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- Unreported Judgment
SUPREME COURT OF QUEENSLAND
Wagners Cement Pty Ltd & Anor v Boral Resources (Qld) Pty Ltd & Anor (No 2)  QSC 163
WAGNERS CEMENT PTY LTD (ACN 126 029 481)
WAGNERS QUEENSLAND PTY LTD (ACN 122 170 745)
BORAL RESOURCES (QLD) PTY LIMITED
(ACN 009 671 809)
BORAL LIMITED (ACN 008 421 761)
BS 4294 of 2019
10 June 2020
4 June 2020
The orders of the Court are:
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – GENERAL RULE: COSTS FOLLOW EVENT – PARTIAL SUCCESS – where plaintiffs claimed declaratory relief resolving particular issues about the implementation of a price adjustment clause in a long-term contract and also a money judgment based on the resolution of those issues in their favour – where plaintiffs succeeded on some issues but failed on the claim for a money judgment – what costs order should be made
Aklia Holdings Pty Ltd v The Carter Group Pty Ltd (in liq) & Ors (No 2)  QSC 266, applied
Oshlack v Richmond River Council (1998) 193 CLR 72;  HCA 11, considered
Wagners Cement Pty Ltd & Anor v Boral Resources (Qld) Pty Ltd & Anor  QSC 124, cited
J McKenna QC, with D Chesterman, for the plaintiffs
L F Kelly QC, with S Eggins, for the defendants
Norton Rose Fulbright for the plaintiffs
Herbert Smith Freehills for the defendants
- In Wagners Cement Pty Ltd v Boral Resources (Qld) Pty Ltd  QSC 124, I decided a number of issues which had arisen between two contracting parties in relation to the operation of a contractual price adjustment mechanism in a long-term cement supply agreement and made the following orders:
- The parties are directed to bring in minutes of orders reflecting the Court’s reasons for judgment by 4:00pm on 2 June 2020.
- The proceeding will be listed before Bond J at 9:00am on 4 June 2020 for the making of formal orders reflecting the agreed position or, in default of agreement, for the making of directions as to the means by which any remaining disputes may be resolved.
- The parties will be heard as to the orders which should be made as to costs at the hearing referred to in order 2.
- On 4 June 2020, I heard argument from the parties concerning their respective draft orders. The parties were in dispute on costs. Otherwise they were in substantial (but not complete) agreement as to the form of the orders which should be made.
- Save as to the costs question – which I will deal with last – I will resolve the controversy, first, by setting out the orders which I will make and, second, by explaining my decision on the points which were in contest. Otherwise, the approach I will take is to formulate the terms of the orders in a way which seems to me to be most consonant with my previous reasons for judgment. Those reasons will stand as a sufficient explanation for the terms of my orders.
- I have used in these reasons and, with one exception, in the orders I will make, the terminology (including defined terms) used in my previous reasons for judgment. The exception is that in the orders I will refer to the Supplier and the Purchaser as, respectively, the first plaintiff and the first defendant.
- The orders which I will make, apart from costs, are:
- It is declared that the notice of 1 March 2019 from the first defendant to the first plaintiff was not a valid and effective Pricing Notice under clause 7.2 of the Agreement when given.
- It is declared that the notice of 18 March 2019 from the first plaintiff to the first defendant was effective as a notice under clause 7.4 of the Agreement electing to suspend supply as at 18 March 2019.
- It is declared that, pursuant to clauses 7.4 and 7.5 of the Agreement, the effect of the notice of 18 March 2019 from the first plaintiff to the first defendant was that the supply of Products under the Agreement was suspended for six months from 18 March 2019.
- It is declared that, for the purposes of clause 7.5(4) of the Agreement, the Suspension Period ended on 18 September 2019.
- It is declared that, for the purposes of clauses 3.4 and 3.5 of the Agreement, the period which should be treated as an Affected Period is the period commencing on 18 March 2019 and ending on 21 September 2019.
- It is declared that the notice of 1 April 2019 from the first defendant to the first plaintiff was not a valid and effective Pricing Notice under clause 7.2 of the Agreement.
- It is declared that the notice of 1 May 2019 from the first plaintiff to the first defendant was not a valid and effective notice under clause 7.4 of the Agreement.
- It is declared that the letter of 2 October 2019 from the first defendant to the first plaintiff was a valid and effective Pricing Notice under clause 7.2 of the Agreement.
- It is declared that the effect of the letter of 2 October 2019 from the first defendant to the first plaintiff was to reduce the price of general purpose cement and fly-ash blend cement under the Agreement to the new price per tonne nominated in the notice from 2 October 2019.
- By their proposed form of order placed before me on 4 June 2020, the defendants sought an order that the plaintiffs’ claim be dismissed. I reject that submission. The plaintiffs were formally successful at least to the extent of establishing their entitlement to the declaration which they had sought as to the invalidity of the March Pricing Notice the subject of order 1. That success, turning as it did on the analysis of Issue 1 as expressed in my previous reasons, is sufficient to warrant the making of order 1 and the rejection of the proposed order that the claim be dismissed.
- There was a minor controversy as to whether I should declare that an obligation to resume purchasing Products commenced from 21 September 2019. The defendants submitted that expressing an obligation in that way would be to oversimplify the nature of the Purchaser’s obligation under the Agreement. There is merit in that submission. But I thought there was also merit in identifying the start and end dates of the Suspension Period, hence orders 3 and 4. Both parties agreed that the duration of the relevant Affected Period should be arrived at by adding the 72-hour period referred to in clause 3.5 of the Agreement to the six months of the Suspension Period referred to in orders 3 and 4, hence order 5. The combination of orders 3, 4 and 5 sufficiently clarifies the impact of the suspension on the Purchaser’s obligation in relation to purchasing Products under the Agreement.
- As to costs, the parties were a long way apart. The plaintiffs sought an order that the defendants pay half of their costs to be agreed or, failing agreement, to be assessed. On the other hand, the defendants sought an order that the plaintiffs pay all of their costs of the proceeding.
- I summarised applicable general principles in Aklia Holdings Pty Ltd v The Carter Group Pty Ltd (in liq) & Ors (No 2)  QSC 266 in the following passage:
- The following summary of general principle derives from Thiess v TCN Channel 9 Pty Limited (No 5)  1 Qd R 156 at 208-209, Interchase Corporation Limited (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 3)  1 Qd R 26 at , Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd (No 2)  QCA 239 at -, and Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd  QCA 168 at :
- (a)Costs of an application in a proceeding are in the discretion of the Court but follow the event unless the court orders otherwise: UCPR r 681.
- (b)The word “event” is to be approached distributively with the consequence that it refers to the event of an issue or of each separate issue, if there is more than one, in the proceeding.
- (c)The application of the general principle may lead to costs orders which reflect different results on separate events or issues, unless the Court considers that some other order is more appropriate.
- (d)The circumstances which a Court might consider in determining whether some other order is more appropriate, and, if so, its form include:
- the preference to avoid the complicated form of assessment that would follow if different issues are determined in different directions as between the parties and costs were to be awarded in respect of issues in the technical sense;
- the possibility of taking the approach of identifying heads of controversy or “units of litigation” (rather than what might technically be regarded as issues on the pleadings) as the criterion for awarding costs;
- where a party has succeeded on one of two ways to the same outcome in a particular unit of litigation, a court might regard the costs of the second way on which that party failed as not so distinct conceptually or practically as to warrant making a costs order which reflected that party’s failure on the second avenue of success; and
- on the other hand, where, in a particular unit of litigation, there are multiple issues which are determined in different directions as between the parties, a court might form an overall impression having regard to the significance of the issues, the way they were determined, and the amount of time and cost spent on them, and order one party to pay a proportion of another party’s costs as a way to reflect fairly the parties’ comparative success or failure in the outcome which was obtained.
-  None of the parties supported the notion of an order of costs on an issue by issue basis in relation to the applications. I agree with that choice. The complexity which would be involved in the costs assessment which such a form of order would necessitate makes that a most unattractive outcome. …
- In hindsight, that summary of general principle would have been improved by recording that the fundamental principle which underlies the policy choice that costs should follow the event, and which also informs the Court’s assessment as to what is appropriate within the calculus I identified, is that which McHugh J explained in Oshlack v Richmond River Council, namely:
-  … the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is granted in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
- As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice.
- The parties in the present case were united in inviting me not to make a costs order on an issue by issue basis. I agree that I should not take that course. Accordingly, in order to make a decision by the application of the principles I have identified, it is necessary to say something more about the controversy between the parties.
- By this litigation the plaintiffs sought to obtain a multi-million dollar judgment based on the take-or-pay penalty which they contended the Purchaser was obliged to pay in respect of the Agreement Year which ended on 30 June 2019. They also sought declarations of right aimed at negating what they correctly anticipated to be the defendants’ position, namely that a Suspension Period was in place, and that the duration of the Suspension Period should be treated as an Affected Period under the Agreement so as to reduce or to negate the amount of any take-or-pay penalty. The arguments which the plaintiffs thereby sought to vindicate were the ways by which they sought to establish their right to the money judgment they claimed.
- By their counterclaim, the defendants also sought a number of declarations of right. But the arguments which they thereby sought to vindicate were the ways by which they sought to defend the plaintiffs’ claim. As the plaintiffs had anticipated, the defendants sought to vindicate the contention that a Suspension Period was in place, and that the duration of the Suspension Period should be treated as an Affected Period under the Agreement so as to reduce or to negate the amount of any take-or-pay penalty.
- Neither side framed the declarations which they sought in terms which applied only to the Agreement Year which ended on 30 June 2019. By their submissions, they each sought to have me determine not just the start date of the Suspension Period and the Affected Period, but when each of those periods ended. The determination of end dates was a necessary incident of deciding issues which had to be decided in order to work out the duration of the Suspension Period and the Affected Period during the Agreement Year which ended on 30 June 2019. Although the determination of end dates may well affect any take-or-pay calculation which applies during the next Agreement Year, no claim was advanced in the proceeding for the amount of any take-or-pay penalty payable by the Purchaser in respect of that year.
- In my view there is one head of controversy or “unit of litigation” which should be regarded as the criterion for awarding costs in this proceeding, namely the validity of the plaintiffs’ claim to recover a substantial take-or-pay penalty from the Purchaser in respect of the Agreement Year which ended on 30 June 2019. On that head of controversy, the defendants have entirely succeeded. That strongly supports the defendants’ submission that the plaintiffs should pay their costs of the proceeding.
- For their part, the plaintiffs pointed out that, having regard to the issues discussed in my previous reasons, the following table showed that the distribution of success was fairly even:
Unnecessary to answer
Unnecessary to answer
Unnecessary to answer
- They then submitted:
However, rather than each party bearing all of their own costs, [the Supplier] should be compensated for its costs in bringing the claim. That is so for the following reasons:
- (a.)The initial dispute which led to the commencement of the proceeding was about the validity of the March pricing notice. [The Supplier’s] success on Issue 1 means that it was justified in bringing the claim against [the Purchaser]. Put differently, [the Supplier] has enjoyed a measure of success on the claim that it brought against [the Purchaser] (and which [the Purchaser] defended). This is not a pyrrhic victory; the reasons for judgment have determined that [the Purchaser’s] understanding of the requirements of cl 7.1 was wrong. The reasons will reduce the scope for any similar disagreement for the remaining term of the contract.
- (b.)[The Supplier’s] success on Issues 4 and 5 mean that [the Purchaser] will likely be liable to pay [the Supplier] a substantial amount of money … which it would not have been liable to pay otherwise. [The Supplier] has achieved meaningful success against [the Purchaser] on the counterclaim.
- (c.) Issue 7, on which [the Purchaser] succeeded, was the repetition of Issue 4 but in respect of a later pricing notice. The parties will not have incurred much expense on that issue, which was only introduced by an amendment by [the Purchaser] on 17 December 2019.
[The Supplier’s] measure of success in the proceeding justifies an order that [the Purchaser] pay 50% of its costs.
- I am not persuaded by these arguments.
- First, it is true that the binding resolution of issues as between parties to a long term contract will reduce the scope for any similar disagreements during the remaining term of that contract. However it seems to me to be fanciful to think that the plaintiffs would have commenced this litigation to vindicate the proposition on which they succeeded in Issue 1, if they had accepted that the Supplier had waived any irregularity in the notice, which was the question on which the plaintiffs failed in Issue 2. As I have observed at  above, the arguments which the plaintiffs sought to vindicate by declaratory relief were the arguments by which they sought to establish their right to the money judgment they claimed. They failed to establish that right.
- Second, whilst the evidence before me suggests that the resolution of Issues 4 and 5 will advantage the Supplier in the calculation of the take-or-pay penalty for the Agreement Year ending 30 June 2020, for the reasons I identified at  above, that is not to the point.
- Third, each of the issues on which the defendants lost was merely one of a number of the ways by which they sought to vindicate their defence of the money judgment claimed against them. Having regard to the conduct of the proceeding before me, I do not regard the costs of the issues on which they failed as so distinct conceptually or practically as to warrant making a costs order which is diminished to some extent by reference to their failure. This conclusion seems to me to be entirely consonant with McHugh J’s discussion of principle and policy in Oshlack v Richmond River Council.
- The defendants should have the costs order they seek.
- The orders which should be made are as follows:
- The plaintiffs must pay the defendants’ costs of the proceeding.
 (1998) 193 CLR 72, citations omitted. The passage was quoted with approval in Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd (No 2) in the passage which I cited in Aklia.
 I use “penalty” as a convenient short-hand reference to the operation of the price adjustment mechanism and not in any technical legal or equitable sense.
 The Supplier accepted that it could not make such a claim against the Purchaser until after 30 June 2020 and reserved its right to make such a claim should there be an Annual Shortfall for which payment was not made by the Purchaser under cl 8.6.
 That conclusion is not gainsaid by the existence of Issue 7, which did directly engage with an issue which was only relevant to the Agreement Year ending 30 June 2020. As the plaintiffs’ own argument on costs recognised, Issue 7 was a late addition to the litigation; and, as my previous reasons recognized (Wagners Cement Pty Ltd v Boral Resources (Qld) Pty Ltd  QSC 124 at  to ), its resolution was dictated by decisions which had to be made in relation to the year which was in dispute.
- Published Case Name:
Wagners Cement Pty Ltd & Anor v Boral Resources (Qld) Pty Ltd & Anor (No 2)
- Shortened Case Name:
Wagners Cement Pty Ltd & Anor v Boral Resources (Qld) Pty Ltd (No 2)
 QSC 163
10 Jun 2020