upon the termination of the lease was not some $21,000,000, but only the amount in column 3 of Sch 3 to the lease, an amount of $5,947,705, less an amount to take account of the loss of one of the trucks and some other adjustments.
The plaintiff said that the exercise of the option under cl 14 constituted a contract between the plaintiff and the defendant. On its proper construction, it was a term of that contract that the method by which the plaintiff would assume the defendant's entitlement under the lease to acquire the Major Plant was by requiring the defendant to terminate the lease and to cause the lessor to sell the Major Plant to the plaintiff at the sum which the defendant was required to pay to the lessor upon termination.
Senior counsel for the plaintiff referred to the passage in cl 14.2.2 of the Special Conditions by which the plaintiff was entitled to "assume … the obligations of the [defendant] under any leases or other arrangements entered into in respect of Major Plant … " and submitted that, in the context of the Mining Contract, it was clear that by cl 14.2 the parties intended that the plaintiff would assume not only the obligations of the defendant, but also the defendant's entitlements under the lease. The plaintiff, if it exercised its option, would simply stand in the shoes of the defendant in all respects.
It was also submitted that the "other arrangements" referred to included any understanding between the parties to the lease, although the understanding may not be legally enforceable, but rather derived simply from trade custom or usage.
The plaintiff relied upon an affidavit of David Berrie, Group Manager - Legal of the plaintiff. Mr Berrie was admitted to practice in 1986 and from 1988 to 1995 was employed by the plaintiff as its corporate lawyer and from 1995 until 2000 was employed by the plaintiff as its Commercial Manager. He assumed his present position of Group Manager - Legal in 2000. Mr Berrie says he is experienced in the leasing of plant as the plaintiff leased considerable quantities of major plant as an owner/operator of its Kambalda operations until the mid‑1990s and also leased, and continues to lease, other items of plant. According to Mr Berrie, in order to be tax effective, such lease agreements typically contain no option in the lessee to acquire the plant by payment of the residual value at the end of the term of the lease, but as a matter of practice the lessor will always permit the lessee to acquire the plant at the residual value. Mr Berrie says that considerable independent expert evidence would be available at trial to that effect.
Accordingly, it was submitted, at the time the plaintiff exercised its option under cl 14.2 of the Special Conditions the defendant, on termination of the lease, was able by trade custom or usage to acquire the Major Plant, or cause the lessor to sell it to whomever the lessee directed, for the residual value. On the exercise of its option, the plaintiff stood in the shoes of the defendant. It was therefore entitled, as it did, to require the defendant to exercise that entitlement, or ability, by directing the lessor to sell the Major Plant to the plaintiff for the residual value. The plaintiff says that, in breach of the contract constituted by the exercise of the option, the defendant refused to do so unless the plaintiff paid not only the true residual value but an additional $15.8 million which the defendant wrongly contended was payable to the lessor upon termination of the lease. The plaintiff paid the $15.8 million under protest and now claims it as damages.
Senior counsel for the plaintiff acknowledged that currently the statement of claim does not plead any such trade custom or usage by which the defendant, as lessee, was entitled or able to procure the lessor to sell the Major Plant at the defendant's direction and conceded that that needed to be pleaded.
The question of the amount payable by the defendant upon the termination of the lease required, on the plaintiff's case, an analysis of the Stage 2 Financing Arrangement. The total Arrangement is, to say the least, complicated. It involves some 17 interlocking agreements between a number of parties. The agreements concerned are set out in an annexure to the statement of claim.
I do not consider that it is necessary for the purposes of the present application to attempt to unravel the Arrangement in all its intricate and interwoven detail. It is, I think, sufficient to refer to a Participation Agreement, entered into on 22 July 1998 between the defendant and the other entities involved in the Stage 2 Financing Arrangement, and to some of the agreements referred to in it.
In the Participation Agreement the parties recite that they have, by that agreement, agreed to certain matters in relation to the "Transaction", which for relevant purposes is the Stage 2 Financing Arrangement.
Clause 16 of the Participation Agreement is, so far as relevant, in the following terms:
"(a)The parties acknowledge that:
(i)pursuant to the Lease, the Lessee must pay or may become obliged to pay to the Lessor … that portion of any … Lease Termination Value set out in column 2 of Schedule 3 of the Lease ('the Relevant Lease TV Portion') …
(ii)...
(iii)pursuant to the Lessor/Factors Swap Agreement:
(A)the Lessor must pay or may become obliged to pay to Factors, Lessor A$ Payments and the Lessor A$ Termination Payment; and
(B)Factors must pay or may become obliged to pay to the Lessor, Factors US$ Payments and the Factors US$ Termination Payment;
(iv)pursuant to the Vendors/Factors Swap Agreement:
(A)the Vendor must pay or may become obliged to pay to Factors, Vendor US$ Payments and the Vendor US$ Termination Payment; and
(B)Factors must pay or may become obliged to pay to the Vendor, Factors A$ Payments and the Factors A$ Termination Payment;
(v)pursuant to the Roche Loan Agreement the Vendor must pay or may become obliged to pay to the Lessee Fixed Roche Loan Payments and Fixed Roche Loan Termination Payments in the manner contemplated in clause 6.1 of the Roche Loan Agreement.
(b)The Lessee, the Vendor, Factors and the Lessor:
(i)acknowledge that:
(A)…
(B)the obligation of the Lessee to pay the Relevant Lease TV Portion under the Lease, the obligation of the Lessor to pay the Lessor A$ Termination Payment to Factors under the Lessor/Factors Swap Agreement, the obligation of Factors to pay the Factors A$ Termination Payment to the Vendor under the Vendor/Factors Swap Agreement and the obligation of the Vendor to pay Fixed Roche Loan Termination Payments to the Lessee under the Roche Loan Agreement are matched as to dates for payment, amounts and currencies;
(C)…
(D)…
(ii)… agree that the payment obligations set out in clause 16.1(a) as and when the same become due and payable shall be deemed satisfied by the execution of this agreement and without further action on their respective parts."
The "Lease" referred to is the lease between Mt Keith Rentals Pty Ltd and the defendant dated 22 July 1998.
It was submitted that the agreement in cl 16.1 (b)(ii) of the Participation Agreement - that none of the payments referred to need be made when they become due and payable - is explicable when one has regard to the terms of the agreements referred to in subpar (a)(i) to (iv).
It is sufficient for present purposes to deal with the termination payment that became payable under each agreement upon a termination of the lease as at 15 March 2003. In each case, the event which triggered the liability to pay the termination payment was the occurrence of the "Termination Date", which for the purposes of each of the agreements was defined in the Participation Agreement as the date upon which the lease terminated.
Pursuant to the lease, on the termination date the defendant, as lessee, was required under column 2 of Schedule 3 to pay to the lessor the sum of $15,184,374. Pursuant to the Lessor/Factors Swap Agreement, the Lessor was required to pay Factors the sum of $15,184,374. Pursuant to the Vendor/Factors Swap Agreement, Factors was required to pay to the Vendor the sum of $15,184,374. Pursuant to the Roche Loan Agreement, the Vendor was required to pay to the Lessee the sum of $15,184,374. The Lessor US$ Loan Agreement did not contain a comparable termination payment provision and can be disregarded for present purposes.
The plaintiff submitted that the ultimate effect of those agreements was, as reflected in cl 16 of the Participation Agreement, a round robin of payments which extinguished each other, with the result that the only amount which the defendant was actually liable to pay under the lease upon termination was that set out in column 3 of Schedule 3; that is, an amount of $5,947,705, subject to an adjustment for the value of the destroyed truck and also subject to certain other adjustments made by the Manager, Meridian, under the Participation Agreement.
Accordingly, it was argued, at the time of the exercise of the plaintiff's option under cl 14.2 of the Special Conditions, the defendant was entitled to terminate the lease and was able, by trade custom or usage, to procure the lessor to sell the leased equipment at the defendant's direction for the amount payable by the defendant on termination of the lease. In this case, pursuant to the terms of the Participation Agreement, the actual amount payable by the defendant on termination was the sum of $5,947,705, subject to adjustments. After the adjustments the sum actually payable was $4,654,587, as pleaded.
I accept the submission on behalf of the defendant that the availability of summary judgment is not confined to cases that are immediately obvious and the fact that a transaction may be complicated does not disentitle a party to summary judgment. But an applicant for summary judgment bears a heavy onus. A case must be very clear indeed to justify the summary intervention of the Court to prevent a plaintiff submitting his case for trial in the ordinary way, and once it appears that there is a real question, whether of fact or law, and that the rights of the parties depend upon it, it is not competent for the Court to dismiss the action on an application of this nature: Day v Victorian Railways Commissioners (1949) 78 CLR 62, at 91.
In my view, this is not such a clear case. I am satisfied that there are triable issues, among other things, as to whether the defendant had, arising by trade custom or usage, a commercial entitlement, or ability, to cause the lessor to sell the Major Plant which was the subject of the lease to the plaintiff for the sum payable upon termination of the lease and, if so, whether upon the exercise by the plaintiff of the option in cl 42 of the Special Conditions, a contract came into existence by which the plaintiff was entitled to, and did, require the defendant to exercise that entitlement or ability. In that event, I consider that there is also a triable issue as to whether the relevant sum payable on termination was an amount of some $4.65 million, as alleged by the plaintiff, or some $20.5 million as asserted by the defendant.
I consider that the statement of claim, as it currently stands, is deficient in the respect acknowledged by Senior Counsel for the plaintiff, namely, that it fails to plead a trade custom or usage by which a lessor under a lease of the type in question will permit the lessee to acquire the leased equipment at the residual value. That such a trade custom or usage arguably exists is, for present purposes, sufficiently made out by the affidavit of Mr Berrie. In my view, once the statement of claim is amended as foreshadowed, it will sufficiently plead an arguable case for the relief that the plaintiff seeks.
I accept, however, that, as pleaded, the reference to "position" in par 6(b) and elsewhere is capable of causing some confusion. As explained by Senior Counsel for the plaintiff in argument, it is intended to refer to the commercial entitlements, or abilities, of the defendant under the lease, as distinct from the defendant's legally enforceable entitlements. Counsel accepted that so long as "entitlements", where pleaded, was taken to refer not only to the defendant's legally enforceable entitlements, but also to its other commercial, non‑legally enforceable entitlements, then "position" may add nothing to "obligations and related entitlements of the defendant". In my view, as it is currently used in the pleading the word "position" is unclear and the pleading needs to be clarified in that respect.
Complaint was also made by the defendant in relation to, for instance, par 11(f), that it simply referred in parenthesis at the end to a number of provisions of different agreements and left it to the defendant to work out from those provisions how the plaintiff arrived at the allegation concerned. The defendant has now had the benefit of the plaintiff's written submissions and argument on this application in explanation of the pleas concerned, but, in any event, in identifying the specific contractual provisions relied upon I consider the plaintiff has pleaded sufficient to enable the defendant to follow the plea. I do not consider that, in the circumstances, the defendant is sufficiently embarrassed by the form of the pleading to justify striking it out. I also do not consider that in the context par 15(b) is embarrassing.
Accordingly, I would dismiss the claim for summary judgment. I would grant leave to the plaintiff to amend the statement of claim in relation to the alleged trade custom or usage, as foreshadowed in the course of argument, and in relation to the reference to the "position" of the defendant. I will hear the parties on the precise form of orders and on costs.