Woodside Energy Ltd and Ors v Electricity Generation Corporation t/as Verve Energy; Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd and Ors

[2013] HCATrans 224

[2013] HCATrans 224

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth   No P15 of 2013

B e t w e e n -

WOODSIDE ENERGY LTD
(ABN 63 005 482 986)

First Applicant

BP DEVELOPMENTS AUSTRALIA PTY LTD (ABN 54 081 102 856)

Second Applicant

CHEVRON AUSTRALIA PTY LTD (ABN 29 086 197 757)

Third Applicant

BHP BILLITON PETROLEUM (NORTH WEST SHELF) PTY LTD
(ABN 41 004 514 489)

Fourth Applicant

SHELL DEVELOPMENT (AUSTRALIA) PTY LTD (ABN 14 009 663 576)

Fifth Applicant

and

ELECTRICITY GENERATION CORPORATION (ABN 58 673 830 106) T/AS VERVE ENERGY

Respondent

Office of the Registry
  Perth   No P16 of 2013

B e t w e e n -

ELECTRICITY GENERATION CORPORATION (ABN 58 673 830 106) T/AS VERVE ENERGY

Applicant

and

WOODSIDE ENERGY LTD
(ABN 63 005 482 986)

First Respondent

BP DEVELOPMENTS AUSTRALIA PTY LTD (ABN 54 081 102 856)

Second Respondent

CHEVRON AUSTRALIA PTY LTD (ABN 29 086 197 757)

Third Respondent

BHP BILLITON PETROLEUM (NORTH WEST SHELF) PTY LTD
(ABN 41 004 514 489)

Fourth Respondent

SHELL DEVELOPMENT (AUSTRALIA) PTY LTD (ABN 14 009 663 576)

Fifth Respondent

Applications for special leave to appeal

KIEFEL J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON THURSDAY, 12 SEPTEMBER 2013, AT 11.50 AM

Copyright in the High Court of Australia

____________________

MR C.L. ZELESTIS, QC:   May it please your Honours, with my learned friends, MR B. DHARMANANDA, SC and MS S.E. RUSSELL, I appear for the applicants in the first matter and the respondents in the second.  (instructed by Lavan Legal)

MR N.C. HUTLEY, SC:   Your Honours, I appear with my learned friend, MR J.C. GILES, for Verve Energy in both applications.  (instructed by Jackson McDonald Lawyers)

KIEFEL J:   Gentlemen, is there any difficulty with you, given there are two appeals, dealing with them each together, so to speak, within a 20 minute period?  If you need more than 20 minutes to both put your appeal and respond to the other we will of course accede to that, but we did not think that more than 20 minutes would be necessary.

MR ZELESTIS:   We accept that, your Honour, save that Mr Dharmananda is going to deal with the response to my learned friend, so we might still do it in that order, unless your Honours are suggesting that we should respond to him as part of our submission.  We can do that.

KIEFEL J:   Well, that is what we are proposing.

MR ZELESTIS:   Yes, we will do that.

KIEFEL J:   They are sort of inextricably linked.

MR ZELESTIS:   They are.  We can deal with it in 20 minutes.

KIEFEL J:   Yes, thank you.

MR ZELESTIS:   As your Honours will have appreciated, for our part we are seeking leave to appeal against the finding of construction relating to clause 3.3 of the gas sales agreement.  That finding was the point of departure for a finding of duress against the sellers in the Court of Appeal.  The Court of Appeal then split two/one on whether the cap on liability held – two/one against the sellers – but they were all of the same view that the buyer could not get relief in duress because the buyer had not rescinded the contract and could not get relief in restitution and that gives rise to the buyer’s application.

Before coming to clause 3.3 one must bear in mind that this related to a supplementary supply of gas, not the main supply for which the contract provided.  There were other provisions of the contract which provided for supply of what would be called a firm obligation.  There were some tolerances and some circumstances where non‑supply was excused, but in essence there was an arrangement for firm supply and then clause 3.3 provided for what was called supplemental supply in certain circumstances.

Clause 3.3 was expressed in two subparagraphs - (a) and (b).  The first subparagraph imposed an obligation to use reasonable endeavours to make gas available for delivery, and the second paragraph expressed an entitlement on the part of the sellers to consider commercial, economic and operational matters in determining their ability to supply. 

The Court of Appeal found that the first paragraph infused the entire character of the provision and that the provision overall expressed an obligation to use reasonable endeavours and that the most that subparagraph (b) did was inform the content of some considerations and could be relevant to what amounted to the exercise of reasonable endeavours in a given circumstance.  That conclusion appears firstly in the reasons of the learned President at paragraph 18 on page 67 and it also appears in the conclusion of Justice Murphy in paragraph 33 just below line 30. 

Now, we say that there is no doubt that the language of clause 3.3(a) was that of obligation, but equally there is no doubt that the language of (b) was that of entitlement and we say ‑ ‑ ‑

KIEFEL J:   I do not quite understand that.  Why do you say it is entitlement?  Why would it not simply be read with paragraph (a)?

MR ZELESTIS:   The entitlement was that in determining whether they are able to supply they may take into account factors.  The nature of the factors was such that the factors relate exclusively to their affairs not the affairs of the buyer at all and the determination is one for them to make.  We say that the language is the language of entitlement but as well the nature of the entitlement emerges from a proper understanding of example (i).

KIEFEL J:   Is it really one of entitlement or simply what kind of matters might be taken into account in forming a reasonable view about whether or not the seller could provide delivery?

MR ZELESTIS:   That was the question posed and answered against us but in our submission a proper understanding both of the language and of the meaning of example (i) points in the other direction.  There are three examples in paragraph (b) of circumstances in which nothing in paragraph (a) requires the sellers to make supplemental gas available for delivery and importantly none of these examples limit the scope of paragraph (b).

KIEFEL J:   But these are all matters in paragraph (b) which would have to be formed by reference to the obligation in (a), would they not?  A reasonable view would have to be formed not by having regard to self‑interest but by reference to contractual obligations and that is the only way it makes sense commercially.

MR ZELESTIS:   In our submission, not so, your Honour, for this reason.  If one goes to the first example and one can find the clause set out perhaps most conveniently in Justice Murphy’s reasons because in his reasons it is set out almost entirely on a whole page – not quite – but it is pages 78 and 79.  If one goes to the first example, it certainly begins that:

the Sellers form the reasonable view that there is insufficient capacity –

So that is speaking from the obligation paragraph (a) perspective, but the critical feature of it is what is in the parenthesis.  In the parenthesis, it is:

(having regard to all existing and likely commitments of each Seller and each Seller’s obligations regarding maintenance –

et cetera.  Now, it is not just ‑ ‑ ‑

KIEFEL J:   This would have to be approached objectively though, would it not?

MR ZELESTIS:   Well, let us assume for the moment that it is to be approached objectively.  There is still a point that I seek to bring out, that in addition to having regard to all existing commitments, the sellers are entitled to have regard to all likely commitments and when you put the two concepts together, the words that begin in (i) and the words in parenthesis, one sees immediately that the determination of the reasonable view of insufficient capacity is able to be made at a time when there is on foot only a likely commitment, that is, a prospective commitment which rises to the standard that it is likely to occur.  Let us assume it is an objective standard. 

The point though is that what this means is that before deciding or determining whether in a reasonable view there is sufficient capacity, the sellers are entitled to determine that because of a likely commitment they will, if you like, put that production capacity and that gas – there are two concepts, there is the gas that lies in the reservoirs and there is the production capacity – they will put that to one side and not make that available.

KIEFEL J:   But that is not an issue which actually arose on the facts in this case, was it?  The capability to provide the gas was not in dispute.

MR ZELESTIS:   Well, it did not arise directly but it arose in this way.  But really what we are doing is we are using example (i) to inform the meaning of the clause.  In our submission, what the example does is show that anterior to the question of the reasonable view being formed, there is an entitlement on the part of the sellers to prefer their own commercial interest in selling – supplying gas to other customers and ‑ ‑ ‑

KIEFEL J:   What is the commercial interest you identify?

MR ZELESTIS:   The commercial interest is the interest in selling to other customers and that is ‑ ‑ ‑

KIEFEL J:   At a higher price.

MR ZELESTIS:   In the facts of this case yes, but that is the nature of the commercial interest.

KEANE J:   Why is not the nature of the commercial interest just selling it at the market price?

MR ZELESTIS:   Because there is no limit to the commercial interest here unless you reach the view, which in our submission is the way the Court of Appeal approached it, more assumption than construction, that there is a reasonable endeavours obligation, the character of which infuses the whole provision.  What we are trying to show is that within example (i) there is an important key to the analysis of the meaning of the provision because example (i) is an example of the sellers being able to make a commercial decision anterior to forming a reasonable view about sufficient capacity.  One must bear in mind that these examples do not set the limit of paragraph (b).  That is very clear from the words that follow the reference to “operational matters”.

KEANE J:   But if you read (b) as entitling the sellers to avoid the obligation in (a) simply because their commercial interest is in selling the gas at the best price they can get on the market, you destroy the whole purpose of (a).

MR ZELESTIS:   But it is only supplemental gas and, your Honour, the proposition ‑ ‑ ‑

KEANE J:   But you cannot just say it is only supplemental gas.  It is only the obligation.  The obligation is to use your best endeavours to provide supplemental gas because upon using those best endeavours the buyers get the benefit of the limit.

MR ZELESTIS:   But, with respect, in our submission, your Honour, that is the question, whether that is the meaning of the clause.  In our submission, what your Honour has put to me is not consistent with the words in parenthesis in the first example because the buyers are entitled, as I say – sorry, the sellers are entitled to determine what the capacity available is, putting to one side their likely commitments.  Now, Justice Murphy ‑ ‑ ‑

KEANE J:   Is there a factual basis for the argument that there were commitments in the offing but sufficiently prospective to be described as likely whereby your clients could have sold at the market price and that that was the reason why they declined to sell to the purchasers?

MR ZELESTIS:   There was no doubt that our case was at trial.  The reason why the sellers did not sell the supplemental gas to the buyer was that they had other demand for it at higher price.  We did not run a case which said that the transactions which were in view themselves fell precisely within the words in parenthesis in (i).  We were using (i) to demonstrate the ultimate intention of the clause, and that intention is that the sellers are entitled to prefer their commercial self‑interest in supplying other customers.  In our submission, that is unarguably clear from these words in parenthesis.

KEANE J:   I can actually understand that argument that if there are other customers who are saying we will pay the market price which is over the contractual price, we will pay that price for those goods.  I can understand why example (i) might arguably, at the very least, entitle you to say well, our commercial self‑interest leads us to want to sell that capacity there so it is not available to deliver to the buyer.  But if that is not the fact – if that is not the fact, then you are simply saying we are preferring our commercial interest in selling at the market price.

MR ZELESTIS:   Well, let us examine further the scope of these words in parenthesis.  The sellers may decide there is insufficient capacity taking a reasonable view because they are contemplating that a likely commitment will crystallise.  The likely commitment may not crystallise, and the words in parenthesis are not themselves qualified by any expressed concept of reasonableness.  So what those words demonstrate is that the sellers before they come to form the reasonable view have a judgment they are permitted to make.  It is about their self‑interest on matters commercial and economic.

KEANE J:   So you could sell to a middleman who would on‑sell to the purchasers to make up their shortfall.  You could sell, say, because you are selling to the middleman who is on‑selling to the purchasers at the market price that you can defeat 3(a) in that way. 

MR ZELESTIS:   Well, in our submission, it is not defeating 3(a) because this is informing the content of 3(a).  Can I show your Honours what Justice of Appeal Murphy said about this at paragraph 130 on page 92 at line 40.  His Honour dealt with example (i) and he noted just about line 38 that:

A ‘likely’ commitment may include a contract with another party under which provision was made for the minimum delivery obligation to increase . . . or a commitment to another party which had not then been undertaken, but would likely be engaged at a time relevant to the dates proposed in the buyer’s nomination.

So his Honour is there recognising this step in our argument.  He did not recognise the consequence of it, but he saw the first step which was the meaning of the words in parenthesis, that is, that the sellers are entitled to say there is a commitment in view, it has not yet been undertaken but it is likely to be engaged at a relevant time.  From that point of departure, we are determining there is insufficient capacity, regardless of whether in fact the anticipated commitment crystallises. 

Now, our submission is that this was a very, very clear indication of the true intention of the relationship between paragraphs (a) and (b) and it is the consequence of that meaning which the Court of Appeal has not taken into account.  In our submission, because this example is not by any means on the express words an example of the limit of the ability to take into account commercial, economic and operational factors, it supports the underlying construction and it supported the seller’s entitlement to take into account their commercial interests in selling gas at a higher price to other customers.

KEANE J:   There is certainly no suggestion, is there, in the evidence that your client actually set aside in some way – dedicated in some way the gas, the supplementary gas, committing it to another purchaser?

MR ZELESTIS:   It certainly did not do that.  It formed the view ‑ ‑ ‑

KEANE J:   I understand why you say you are just using this to illustrate the operation of the thing, but just in terms of what is available in terms of ‑ ‑ ‑

MR ZELESTIS:   The sellers took the view that in the circumstances there was a market prepared to buy a lot of gas at a higher price and they preferred to sell into that market.

KEANE J:   Including people who might take it as a middleman and on‑sell it to Mr Hutley’s client.

MR ZELESTIS:   It is a free market, with respect.  If the sellers were entitled to take into account their commercial interests, as we submit they were, that is the position.  So, in our submission, although Justice Murphy unlike the other two Justices appreciated the breadth of this example, his Honour did not see the significance of it for the overall meaning of the clause which, in our submission, is that it informs the freedom to consider commercial interest, that freedom not being constrained directly by an obligation of reasonableness.  Mr Dharmananda will deal with the ‑ ‑ ‑

KIEFEL J:   Just before he does, do you say that – or perhaps you would like to deal with this - the argument on construction has any bearing upon the question of whether or not economic duress was made out?

MR ZELESTIS:   In our submission, the duress issue if that is addressed raises questions whether every breach of contract can be considered to be illegitimate pressure and it also raises questions about what it means to say

the pressure has to be applied in terms of is the pressure to be used is it part of the object of the exercise in any sense.  In this case there was no finding that it was ever part of the purpose of the seller’s refusal that they would cause this buyer to buy gas at a higher price.  The case was that there was plenty of other demand.  There was just no finding that any part of their object in declining to supply supplemental gas was to procure some result from this buyer, and there was a finding that the sellers had acted genuinely and so there is a real question about the principles going to duress.

MR DHARMANANDA:   Your Honours, may I deal with the response to P16 which is the respondent’s special leave application.  We submit that special leave in that application should not be granted because the Court of Appeal did not err in its conclusion that the two short‑term gas sale agreements had to be rescinded before the applicant was entitled to restitution of payments made arising from the alleged economic duress.

KIEFEL J:   Why is rescission required particularly in relation to a wholly executed contract?

MR DHARMANANDA:   We say that in a claim for money had and received relying on unjust enrichment, the authorities make it quite plain that in that claim it is a claim to set aside the contract or to rescind the contract and then get payment by way of restitution.

KIEFEL J:   But why would the restitution principle require that in the case of duress that an executed contract, its status is affected?  Why would not the question simply be whether or not there was economic duress and then more money paid than would have otherwise been the case?  That raises a prima facie obligation.  The question then is whether the defendant should retain it.  Is that not the question?

MR DHARMANANDA:   The question will be if rescission is sought whether restitutio in integrum can be achieved and then the question will be the question your Honour has identified.

KIEFEL J:   But restitution of the gas supply would not be required in a case like this, would it?

MR DHARMANANDA:   The principle is that in the way one approaches unjust enrichment if it is relying on a duress claim is to have rescission.  In that rescission process, your Honour, one can get to the conclusion that you would not have to return the gas, but that is not how the case was run.

KIEFEL J:   Here all you are really talking about is the consequence of the duress and the subject of the restitutionary claim is the quantum of the money paid in relation to the contract.  All the rest of it falls away, does it not?

MR DHARMANANDA:   Only if rescission is sought.  May I take your Honours to the authorities?  First can I take your Honours to Universe Tankships which is in the bundle – that is at page 93 of the bundle – and take your Honours to page 112 of the bundle which is Lord Diplock’s judgment at page 385 and may I invite your Honours’ attention to lines B to C where Lord Diplock makes it plain that:

The use of economic duress to induce another person to part with property or money is not a tort per se; the form that the duress takes may, or may not, be tortious.  The remedy to which economic duress gives rise is not an action for damages but an action for restitution of property or money exacted under such duress and the avoidance of any contract that had been induced by it; but where the particular form taken by the economic duress used is itself a tort, the restitutional remedy for money had and received by the defendant to the plaintiff’s use is one which the plaintiff is entitled to pursue as an alternative remedy to an action for damages in tort.

Then, your Honours, if I could take you to Lord Scarman’s judgment at page 400 of that report which is at the book at 127, Lord Scarman was in dissent and he took a slightly different view at point B, where he said:

It is, I think, already established law that economic pressure can in law amount to duress; and that duress, if proved, not only renders voidable a transaction into which a person has entered under its compulsion but is actionable as a tort, if it causes damage or loss –

Now, I should tell your Honours that below ‑ ‑ ‑

KIEFEL J:   That was not in issue, the tortious claim was not pursued.

MR DHARMANANDA:   The point I was just about to make, your Honour, was below at trial the case was precisely run as a case relying on the tort of duress.

KIEFEL J:   That is not what the Court of Appeal seemed to have understood.

MR DHARMANANDA:   If I could take your Honour to Justice McLure’s judgment at paragraph 23 at page 68 of the application book, your Honours will notice what the President stated, the last sentence:

Although the grounds of appeal (4(b) and 5(b)) are confined to the tort of duress, the oral submissions ventured into the area of unjust enrichment.

So when one looks at the grounds of appeal and they are in the papers, they were addressed as damages for the tort of duress.

KIEFEL J:   Well, in any event, I do not understand Verve to pursue anything to do with the tort in this Court.

MR DHARMANANDA:   The reason for that, your Honours, is that if it were a tort then the cap on liability would apply.

KIEFEL J:   Well, that is a question that you raise about whether or not clause 22.7 operates.  You would have to raise that by way of notice of contention or cross‑appeal.

MR DHARMANANDA:   Contention, yes, your Honour.

KIEFEL J:   But the other point that you raise, if leave were granted on this matter, is whether or not illegitimate pressure was in fact applied.  That would have to be by way of cross‑appeal, would it not, because I do not think you have got a finding from the primary judge, but the Court of Appeal held that there was a legitimate pressure.

MR DHARMANANDA:   There is no consequence it flowed from the duress finding because of this finding on rescission.  So we would contend it is by way of contention, not cross‑appeal.

KIEFEL J:   You might like to have another look at that, if leave is granted.

MR DHARMANANDA:   Yes, your Honour.  Now, may I deal with the duress point?  Mr Zelestis has already made the submission I was going to make, namely that one looks at the reasons for judgment of both President McLure and Justice of Appeal Murphy.  We submit that there was a conflation of two different questions:  one, whether or not Verve had a practical reasonable alternative and two, the real question whether any pressure was applied by the sellers in causing Verve to enter into the two short‑term contracts.  Unless there was pressure applied by the sellers to cause the entry into those two short‑term contracts we would submit ‑ ‑ ‑

KIEFEL J:   The two questions are interlinked is really what you are saying.

MR DHARMANANDA:   But you cannot identify an alternative to say therefore there was coercive pressure applied.  We submit that is what the court effectively did, and that can be picked up when one looks at President McLure’s judgment at page 69 of the book at paragraphs 28 and 29 in particular, and may I invite attention to the last sentence at the bottom of page 69 where her Honour said:

The live question is whether the Sellers ‘applied’ pressure on Verve, not whether they made threats or demands –

Then her Honour says:

In my view they did.  The known consequences of their conduct was, in the circumstances, so dramatic that threats and demands were superfluous.

But her Honour had previously noted that the findings of the trial judge were that there was simply no pressure at all applied, and so her Honour has drawn the conclusion that there must have been pressure because there was no alternative.  But, as Mr Zelestis has already explained, in circumstances where demand exceeded supply significantly, the sellers did not wish to force the buyer Verve to acquire any gas because they could have sold it to their significant other buyers in the market who were demanding gas.  So no pressure at all was applied, and if that is so, then there would be no duress.  That is one of the three reasons why we say even if the restitution rescission point arises ‑ ‑ ‑

KIEFEL J:   The primary judge found that there was no duress because of the view he took of the construction of the contract.  That is right, is it not?

MR DHARMANANDA:   But, your Honour, at paragraphs 76 ‑ ‑ ‑

KIEFEL J:   I was looking at paragraphs 85 to 87.

MR DHARMANANDA:   Yes, your Honour, but may I take you to the findings that his Honour made at page 28 and 29, 76, 77, 78 and 79.  His findings of fact there are findings of fact about what occurred and those findings, in our submission, in no way would suggest that there was any pressure applied by the sellers.

KIEFEL J:   But is his Honour saying that if they reasonably believe they were entitled to not supply, that amounted to no economic duress?  That seems to be a view with which the Court of Appeal did not agree.

MR DHARMANANDA:   His Honour was saying in those findings of fact that there was nothing said by the sellers to force the buyer to buy

separately.  His Honour, as your Honour has pointed out, did not deal with the duress question because it all flowed from his finding there was no breach of the clause 3.3 obligation.  If no breach then no duress, which is the answer to your Honour’s question to Mr Zelestis that the issue as to whether there is breach is the springboard for the duress claim.  Only if there is a breach of 3.3 does the duress claim arise and that is the way it was pleaded and that is common ground.  So if our submissions on 3.3 not having breached are correct, then the duress question will not arise.

KIEFEL J:   Is there anything further?

MR DHARMANANDA:   No, your Honour, those are the submissions in opposition to the special leave application.

KIEFEL J:   Thank you.  Yes, Mr Hutley.

MR HUTLEY:   Your Honour, none of the facts which we have set out at application book 2 to 17 in our submissions are in dispute in relation to our application and, in effect, the short point is encapsulated in what transpired in your Honour, the presiding ‑ ‑ ‑

KIEFEL J:   Speaking for myself, the question about the construction argument, even if Woodside’s case construction is not strong, nevertheless it may be intertwined with questions of economic duress, at least in the approaches that have been taken below.

MR HUTLEY:   Your Honour, can I just go to that construction question?  At the end of the day, my learned friend’s case has to be this, and this is a case that he mounted and the case that he lost on.  When it uses “able” in the relevant clause – “able” just means willing – short of, in effect, the perverse, the colour of one’s hair type decisions, his construction is we will sell you gas at this price if we are willing to sell you gas at this price. 

In effect, the large architecture of the clause, and I am not going to take your Honours through all the twists and turns – if your Honours decide to deal with it your Honours will – but the way the clause was structured was quite complex, in effect, allowing times within which one could send these notices and times where the obligation to use reasonable endeavours attached.  We did not dispute, in effect, up to those times in respect of a particular request.  They could if they entered into commitments or other things.  They could sell the gas.  That is why it is interruptible SMDQ. 

What my learned friend says is that complete architecture which is very complex and it is not only just in those two clauses, it feeds through a whole series of other clauses the significance and changes amounts to “if I feel like it (unless I am doing it because of the colour of your hair) I cannot pay you”, and not pay you at any moment up to the moment before I would have to supply the gas.  So, in effect, we say at the end of the day that argument will fail and despite the elegant submissions about commitments and the like it simply has to go that far.

KIEFEL J:   Do you say that the construction argument has no relevance to any other aspect of your appeal or potential cross‑appeals and notices of contention?

MR HUTLEY:   Your Honour, theoretically if your Honours acceded to it, it would mean that they did not breach their obligation to us and therefore there was no economic duress because they were just confronting us with the world.  They could always say to us at any moment “we are not going to give you the SMDQ and we are not going to give it to you because we would like to leave it in the ground because we think it might be more valuable in 200 years”, and they could just stop.

KIEFEL J:   So its only relevance is if their view is correct?

MR HUTLEY:   If their view is correct, and we say, really, the chances of this Court concluding that construction amounts to saying that lines and lines and lines of complex drafting and notices just meant nothing.

KIEFEL J:   You are just trying to put us off reading it, are you not?

MR HUTLEY:   Anyway, your Honours, we say it could theoretically impact.  In effect, it is a step along the way.  It will not.  Then one has got the duress point, and the duress point has to be looked at – my learned friend took you to paragraph 29.  He did not take you to the beginning of 29 or paragraph 11.  Now, there is absolutely no doubt that once they did what they did we had to commercially buy from them.  There was just absolutely no doubt because of the collapse. 

There was a massive shortage of gas.  We have obligations which everybody knew to supply power to a large part of south‑western Western Australia and unless we went out and bought diesel oil which was at some extraordinary amount of money, they just simply were in a position which they knew they were in a position.  We did not say that they were consciously breaching the contract, but they knew if they did not supply the SMDQ we had to buy it from them.  So they did not have to make a threat.

KIEFEL J:   The fact of pressure applies.

MR HUTLEY:   Exactly.  The breach put us in the commercial position we had to do it.  So we say yes, that is the duress point.  Then they have got the cap point, and the cap point is about as unattractive a point as one can imagine.  This amounts to this.  A clause in the contract for supply by these parties to us of gas which capped amounts to something like a monopoly card, “get out of duress free” card.  So, in other words, they were saying that cap on liabilities for breach of that obligation entitled them to exercise economic duress to their benefit.  That then brings us to ‑ ‑ ‑

KIEFEL J:   In that regard will you be contending that Justice McLure’s conclusion at the last sentence of paragraph 40 is correct?

MR HUTLEY:   I missed the number.

KIEFEL J:   Paragraph 40, page 72.

MR HUTLEY:   Yes, that is what it amounts to, the argument.  Then one comes to, if one jumps over those gates, then we come to the point on which we lost and we say we lost on the basis of authorities which had not addressed the point.  This Court has said in – and I will not take your Honours to it, we have given your Honours a list but your Honours are familiar with the statements in David Securities, Roxborough and Equuscorp which says duress is the, in effect, with unjust enrichment ‑ ‑ ‑

KIEFEL J:   The vitiating factor. 

MR HUTLEY:   Is the vitiating factor.  Now, to impose upon it by reference to dicta, and they were all dicta in a different context which have never confronted this, this requirement is, with respect, wrong and it leads, as we submit, to wholly capricious results unless it is merely formal.  Let us assume one has to set aside these contracts we applied to, then a question is do we have to give them gas or do we have to go out and buy it at the then prevailing market price? 

What happens if that has gone up for other reasons?  Do we give it to them and then we get back the consideration or do we take a notional accounting at the period, the point in time, and if so what is the notional counting for giving back the gas?  The then market price, in which case we would never get back the just enrichment, or the contract price, and if so why that?  The whole exercise, with respect to the Court of Appeal, was completely unreal in the circumstances of a wholly executed contract for supply of an asset which was contemplated to be burned within a very short time of its receipt.

Now, often you will have to, in effect, make an election.  If the contract is ongoing one may have to make an election between, in effect, adopting the contract or setting it aside once the duress is oppressed, we understand all that, and many of the cases with which our learned friends tax your Honours are concerned really with that problem and that really is,

in effect, an election position which one can understand.  But the Court of Appeal’s judgment, in our respectful submission, on the point on which we lost is simply wrong, and it is contrary to a whole series of statements by the High Court and we have referred to them and your Honours know them, I will not take your Honours to them. 

It is a point which has never been determined at the highest level about economic duress anywhere in the world.  It is an important question and your Honours would grant leave, and your Honours would not be deterred from that by concerns about notices of contention.  I have asked around.  I do not know what the practice is, quite frankly, when there is a notice of contention point which is also sought to be a cross‑appeal point.  That, of course, is a matter totally for your Honours, how your Honours treat it, and that is really the contract point.

My learned friends want, in effect, leave on the contract to set aside the judgment that they got – was awarded against them up to the cap, that is why they want it, but whether they can raise it by way of notice of contention as going to the duress point I do not understand there are any cases – I was unable to find what the practice of this Court is in those somewhat strange circumstances. 

We say the contract of itself would not merit special leave because its prospects are so low, but if your Honours take the view that because it could be raised by way of notice of contention on our duress case your Honours are granting leave, we say no more about that, but we consider your Honours will not be overly troubled about it.

We accept that my learned friends can raise the duress point and even the cap point, but neither of those possibilities because they themselves, if your Honours were to find, for example, there cannot be duress without, as it were, an animus, that would be a very important question.  We also say if your Honours were to find a cap in a contract which is seeking to limit liabilities related to the contract is a charter for economic duress which is their construction on the exclusion clause, that would be an important development in the drafting of exclusion clauses, and obviously the ultimate point is a point of real significance which has never been decided anywhere in the common law world so far as we are aware.  Those are our submissions, if your Honours please.

KIEFEL J:   Anything in reply, Mr Zelestis?

MR ZELESTIS:   Just quickly, your Honours.  In our submission ‑ ‑ ‑

KIEFEL J:   I should say, if there is something raised in relation - because we took you out of order, if there is something that was raised you feel you

need to respond to in relation to the duress point, restitutionary claim, you have liberty to do that.

MR ZELESTIS:   May it please your Honour.  The only point I wanted to make was that with respect to your Honour the presiding Judge’s point, on the duress argument if that arises there is going to be a contention about the quality of the conduct and whether there is a mental element to it of the person who allegedly committed the duress and that will raise a question about that person’s – or it may raise a question about that person’s reasonableness and understanding of the meaning of the contract.  In our submission, one cannot divorce the construction question from the duress question.

KIEFEL J:   Anything in reply, Mr Hutley?

MR HUTLEY:   Nothing, your Honour.

KIEFEL J:   The Court will adjourn for a short time to consider the direction it will take.

AT 12.32 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.35 PM:

KIEFEL J:   There will be a grant of special leave in each of these appeals.  Time estimates, gentlemen - would it take more than a day?

MR HUTLEY:   I am afraid, your Honour, particularly if one has a discursus into the ‑ ‑ ‑

KIEFEL J:   Contract.

MR HUTLEY:   ‑ ‑ ‑ the contract and also the metes and bounds of economic duress I think really a day and a half is ‑ ‑ ‑

KIEFEL J:   Do you agree with that, Mr Zelestis?

MR ZELESTIS:   Yes, your Honour.

KIEFEL J:   Yes, very well.  It will be set down for a day and a half.  The parties will, of course, approach the Registrar for details of the timeframe for submissions.  The Court will now adjourn until 2.15.

AT 12.36 PM THE MATTERS WERE CONCLUDED