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Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd (No 3)

 

[2015] QSC 295

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Callide Power Management Pty Ltd & Ors v Callide Coalfields (Sales) Pty Ltd & Ors; CS Energy Ltd v Callide Coalfields (Sales) Pty Ltd & Ors (No 3) [2015] QSC 295

PARTIES:

CALLIDE POWER MANAGEMENT PTY LTD
ACN 082 468 700

(first applicant)
CALLIDE ENERGY PTY LIMITED
ACN 082 468 746

(second applicant)
IG POWER CALLIDE LTD (FORMERLY SHELL COAL POWER CALLIDE LTD)
ACN 082 413 885

(third applicant)

v

CALLIDE COALFIELDS (SALES) PTY LTD
ACN 082 543 986

(first respondent)
ANGLO COAL (CALLIDE) PTY LTD
ACN 081 022 228

(second respondent)
ANGLO COAL (CALLIDE) NO. 2 PTY LTD
ACN 004 784 454

(third respondent)

CS ENERGY LIMITED
ACN 078 848 745

(applicant)

v
CALLIDE COALFIELDS (SALES) PTY LTD
ACN 082 543 986
(first respondent)
ANGLO COAL (CALLIDE) PTY LTD
ACN 081 022 228
(second respondent)
ANGLO COAL (CALLIDE) NO. 2 PTY LTD
ACN 004 784 454
(third respondent)

FILE NOS:

SC No 12122 of 2013

SC No 12138 of 2013

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

28 October 2015

DELIVERED AT:

Brisbane

HEARING DATES:

13 April; 5 May; 15 May; and 15 July 2015

Supplementary submissions received 7 September 2015 (applicants) and 14 September 2015 (respondents)

JUDGE:

Flanagan J

ORDER:

It is determined that this is an appropriate case for the ordering of the hearing and determination of separate questions.

I will hear from the parties as to the precise formulation and wording of the proposed separate questions and as to costs.

CATCHWORDS:

PROCEDURE – MISCELLANEOUS PROCEDURAL MATTERS – CROSS-CLAIMS: SET-OFF AND COUNTERCLAIM – COUNTERCLAIM – OTHER MATTERS – where the applicants in two separate but related proceedings applied for the respondents’ counterclaims to be excluded from the proceedings pursuant to r 182 of the Uniform Civil Procedure Rules 1999 (Qld) – where the exclusion of the counterclaims was sought on the basis that the hearing of the counterclaims might cause an undue delay in the trial of the action – where the hearing of the counterclaim will involve extensive evidence and many months of hearing time – whether there is any overlap between the applicants’ proceedings and the respondents’ counterclaims – whether there is any utility in excluding the counterclaims from the present proceedings

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – OTHER MATTERS – where the applicants in two separate but related proceedings applied for the determination of separate questions pursuant to r 483 of the Uniform Civil Procedure Rules 1999 (Qld) – where the proposed separate questions involve the construction of a contract and the validity or invalidity of a notice delivered pursuant to that contract – where the trial of separate questions would take a substantially shorter amount of time than the trial of the balance of the issues – where the applicants’ submit that the separate questions are distinct, of short compass and involve limited factual disputes – where the respondents’ submit that there will be a substantial overlap of evidence and witnesses in a trial of the separate questions and a trial of the entire proceedings – where the respondents’ submit that the separate questions will not result in the whole of the dispute being resolved and that a separate questions trial will delay the resolution of the whole of the dispute – whether there is an overlap of issues and evidence between a trial on separate questions and a trial on the whole of the dispute – whether there is utility and economy in the determination of separate questions – whether the determination of separate questions will delay the balance of the proceedings – whether the determination of separate questions ought to be ordered in the interests of justice

Uniform Civil Procedure Rules 1999 (Qld), r 5, r 182, r 483

Australian National Industries Limited v Spedley Securities Limited (in liq) (1992) 26 NSWLR 411, cited

Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9, cited

Callide Coalfields (Sales) Pty Ltd v CS Energy Ltd [2008] QCA 408, related

Callide Power Management Pty Ltd & Ors v Callide Coalfield (Sales) Pty Ltd & Ors; CS Energy Ltd  v Callide Coalfields (Sales) Pty Ltd & Ors [2014] QSC 216, related

Callide Power Management Pty Ltd & Ors v Callide Coalfields (Sales) Pty Ltd & Ors; CS Energy Ltd v Callide Coalfields (Sales) Pty Ltd & Ors (No 2) [2015] QSC 142, related

City of Swan v Lehman Brothers Australia Ltd (2009) 73 ACSR 86; [2009] FCA 784, applied

Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215, cited

Jacobson v Ross [1995] 1 VR 337, cited

Landsdale Pty Ltd v Moore [2009] WASCA 176, considered

Murphy v Victoria (2014) 313 ALR 546; [2014] VSCA 238, cited

POS Media Online Ltd v Queensland Investment Corp [2000] FCA 1451, considered

Tepko Pty Ltd v Water Board (2001) 206 CLR 1; [2001] HCA 19, cited

COUNSEL:

P L O’Shea QC, with D O’Brien QC, for the applicants in SC No 12122 of 2013

J C Bell QC, with A Pomerenke QC, and J O’Regan, for the applicant in SC No 12138 of 2013

D G Clothier QC, with S R R Cooper, and S J Webster, for the respondents in SC No 12122 of 2013 and SC No 12138 of 2013

SOLICITORS:

Johnson Winter Slattery for the applicants in SC No 12122 of 2013

Corrs Chambers Westgarth for the applicant in SC No 12138 of 2013

Gilbert + Tobin Lawyers for the respondents in SC No 12122 of 2013 and SC No 12138 of 2013

Introduction

  1. The question to be decided is whether this is an appropriate case for the separate determination of certain questions prior to the hearing of the balance of the case.
  2. For reasons which follow I have concluded that this is such a case primarily due to considerations of utility and economy, case management and the interests of justice.

Background

  1. Some of the applicants are owners of power stations located in Central Queensland.  The coal for the operation of these power stations is supplied by some of the respondents pursuant to Coal Supply Agreements entered into on or about 11 May 1998.  Whilst there are two sets of proceedings, namely BS12138/13 and BS12122/13, the issues which arise are, for all practical purposes, the same.  The Coal Supply Agreements are also substantially identical.  For the purposes of determining these applications for separate determination I will refer to the pleadings and particulars in BS12138/13.  CS Energy Limited is the named applicant in those proceedings.  The Coal Supply Agreement was for an initial term of 10 years.  The applicant, however, has four successive options to extend the term of the Coal Supply Agreement, each option being for a period of five years.  In or about 2009, the first option was exercised. 
  2. Clause 12 of the Coal Supply Agreement, entitled “Review of Agreement”, contains a procedure for the possible adjustment of the terms of the Coal Supply Agreement consequent upon the occurrence of a “Change Event”.  It relevantly provides:

12.3Change Events

  1. A ‘Change Event’ is a change in circumstances which has, or will have, a material effect on the competitiveness of either the Coal Mine Owners or the Buyer (in the reasonable opinion of a Party) in relation to the industry in which it operates, and includes, without limitation:

(i)the Commercial Load Date of Unit 2 occurring more than 18 months after the Effective Date;

(ii)if the Buyer reasonably demonstrates, by the elimination of other relevant factors, that there is a change in coal prices being paid by other power stations.  The Parties acknowledge that the Buyer must reasonably demonstrate, by the elimination of other relevant factors, that there is a material adverse change in the competitive position of the Power Station which is due to changes in coal prices being paid by other power stations, before the Parties will be obliged to review this Agreement against the principle set out in Clause 12.1(a)(iii).

(iii)major changes to working conditions within the coal mining industry, including, without limitation, advances in technology which were not foreseen at the date of this Agreement;

(iv)a demonstrated (by the Seller) increase in the long term (being at least five years) trend in electricity price occurring during the whole or any part of any period when an EMI is not operative; and

(v)a change in governmental policy, or a change in a law or regulation, relating to environmental standards and compliance with those standards.

  1. If at any time after the date of execution of this Agreement there occurs, or either Party considers there may occur, a Change Event, then:

(i)a Party (the ‘Notifying Party’) may notify the other (the ‘Receiving Party’) in writing promptly when that Change Event becomes known to the Notifying Party that it is the Notifying Party’s intention to initiate a review of this Agreement which may lead to an Adjustment;

(ii)if it wishes to proceed with a review of this Agreement, the Notifying Party must, as soon as practicable in all the circumstances, submit a formal notice of a Change Event (the ‘Change Event Notice’) to the Receiving Party, which will include:

  1. all data which the Notifying Party holds which is relevant both to the Change Event including detailed information regarding the nature, extent and quantum of the cost and revenue impacts of the Change Event and to calculating those costs and revenue impacts as they relate to all of the options and alternatives identified by the Notifying Party available to accommodate or mitigate the Change Event; and
  2. options and alternatives identified by the Notifying Party and the Notifying Party’s recommended option,

and a Change Event will be deemed to have occurred;

(iii)As soon as possible after a Notifying Party becomes aware that an estimate of the financial effect is likely to be incorrect, the Notifying Party must amend that estimate and give copies of the amended estimate and the estimate it amends to the Receiving Party;

(iv)The onus is upon the Notifying Party to establish the impact of the Change Event;

(v)The Parties must use their best endeavours to review and to attempt to agree an Adjustment generally in accordance with the principles set out in Clause 12.1.”

  1. The principles governing any review pursuant to clause 12.3 are set out in clause 12.1:

12.1Principles

  1. Each Party acknowledges and agrees:

(i)subject to Clause 12.1(a)(ii), the Coal Mine Owners and the Buyer have an expectation of benefiting under this Agreement;

(ii)subject to Clause 12.1(a)(iii), each Party supports the process of review set out in this Clause 12 to ensure both the Coal Mine Owners and the Buyer remain competitive in relation to their respective industries; and

(iii)during the Initial Term, the competitive position of the Power Station relative to other power stations operating in the Power Station’s industry in Queensland as at the Effective Date should be restored, having regard to the viability of the Coal Mine Owners’ mine in its industry.

  1. Each Party agrees that circumstances may change during the Term of this Agreement which may require the terms of this Agreement to be reviewed to ensure those terms remain consistent with the principles set out in Clause 12.1(a).”
  1. Clauses 12.4 to 12.8 of the Coal Supply Agreement then detail a regime requiring the parties to meet in an attempt to agree on the nature and quantum of the financial effect of the Change Event and the “Adjustment” (if any) to the terms of the Coal Supply Agreement.
  2. On 6 November 2013, the relevant respondents delivered to the applicant a document described as a “Notice of Change Event” purportedly pursuant to clause 12.3(b)(i) of the Coal Supply Agreement  (“the First Notice”).  By the First Notice, the respondents purported to notify the applicant that a Change Event had occurred and that it was the respondents’ intention to initiate a review under Clause 12 which may lead to an Adjustment.  The First Notice continued:

“Briefly, and without prejudice to the Change Event Notice, since the time of entry into the CSA [Coal Supply Agreement], there have been a number of changes in circumstances which, in the Seller’s reasonable opinion, have had, and continue to have, a material effect on its competitiveness in the coal mining industry such that a Change Event within the meaning of clause 12.3(a) has occurred.  The effect of these changes is that the cost of production at the Callide Mine has substantially increased in circumstances where the Contract Price has remained relatively stable.

The Seller will, pursuant to clause 12.3(b)(ii), submit a formal Change Event Notice as soon as practicable in all the circumstances.

As required under clause 12.3(b)(v), the Seller will use its ‘best endeavours’ to review and attempt to agree an Adjustment generally in accordance with the principles set out in clause 12.1.  We expect that the Buyer will do the same.

The terms used in the CSA bear the same meaning in this letter.”

  1. On 12 November 2013, the relevant respondents delivered to the applicant a second notice described as a “Change Event Notice” purportedly pursuant to clause 12.3(b)(ii).  This Change Event Notice:
    1. provided by [4.2] – [4.6] that:

“4.2Since the time of entry into the CSA [Coal Supply Agreement], there have been a number of changes in circumstances (identified below in this Notice) which, in the Seller’s reasonable opinion, have had, and continue to have, a material effect on the Coal Mine Owners’ competitiveness in the coal mining industry.

4.3The effect of these changes in circumstances is a substantial increase in the cost of producing coal from the southern areas of Callide Coalfields (referred to as the Callide Mine), in circumstances where a significant proportion of the coal from the Callide Mine is sold to the Buyer under a contract which fixes the coal price paid by the Buyer at a rate far lower than market value.  These changes in circumstances together and cumulatively constitute a Change Event, being a Change Event within the meaning of clause 12.3(1) [sic].

4.4The Seller identifies the following changes in circumstances, the nature and extent of each of which is described in sections 5 to 16 of this Notice:

(a)Changes to market and economic circumstances;

(b)Changes to the mine planning conditions;

(c)Extensive and ongoing rainfall initially constituting Force Majeure Events under the CSA, together with the frequency of such rainfall Force Majeure Events and their immediate, cumulative and ongoing effects;

(d)Significant reduction in operating flexibility due to changes in government regulation resulting in changes to the mine’s water discharge and storage requirements;

(e)Significant increases to the overall costs of production of coal at the mine;

(f)Increases in labour and contractor costs at the mine;

(g)Increases in the cost of diesel incurred by the mine;

(h)Increases in the cost of explosives incurred by the mine;

(i)Increases in maintenance costs incurred by the mine;

(j)Increases in the cost of electricity incurred by the mine;

(k)The Coal Mine Owners ceasing to benefit under the CSA; and

(l)Significant change in the coal prices paid by other power stations.

4.5Pursuant to clause 12.3(2)(2) [sic] upon the issuing of this Notice, a Change Event will be deemed to have occurred.

4.6If any part of this Change Event Notice is determined to be ineffective or invalid for any reason whatsoever, such ineffectiveness or invalidity will not affect the validity or operation of the remainder of this Change Event Notice and such ineffective or invalid part will be deemed to be deleted from this Change Event Notice.”

  1. described  the nature and extent of each change in circumstances set out in [4.4] in [5] – [16] of the Change Event Notice;
  2. provided by [17] of the Change Event Notice, the quantum of the cost and/or review impacts of the changes in circumstances.
  3. provided by [18.1] of the Change Event Notice:

18Options and Alternatives Identified by the Seller

18.1The Seller has identified five possible options or alternatives to take account of the changed circumstances described in this Notice.  Four of the possible alternatives proposed by the Seller contain a number of adjustments to the CSA relating to:

  • Options terms;
  • Tonnage requirements and notice;
  • Coal quality; and
  • Contract and Invoice Price.”
    1. set out in [18.2] – [18.6], four of the five alternatives referred to in [18.1] (identified as Alternatives 1 and 2 and 1A and 2A) and proposed by [18.7], as Alternative 3, the early and orderly termination of the Coal Supply Agreement;
    2. identified in [19.1] of the Change Event Notice, the quantum of the costs and/or review impacts of the options and alternatives; and
    3. provided by [20] of the Change Event Notice, that the Seller’s recommendation was Alternative 2 as described in Annexure 2 to the Notice.
  1. The narrative part of the Change Event Notice runs approximately 80 pages.  As identified above it refers to 12 matters which are alleged to constitute a “Change Event” within the meaning of the Coal Supply Agreement.  The Notice includes approximately 60 annexures which, when printed single-sided, occupy more than seven lever arch volumes.[1]
  2. The Change Event Notice also annexes detailed cost models, which were served in electronic Excel spreadsheet form, which set out:

(a)historical physical and financial data, including costs and revenue data, for the Callide Mine for the period 1998 until 2013;

(b)forecast physical and financial data, including costs and revenue data, for the Callide Mine for the period from 2014 until 2031; and

(c)separate forecast physical and financial data, including costs and revenue data, for the Callide Mine for the period from 2014 until 2031, assuming that the options and alternatives proposed in the Change Event Notices were implemented.

  1. In or about December 2013 the applicant commenced proceedings by way of originating application seeking declarations that the Change Event Notice was not a Notice given in accordance with the relevant clauses of the Coal Supply Agreement.  The applicant’s case is that the Change Event Notice on its face, is not of the kind required by the Coal Supply Agreement and is therefore ineffective to engage the clause 12 process.  Further, that even if the Notice is of the kind required by the Coal Supply Agreement it was not given within the time stipulated in the Agreement and was therefore ineffective to engage the clause 12 process.[2] 
  2. The originating application was filed in circumstances where a meeting of executives to discuss the Change Event Notice had been nominated for 18 December 2013.  The applicant did not attend this meeting expressly on the basis that it disputed that the Change Event Notice was a valid notice under the Coal Supply Agreement. 

Some procedural history

  1. These proceedings were previously on the Commercial List before Jackson J.  On 22 August 2014 his Honour heard similar applications, namely applications for an order excluding the counterclaim from the trial of the proceedings and for the determination of separate questions.
  2. Jackson J identified the applicants’ objective as follows:[3]

“The applicants’ objective is to separate and have decided their allegations of invalidity of those notices before anything else is decided.  In particular, they seek to defer the hearing of the respondents’ allegation in the defence that the CSA [Coal Supply Agreement] has been frustrated so that the relief sought by the applicants should not be granted.  As well, they seek to defer the hearing of the respondents’ counterclaims. One of those is that the CSA should be adjusted in accordance with the contractual provisions and for damages to be awarded to the respondents for the applicants’ failure to engage in the contractual process for adjustment. If the change event notice is invalid, it will not fall for determination. The other is that if the change event notice is invalid the CSA is frustrated and discharged.  That claim will not fall for determination if the change event notice is valid.” 

  1. What was sought before Jackson J was the separate and preliminary determination of issues in respect of the validity of the Change Event Notice.  His Honour did not grant the applicants’ application but was nevertheless of the view that an order should probably be made to hear and determine some or all of the separate questions:[4]

“…I have reached two dispositive views about the present applications.  First, although I consider that an order should probably be made to hear and determine some or all of the separate questions within the range applied for by the applicants, in advance of the other questions in the case, my view is also that it is not yet clear enough what the scope of the factual enquiry will be to hear and determine all of them.  In particular, it does not seem to me that the ambit of the facts to be decided or assumed in relation to questions whether the purported notice under cl 12.3(b)(i) and the purported change event notice under cl 12.3(b)(ii) were given in a timely fashion has yet been established clearly enough.  In those circumstances, it seems to me to be premature to make the orders sought by the applicants.  The applications as presently framed should be refused.” 

  1. His Honour identified two primary reasons why it was “premature” to make such an order:

(a)his Honour considered that the ambit of facts to be decided or assumed in relation to the question as to whether the purported Change Event Notice was given in a timely fashion had not yet been established clearly enough;[5] and

(b)his Honour considered that the ambit of any facts which the parties may tender in evidence as surrounding circumstances relevant to the proper construction of clause 12 of the Coal Supply Agreement was unclear.[6] 

  1. On 2 September 2014, in the course of delivering Judgment, his Honour ordered that the proceedings be transferred to the Supervised Case List.  The proceedings were therefore placed on my Supervised Case List.
  2. On 29 September 2014 I made directions for the parties to confer and attempt to agree on a document plan and a list of the real issues in dispute in respect of the whole of the proceedings.  The direction in relation to the identification of the real issues in dispute was to assist the Court in determining the foreshadowed separate questions application.
  3. On 11 December 2014 further extensive directions were made.  These included directions for further pleadings and enlarging the date for the parties to confer and attempt to agree on a document plan and a modified direction for the applicants to provide a draft list of issues.  Directions were also made for the bringing of any separate questions application.
  4. The application for separate questions was first heard on 13 April 2015.  It was clear from the parties’ written and oral submissions that there were concerns as to the manner in which both the applicant and the respondents had pleaded parts of their case.  The concern as to the applicant’s statement of claim related to an allegation that a Change Event, if it is to consist of more than one event, must be a “closely related series of events”.  The respondents submitted that the allegation was vague and ambiguous.
  5. The concern as to the respondents’ defence related to two “reasonable recipient” pleas in defence of the claims of invalidity of the Change Event Notice.  The respondents had pleaded as an alternative defence that if the Change Event Notice did not, on its face, state that which is required under the Coal Supply Agreement, then it nonetheless complied with those requirements because those required matters were “discernible by a reasonable reader” of the Change Event Notice. 
  6. The respondents had on 27 March 2015 served eighteen and a half pages of particulars asserting facts said to be relevant to what the Change Event Notice would have conveyed to a reasonable reader in the applicant’s position so as to particularise paragraph 13(a)(iii)D of the defence.  These particulars raised numerous factual matters.  The respondents initially submitted that there was likely to be a substantial overlap between the factual issues raised by the reasonable reader particulars and the balance issues raised by the counterclaim.  The scope of this overlap and the likely extent of disclosure, witnesses and evidence was generally identified in paragraphs 23 to 30 of Ms Platford’s 27 March affidavit.[7] 
  7. The second reasonable recipient plea was in response to an allegation made by the applicants that the Change Event Notice was invalid as it did not permit “analysis” or “identification” of when the Change Event occurred and its distinct effects. 
  8. In the course of the hearing the applicant agreed to provide further and better particulars.  The application for separate questions was therefore in effect adjourned so as to permit this to occur. 
  9. On or about 22 April 2015 the applicant provided the further and better particulars.
  10. Subsequently, at a mention on 5 May 2015, the respondents applied to have certain paragraphs of the amended statement of claim struck out or, alternatively, the further and better particulars struck out.  The applicant also renewed its previous application to have the respondents’ particulars to paragraph 13(a)(iii)D of the defence struck out.  These applications were heard by the Court on 15 May 2015.
  11. In my judgment delivered 29 May 2015[8] I found that the tests propounded by the applicants in their further and better particulars invited unnecessary factual enquiries rather than pure questions of construction. I therefore found that the vagueness of the particulars had, in terms of r 162(1)(a) of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”), a tendency to prejudice or delay the fair trial of the proceedings.
  12. As a result of the strike-out application the applicant amended its pleadings relevantly to delete the “closely related series of events” allegation and “chain of facts” particulars as well as the permit “analysis” or “identification” allegation.  These amendments resulted in the defendants’ extensive particulars of the “reasonable recipient” plea being deleted and being replaced by a plea that the matters in question are discernable by a reasonable reader of the Change Event Notice on a plain reading of the Notice.  The result of these amendments therefore is that the previously expressed concerns of the respondents as to a potential substantial overlap between the factual issues raised by the reasonable recipient particulars and the balance issues have dissipated. 
  13. A further amended application for separate questions was filed and served on 21 August 2015.
  14. The separate questions application was thereafter to be determined on the papers after the receipt of supporting material and further submissions from both sides.
  15. The parties have been able to reach agreement upon the terms of a final list of issues in dispute.  The agreed list of issues appears at pages 1 to 13 of exhibit CAP-3 to the affidavit of Ms Platford sworn 31 August 2015.[9]  There are three minor differences between the list of issues at Annexure A to the further amended application and the agreed list of issues in Ms Platford’s affidavit.  I have made the agreed list of issues Annexure A to this Judgment.  The agreed list of issues is divided into four parts.  Part 1 identifies matters which are common ground between the applicants and the respondents.  This constitutes issues 1 to 12.  Part 2 addresses the issues raised by the applicant’s statement of claim excluding the issues raised in paragraphs 14 and 15 of the fourth further amended defence.[10]  This is the allegation that if the Change Event Notice is not valid then the Coal Supply Agreement is frustrated.  Part 3 addresses the issues raised in the respondents’ counterclaim and in paragraphs 14 and 15 of the respondents’ defence.  Part 4 addresses the issues that arise on both the applicant’s claim and the respondents’ counterclaim.
  16. The issues for which a separate determination is sought by the applicant are issues 13 to 34.  There are three preliminary observations that should be made in respect of issues 13 to 34.  The first is that these issues for separate determination no longer include the question as to whether the Change Event Notice was given in a timely fashion.  As observed by Jackson J the scope of that factual inquiry was not clear at the time of his Honour hearing the initial application.  The applicant no longer requests the Court to decide any separate questions as to whether the Notice was given in a timely fashion.  This constitutes an acknowledgement by the applicants that the factual inquiry as to when the respondents became aware of the 12 circumstances said to constitute the Change Event is extensive and will overlap with the evidence and issues in respect of the counterclaim.  These timing issues which involve issues of fact are paragraphs 35 to 37B of the agreed issues list under the heading “Timing and engagement of clause 12 – issues of fact”.  The only aspect of the timing issues to be determined separately are identified in issues 19 to 23.  The applicant submits that these timing issues are matters of construction and do not require any factual inquiry.  The second observation is that the issues the subject of the application for separate determination, namely issues 13 to 34, rather than reflecting a list of the “real issues” are more accurately described as a list of the pleaded issues going to the validity of the Change Event Notice.
  17. The issues seek to reflect the present state of the pleadings which are now in a more advanced stage than was the case before Jackson J.  I consider the formulation and wording of the separate questions later in these Reasons.
  18. The respondents by reference to the procedural history submit:[11]

“The changing positions taken by the applicants reveal:

(a)First, that the applicants have consistently and relentlessly pursued separate questions as an end in themselves, without any real regard for the delay, risks and difficulties which pursuing that course might create;

(b)Secondly, if the applicants’ position on their earlier applications had been accepted and the applications granted, the Court would have been faced with very significant difficulties down the track dealing either with significant factual controversies, or false issues, or both.

There is no reason to think that the applicants’ present contentions about the advantages of the proposed separate questions are any more reliable now than their past contentions have proven to be.”

  1. Whilst I accept that given the history of this matter there is some force in this submission, I am satisfied that the procedural steps taken have considerably refined the issues between the parties and significantly reduced the extent of any factual dispute.

The present applications

  1. There are now only two applications before the Court.  The first is made pursuant to r 182 or r 367 of the UCPR seeking that the respondents’ counterclaim be excluded from the applicant’s proceeding. The second application is made pursuant to r 483 or 367 of the UCPR for the determination of separate questions.
  2. The applicant seeks the exclusion of the counterclaim on the basis that the hearing of the counterclaim might cause an undue delay in the trial of the action.  The applicant submits that its claim is of very limited compass involving a determination of the validity or otherwise of the Change Event Notice.  A perusal of the counterclaim, however, according to the applicant, “reveals an array of complex factual issues”.[12]  It may be accepted that the counterclaim involves the existence and extent of 12 changes of circumstances and their effect on competitiveness in the industry in which the respondents operate.  The counterclaim also raises complex issues as to damages as to what adjustment (if any) should have been made to the Coal Supply Agreement to ensure compliance with the principles enshrined in clause 12.1.  It may also be accepted that the hearing of the counterclaim will involve extensive lay and expert evidence and many months of hearing time.[13] 
  3. The applicant, in its submissions in support of excluding the counterclaim, does not, in my view, give sufficient weight to its desire to have the timing issues of fact identified in issues 35 and 37B heard as part of the balance of the proceeding without the counterclaim.  The timing issues of fact are connected with the 12 circumstances constituting the frustration case in the respondents’ counterclaims.  The issues involve a factual inquiry as to the respondents’ knowledge of the change in circumstances and the formation of a reasonable opinion that those changes in circumstances would have a material effect on the competitiveness of the relevant respondents in relation to the industry in which they operate.  Depending on how the questions for separate determination are answered the balance of the proceedings may include not just the counterclaim but also these timing issues.  In such circumstances it is difficult to identify the utility of an order excluding the counterclaim from the present proceeding.
  4. I accept the respondents’ submission that it is unclear what the applicant hopes to achieve by the exclusion of the counterclaims[14]  The respondents further submit:[15]

“If it is decided that some aspects of the applicants’ claims should be determined as separate questions then the Court is amply able to order that occur without the counterclaims being excluded.  In the circumstances, the exclusion of the counterclaims is a procedural device ill-suited to advancing the just and expeditious resolution of the real issues in the proceedings.” 

  1. The separate determination of questions is a procedure better suited to determining the validity of the Notice.
  2. Further, the directions made by me as to the identification of the real issues in dispute was to assist the Court with the foreshadowed applications for a separate determination of questions, not with excluding the counterclaim.
  3. I will therefore proceed to determine the present application as solely being an application made pursuant to r 483 or r 367 of the UCPR for the determination of separate questions.

Separate determination – relevant principles

  1. The application for a separate determination of questions is made either pursuant to r 483 or r 367 of the UCPR.  Rule 483(1) provides that the court may make an order for the decision by the court of a question separately from another question, whether before, at, or after the trial or continuation of the trial of the proceeding.  Rule 367 deals with the Court’s power to make directions and gives the court a discretion to  make any order or direction about the conduct of the proceeding it considers appropriate.  Rule 367(2) states that in deciding whether to make an order or direction, the interests of justice are paramount. 
  2. The court has a wide discretion to order separate questions.  That discretion must however be exercised consistent with the overriding obligations of parties and the court stated in rule 5 of the UCPR.  Rule 5(1) identifies that the purposes of the rules is to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense.  Rule 5(2) states that the rules are to be applied by the courts with the objective of avoiding undue delay, expense and technicality and facilitating the purposes of these rules.  In Landsdale Pty Ltd v Moore,[16] Newnes JA, with whom Buss JA agreed, noted that the court should “approach each case with the object of eliminating any unnecessary delay or cost, and ensuring the efficient and timely resolution of the case, consistent with doing justice to both sides.” 
  3. The principles in relation to whether an order should be made for separate questions to be heard were summarised by Rares J in City of Swan v Lehman Brothers Australia Ltd:[17]

“(1)As a general rule the starting point is that all issues of fact and law should be determined at the one time.

(2)A party seeking the determination of separate questions must satisfy the court that it is ‘just and convenient’ for the order to be made.  The order must be made on concrete facts, either established or agreed, for the purpose of quelling a controversy between the parties so as to produce a conclusive or final judicial decision on the issue, which is of a real, not hypothetical, importance to the determination of the controversy.

(3)There are special problems where the separate issue involves a mixed question of fact and law, although it may still be able to be decided as a separate issue.  However, care must be taken in precisely formulating the question and specifying the facts upon which it is to be decided.

(4)The court must have all relevant matters before it as a precondition of it being asked to exercise its discretion if the separate question involves the grant or refusal of declaratory relief.

(5)It may still be appropriate to determine a separate question even if it will not resolve all the issues, provided that there is a strong prospect that the parties will agree upon the result when the core of the dispute has been decided or if the decision will obviate unnecessary and expensive hearings of other questions.

(6)Generally speaking an issue will not be appropriate for separate determination if it is simply one of two or more alternative ways in which an applicant or plaintiff frames its case and its determination would leave other significant issues unresolved.

(7)It is relevant to consider whether:

  • the separate questions will contribute to the saving of time and cost by substantially narrowing the issues for trial or even lead to the disposal of the proceedings;
  • they will contribute to the settlement of the proceedings;
  • they will give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of the trial;
  • there will be any significant overlap between the evidence adduced on the hearing of the separate question and a trial;
  • the questions will prolong, rather than shorten, the proceedings.”
  1. Whilst the court is exercising a wide discretion in determining whether it is appropriate to order separate questions, a cautious approach should be adopted.  As identified by Lehane J in POS Media Online Ltd v Queensland Investment Corp,[18] one of the main considerations requiring a cautious approach is that the court is called upon to make a discretionary judgment at an early stage in proceedings.

Each party’s position

  1. All parties sought to identify the anticipated length of the separate questions and the balance of the trial.  Mr Powell has the conduct of this matter for Callide Power Management Pty Ltd.  He has in excess of 25 years’ experience practicing as a solicitor in commercial litigation.  He estimates that the hearing of the proposed separate questions will take between five and seven days and the balance of the trial would take between 3 to 4 months.  These estimates are made on certain assumptions identified in his affidavit.[19]
  2. Mr Kimmins is also an experienced commercial litigator and has conduct of the matter for CS Energy Limited.  He is of a similar opinion to Mr Powell that the hearing of the proposed separate questions would take less than two weeks.[20]  His estimate for the balance of the trial is 4 to 6 months.[21] 
  3. Ms Platford who has conduct of both proceedings for the respondents also has in excess of 25 years’ experience practicing in commercial litigation.  Ms Platford initially estimated that the hearing of the proposed separate questions would take between approximately 5 to 8 weeks.  She was also initially of the opinion that preparation for a trial of separate issues including disclosure and the preparation of lay and expert evidence will take in excess of four months and more likely six months.[22] As at 27 March 2015 Ms Platford did not think it was possible to give even a broad estimate of the length of the trial of the whole of the proceedings, although she acknowledges that it would be substantially longer than a trial of the proposed separate issues.[23]  Ms Platford now estimates that a trial of the proposed separate issues would be three weeks and preparation for this trial would be in excess of three months and more likely five months.[24]  It may be accepted that the primary reason for Ms Platford’s estimate for the length of trial being reduced to three weeks is because the respondents do not maintain the “reasonable recipient” plea to uphold the validity of the Change Event Notice.
  4. The applicant submits that its proceedings are relatively simple, concerning the invalidity of the Change Event Notice.  This invalidity is sought to be determined primarily by reference to the Coal Supply Agreement and what appears on the face of the Notice. Thus the questions identified by the applicants for separate determination concern:[25]
    1. the construction of the Coal Supply Agreement (issues 13 to 23); and
    2. whether on its face the Change Event Notice was invalid as alleged in the statement of claim but excluding timing issues (essentially, whether the Change Event Notice was invalid on its face) (paragraphs 24 to 34 of the agreed list of issues).
  5. The applicant’s position is that the separate questions are therefore distinct and confined in nature.  They are of short compass and involve limited factual disputes.[26]
  6. The respondents do not consent to the determination of separate questions but rather seek the continued management of the proceedings with a view to the determination of the whole of the dispute between the parties principally because they:[27]

(i)consider that there will be a substantial overlap of evidence and witnesses between a trial of the proposed separate issues and a trial of the balance of the issues in the proceedings;

(ii)consider that a determination of the proposed separate issues will not result in the whole of the dispute between the parties being resolved; and

(iii)are concerned that a trial of the proposed separate issues (and any appeal) will delay the resolution of the whole of the dispute.

  1. The respondents submit that the benefit of determining separate questions is not clearly demonstrated and that there is an unacceptable risk of embarrassment in the court’s consideration of issues and witnesses on more than one occasion which may give rise to an unacceptable risk of delay in the resolution of the whole of the proceedings.[28]
  2. The primary reason for the difference in the estimates of the length of the trial of any separate questions is the respondents’ desire to present extrinsic evidence as to the surrounding circumstances relevant to the construction of the Coal Supply Agreement.  The respondents also anticipate that further evidence (both lay and expert) may need to be led in relation to whether a change in geological conditions experienced by the respondents while mining at the Callide Mine constitutes a “change of circumstances” for the purposes of the Coal Supply Agreement.  This is relevant to issue 15(b) of the List of Issues.  The respondents also point to the fact that the applicant alleges that the Change Event Notice does not include the quantum of cost and revenue impacts of the change event or the proposed options.  The respondents therefore submit that in resolving these issues the court may need to form a view about the sufficiency of various financial information contained in spreadsheets forming part of the annexures to the Change Event Notice as well as other financial and quantities information included in the body of the Change Event Notice.[29]  Ms Platford therefore anticipates that the volume of disclosure required in relation to the proposed separate issues is likely to be significant and that lay and expert evidence will need to be led.[30]  The respondents therefore identify that the practical question on the present application is which of these two approaches represents the better course at this stage of the proceeding, with the applicants having the burden of demonstrating that the course that they propose is plainly of greater utility and economy.[31]  To answer that question it is necessary to consider in more detail the issues raised by the parties.  Those issues may be identified as follows:
    1. the nature and extent of extrinsic evidence as to the purpose of the Coal Supply Agreement;
    2. evidence as to cost increases associated with geological conditions;
    3. evidence as to whether the Change Event Notice permits identification of the quantum of the cost and revenue impacts;
    4. whether there is an overlap of issues and evidence;
    5. whether there is utility and economy in the determination of separate questions;
    6. will the determination of separate questions delay the balance of the proceedings; and
    7. the interests of justice.
  1. The nature and extent of the extrinsic evidence as to the purpose of the contract
  1. At the time of the hearing of the application for separate questions before Jackson J the respondents had not identified any extrinsic facts which would inform their contentions as to the proper construction of the Coal Supply Agreement.[32] 
  2. Subsequently the respondents pleaded a number of extrinsic facts to support a constructions that the Coal Supply Agreement has as its objective commercial purpose:[33]

(a)the sale and purchase of coal on terms that were competitive and economic over the term or potential term of the agreement; and

(b)clause 12 was to provide a mechanism for reviewing and, as required, changing the terms of the Coal Supply Agreement so as to ensure that those terms fulfilled the purpose referred to in (a) above. 

  1. By way of reply the applicant has admitted most of the extrinsic facts and only four issues remain in dispute.  Of these four issues, two are readily resolved as matters of construction of the relevant document and will not give rise to any significant dispute of fact.[34]  As to the remaining issues, the first is an allegation that each party, at or about the time of entering into the Coal Supply Agreement, had made its own estimates, and that those estimates showed that the Contract Price agreed would result in it being competitive and profitable in its operations.  The respondents plead that they conducted modelling which estimated that the contract price would result in an internal rate of return of a certain percentage and that similar modelling would have been undertaken by the applicant.
  2. Ms Platford for the respondents has identified three lay witnesses that may be called as witnesses in relation to this issue.  Mr Kimmins has identified two possible relevant witnesses.  The number of lay witnesses and the number of relevant meetings are limited.  Ms Platford also anticipates that the respondents may seek to lead expert evidence from a person or persons experienced in the coal mining and electricity generation industries which identifies the modelling as being notorious at the time of the Coal Supply Agreements as well as lay and expert evidence to explain the modelling to the Court.[35] 
  3. Because of recent amendments to the fourth further amended defence of the respondents[36] there is now an additional allegation concerning the construction of the Coal Supply Agreement.  Ms Platford anticipates that the respondents will also need to seek disclosure and lead evidence including expert evidence in respect of this new allegation.  The allegation is that at the time of execution of the Coal Supply Agreement it was the parties’ understanding that, during the actual potential term of the Agreement, certain changes might affect the competitiveness and profitability of the Callide Mine and the Callide B Power Station and the Callide C Power Station:

(a)suddenly or over a period of time (including weeks, months or years);

(b)with short, medium or long term consequences and effects, which may not be capable of being promptly ascertained; and

(c)distinctly and independently of other changes, or concurrently with other changes or because of the cumulative and interdependent consequences and effects of several changes over a period of time.

Further, there might be changes to the mining process at Callide Mine that would have a cumulative and interdependent effect upon each other.  The expert evidence anticipated by Ms Platford is from a person or persons experienced in the coal mining and electricity generation industries.[37] 

  1. The applicant submits however, that the prospect that such evidence will be required or if required will be extensive is limited.  The applicant submits that changes such as those pleaded (for example changes to working conditions) were likely to occur to those businesses over the life of a long term supply contract and would affect their performance are highly unlikely to be controversial.  The only reason the applicant has not admitted these allegations is because of the ambiguity of the meaning of the words used in the defence, namely “competitiveness” and “profitability”.[38] 
  2. The respondents’ anticipated evidence however, remains only relevant to the proper construction of the Coal Supply Agreement.  It must be remembered that this evidence is only sought to be led to assist in the construction of the Coal Supply Agreement in the respects I have identified.  The Court is presently not in a position to determine either the admissibility or permissible use of such evidence.  The issue is, however, of sufficiently narrow evidentiary compass that it may be readily managed within the timeframes estimated by the applicant for the hearing of any separate questions.
  3. I note that the proper construction of the Coal Supply Agreement is in issue, both in connection with the claim and the counterclaim.[39]  The only extrinsic facts pleaded, however, are those which I have already identified.  It is a possibility that the lay witnesses who participated in the negotiations at the time the Coal Supply Agreement was entered into will also be called as witnesses at the trial of the balance of the issues.  The respondents submit that the existence of factual disputes and the potential overlap of factual issues creates a real risk that there will be witnesses who give evidence on the separate questions who would also be called to give evidence on the balance of the issues and about whom findings of credit are made.  The Court may be placed in the position in which there may be findings of credit made against witnesses on the hearing of the proposed separate questions which will cause real difficulties if those same witnesses are to be called again at the trial of the balance issues.[40] 
  4. In my view such difficulties are unlikely to arise in the present case.  The extrinsic issues relate to the years 1997 and 1998 and the negotiations and modelling leading to the execution of the Coal Supply Agreement.  The relevant lay witnesses who attended these meetings are unlikely to have a clear independent recollection of what was discussed.  They will no doubt have to rely on file notes and memoranda recording the discussions at these meetings.  The evidence is only sought to be led to assist in construing and identifying the commercial purpose of the Coal Supply Agreement.  Indeed, all the extrinsic evidence which the respondents seek to lead only goes to the proper construction of the Agreement and the Notice.  Any findings of credit are peripheral to questions of construction.  Further, given the passage of time, it would be difficult to make a finding of credit simply because a witness’s recollection of what was discussed may vary from that of another witness or contemporaneous documents.
  5. I am therefore of the view that because of the limited nature and purpose of the evidence which the respondents presently seek to lead, such evidence if ultimately held to be admissible, would not, in itself, detract from the utility of determining separate questions.  I also note that the applicant asserts that there should not be any real issue as to the commercial objective of the Coal Supply Agreement given that there has already been a finding about this by the Court of Appeal in Callide Coalfields (Sales) Pty Ltd v CS Energy Ltd.[41]
  6. Similar observations apply to the second extrinsic issue in dispute, namely whether at the time of entering into the Coal Supply Agreement it was contemplated that there may be changes to conditions affecting the competitiveness and profitability of the relevant mines and power stations.  This pleaded fact is not admitted by the applicants.  Mr Kimmins has deposed to his opinion that the applicant will not adduce evidence on this issue.[42]  I accept the submissions of the applicant that this issue should be capable of resolution by reference to:

(a)any estimates actually undertaken by the parties;

(b)any contemporaneous documents as to contingencies; and

(c)the oral evidence of the respondents’ own lay witnesses and the respondents’ cross-examination of the applicants’ lay witnesses. 

  1. This issue (as a non-admitted issue) would be manageable.
  1. Evidence as to cost increases associated with geological conditions
  1. The respondents foreshadowed that they may wish to lead evidence in respect of Issue 15(b) of the Agreed List of Issues which reads:

“15.Whether the ‘change in circumstances’ comprising a ‘Change Event’ within the meaning of the Coal Supply Agreement must:

(b)(subject to any express exception) be supervening or external in nature, such that a mere failure to meet one party’s own expectations or forecasts would not fall within the definition.”

  1. Ms Platford, in paragraphs 32 and 33 of her 27 March affidavit, states that the respondents will seek to adduce lay and (possibly) expert evidence from a person experienced in the coal mining industry about:

(a)how knowledge of geological conditions in respect of unmined areas of an open cut coal mine is necessarily derived from exploration activities and changes over time as actual mining or further exploration occurs;

(b)how this knowledge and changes over time are characterised in the coal mining industry; and

(c)how changes to the geological conditions experienced while mining are characterised in the coal mining industry.

  1. Ms Platford expects that this evidence will overlap with evidence in relation to the balance issues.  Ms Platford does however appreciate that “these types of evidence are likely to be examined in different levels of detail in connection with a trial of the proposed separate issues on the one hand and a trial of the balance issues on the other hand”.[43] 
  2. The respondents’ submissions make it clear that this evidence will not be directed to establishing whether the underlying circumstances alleged in the Change Event Notice connected with the geology in fact occurred.[44] 
  3. The relevant paragraph of the Change Event Notice which raises this issue is paragraph 6.1:

“Since the time of entering in the CSAs, the Seller has become aware of several features of the Coal deposit at Callide Mine which have increased the cost of extracting coal from the deposit and significantly reduced the profitability under the CSA.”

  1. The issue is whether the alleged initial failure of the respondents to appreciate features of the geology, as a matter of construction, constitutes a Change Event.  Whilst some limited evidence may be required to explain to the Court the nature of the alleged Change Event, the question remains one of construction.  I am not persuaded that any evidence that would need to be led in relation to this issue would be such as to significantly overlap with evidence to be led on the balance issues.  Nor would the limited nature of such evidence add significantly to the applicants’ time estimate of the trial of the separate questions.
  1. Evidence as to whether the Change Event Notice permits identification of the quantum of the cost and revenue impacts
  1. This question is raised by issues 14(b), 30, 31 and 32 of the List of Issues.  The question is one of construction, namely whether for the Notice to be valid it needs to identify the quantum of the cost and revenue impacts of the Change Event.  If the Change Event is identified by reference to twelve circumstances then should the relevant cost and revenue impacts be determined in relation to all those circumstances to constitute the Change Event rather than some of those circumstances.
  2. Ms Platford states that the respondents will seek to adduce evidence to the effect that the Change Event Notice sufficiently identified the cost and revenue impacts of the Change Event it describes.  In her opinion this may involve proving, as a matter of fact, the financial information that was available to the respondents at the time of the Change Event Notice, the presentation of it in the Change Event Notice and the way in which a reasonable person, with appropriate assistance, was able to analyse it.[45]  Even at this preliminary stage I cannot appreciate how such evidence would assist in the resolution of issues 14(b), 30, 31 and 32.  As a matter of determining the validity of the Notice, either the Notice sets out or includes detailed information regarding the quantum of the cost and revenue impacts of the Change Event constituted by all twelve circumstances or some of them or it does not. 
  1. Whether there is an overlap of issues and evidence
  1. In considering this question there is an important distinction that must be drawn between the evidence that may be led at the determination of the separate questions as opposed to the trial of the balance issues.  The separate questions concern the proper construction of the Coal Supply Agreement and the Change Event Notice.  The evidence that may be led as extrinsic evidence is limited and governed by established principles.  It is evidence that ultimately must assist the Court in construing the relevant documents.
  2. At the trial of the balance of the issues, however, the nature and extent of the evidence is far more complex.
  3. It will involve an examination of the underlying truth of the twelve changes of circumstances and the effect on competitiveness referred to in the Notice, as well as the appropriateness of the various options and alternatives outlined in the Notice and a determination of which, if any, would have been the adjustment that would have been agreed to by the parties.[46] 
  4. Mr Powell has identified that the balance issues are likely to require considerable disclosure, from both the applicant and the respondents of documents that are directly relevant to the wide array of factual allegations made by the respondents in the counterclaim.  There will be numerous witnesses of facts and experts in the fields of economics, coal pricing and marketing, hydrology, geology, accountancy, geotechnics, mine management and mine engineering.[47] 
  5. Given the different purposes of the evidence presently contemplated to be led, I do not consider that there would be any significant overlap of evidence, either lay or expert.
  6. Whilst it is true that one of the frustration claims is common to both the defence of the claim and the counterclaim, it may be viewed as quite separate and distinct from the issues concerning the validity of the Change Event Notice.
  1. Whether there is utility and economy in the determination of separate questions. 
  1. This is not a case where the resolution of the proposed separate questions is likely to lead to the prospect of a settlement.  Nor is there any evidence before the Court that would suggest that any preliminary determination of the validity of the Change Event Notice would benefit or assist the parties in any ongoing contractual negotiations except that if the Notice is invalid the applicant will be under no obligation to enter into negotiations contemplated by clause 12.4 to 12.8 of the Coal Supply Agreement.  Nor will a determination result in the whole of the dispute between the parties being resolved.
  2. If, however, separate questions are determined in favour of the applicant this will have a number of potentially beneficial consequences.  The separate questions will resolve all but two issues in the applicant’s claim.  The first of these issues is the questions associated with the timing of the Notice (issues 35, 36, 37A and 37B).  If the Notice is declared invalid it will not be necessary to determine these timing issues as part of the trial of the balance issues.
  3. Even if it is determined that the Notice is valid, the remaining grounds of invalidity based on the timing issues may yet be resolved depending on the Court’s decision in respect of issues 19 to 23.  If, for example, the Court was to decide the requirement for giving the Notice promptly does not affect the validity of the Notice, then the timing issues may fall away.
  4. The second issue that would remain is the respondents’ discrete plea that the declaration sought as to invalidity should be refused on discretionary grounds because the Coal Supply Agreement has been frustrated.  I accept the applicant’s submission that if they are successful on the separate questions, the Change Event Notice will have been held to be invalid.  Irrespective of whether a declaration to that effect is made, it will have been determined that the applicants are under no obligation to enter into negotiations pursuant to clauses 12.4 to 12.8 of the Agreement.  It follows that a determination in favour of the applicant will dispose of the applicant’s claim.
  5. A determination of the separate questions will also resolve those issues arising from the counterclaim which are premised in some instances on the Notice being valid[48] and in others on the Notice being invalid.[49] 
  6. If the Notice is determined to be invalid then those parts of the respondents’ frustration case and remedies (including damages) which rely on the validity of the Notice fall away.  This may have a potentially substantial time saving in respect of the trial of the balance issues.
  7. Similarly, if the Notice is invalid, the respondents’ case pleaded in the counterclaim for breach of contract under the following headings would also fall away:

(a)applicant’s failure to attend senior officers’ meeting convened pursuant to clause 12.5;[50]

(b)applicant’s failure to engage in dispute resolution;[51] and

(c)breach of contract.[52]

  1. I recognise that the applicant, by excluding factual issues relating to timing, have lessened the utility of separate questions.  If the separate questions are determined against the applicant (and depending how these questions are determined in relation to issues 19 to 23) the separate questions may not finally determine the whole of the applicant’s claims.  However, as Rares J identified in City of Swan,[53] it may still be appropriate to determine separate questions if the decision will obviate unnecessary and expensive hearings of other questions. In the present case the separate questions have the potential to dispose of the applicants’ claims.  Further, their determination may result in significant parts of the respondents’ counterclaim falling away.  Such a determination has in my view a real potential of avoiding undue delay and expense in deciding the applicants’ claim and significantly reducing the remaining balance issues.
  1. Will the determination of separate questions delay the balance of the proceedings
  1. There are a number of aspects that require consideration in respect of delay.  The separate questions may be heard in 2016. 
  2. Even if one was to accept Ms Platford’s estimate of the time it would take for the preparation for the hearing of the separate questions, all parties would be able to be prepared in a timely fashion for a hearing in 2016.
  3. The respondents are, however, concerned that separate questions will overall delay the determination of all issues in the proceedings.  This is in circumstances where the present proceedings were commenced on 17 December 2013.  The respondents’ counterclaim alleging frustration was first served on or about 9 May 2014.  It may be accepted that the counterclaim replicated the contents of the Change Event Notice which the applicants had received approximately six months earlier.  The respondents point to the necessary delay that will arise from the delivery of a judgment in respect of the separate questions and any subsequent appeals. 
  4. The applicants submit, however, that extensive delay in the hearing of the balance issues, including the respondents’ frustration case, is in effect inevitable because of related Supreme Court proceedings 11905/13.
  5. These proceedings are referred to as the “Revenue Compensation Proceedings” by Mr Powell.[54]  These proceedings concern the same Coal Supply Agreement.  The plaintiffs’ claim that Callide Coalfields (Sales) Pty Ltd (as the seller) failed to deliver the full amount of coal it was required to deliver under the Coal Supply Agreement and that as a result the plaintiffs are entitled to compensation under clause 16 of the Agreement.  The defence to these related proceedings is that the plaintiffs are not entitled to revenue compensation because the seller was prevented or delayed from meeting its delivery obligations as a result of certain alleged event of force majeure.[55]  There is some overlap between the events of force majeure alleged in the related proceedings and the circumstances relied upon by the respondents in their frustration case in the present proceedings.
  6. What is significant is that in the present case it is a component of the counterclaim that there should be an adjustment in respect of the whole Coal Supply Agreement into the future whereas in the related proceedings the respondents seek declarations to the effect that the Agreement was partially terminated as and from 25 February 2014.  The applicant submits that the implications of that plea are that:[56]

(a)if the Coal Supply Agreement has been partially terminated, as the respondents contend, there could be no warrant for the Court in this proceeding to order an adjustment in respect of the whole Agreement into the future;

(b)logically, the issue whether the Coal Supply Agreement has been partially terminated should be determined before any determination is made as to whether there should any adjustment in respect of the Coal Supply Agreement into the future; and

(c)it introduces a further degree of complexity and potential delay to the counterclaim in the present case.

It may be accepted that the related proceedings may ultimately cause additional delay in determining the respondents’ counterclaim. 

  1. Further, given the complexities of the trial of the balance issues and the length of time it will take the parties to prepare for trial, it is unlikely that the balance issues will be ready for trial until at least 2017.  It is, however, likely that the separate questions, including appeals, may be determined in the course of 2016.  The respondents’ concerns as to delay may however be ameliorated by the making of appropriate directions to ensure that the preparation for the trial of the balance issues is progressed and does not fall into abeyance simply because of the ordering of separate questions.  Given that the applicant views the preliminary issues as primarily matters of construction I see no reason why they would be unable to comply with directions that furthered the progress to trial of the balance issues.
  2. I am therefore of the view that the determination of the separate questions will not necessarily delay the trial of the balance issues.  Nor is it sufficiently clear that the whole proceedings would be determined any earlier if separate questions were not ordered.  This is because the determination of separate questions has the potential to finally resolve the applicant’s claim as well as complex issues of damages in the respondents’ counterclaim.
  1. The interests of justice
  1. It was the respondents who chose to serve the Change Event Notice on the applicants.  The service of such a Notice (if valid) requires the parties to undertake negotiations in accordance with clause 12 of the Coal Supply Agreement.  By challenging the validity of the Notice the applicants seek to be relieved of this requirement.  The resolution of the validity issues (issues 13 to 34) are important to both parties.  The resolution may finally determine the applicants’ claim and considerably shorten the trial of the balance issues.  The interests of justice therefore in terms of what is “just and convenient” favours the ordering of the separate questions.

The formulation and wording of the separate questions

  1. In oral submissions on 13 April 2015, Senior Counsel for the respondents submitted that the list of issues, rather than being a list of real issues, simply constituted a list of pleaded issues.  Whilst the separate questions have been agreed between the parties the respondents nevertheless submit that the questions are not defined with sufficient precision.  Accordingly, if the Court is minded to order separate questions, the respondents submit that the Court should do so by reference to the pleadings, using the agreed list of issues as a guide as to what pleaded allegations are to be included or excluded.
  2. It may readily be accepted that the separate questions must be precisely formulated.[57] 
  3. The respondents further submit that the agreed list of issues was prepared primarily as a tool to enable the Court and the parties to judge the extent of any overlap issues, and more generally, the utility, economy and fairness of ordering the proposed separate questions.  They are not, according to the respondents, a substitute for the pleadings.[58]  I note however, that each of the relevant separate questions in the agreed list of issues is referenced by a footnote to the relevant paragraph or paragraphs of the pleadings.
  4. The respondents identify two particular questions which the Court is unlikely to be able to answer in the abstract.  Issues 20 and 22 of the List of Issues concern, respectively, the meaning of “promptly” in clause 12.3(b)(i) of the Coal Supply Agreement and the meaning of “as soon as practicable in all the circumstances” in clause 12.3(b)(ii) of the Coal Supply Agreement.  These proposed questions relate to timing issues.  The respondents submit that it is difficult to see how the Court could meaningfully reach a conclusion about them in the abstract or what utility there would be in doing so.[59]  The applicants have not responded to these submissions as to the formulation of the separate questions by reference to the pleadings using the agreed list of issues as a guide only.  In those circumstances it is appropriate that I hear further from the parties as to the formulation and wording of the separate questions.

Disposition

  1. It follows from my Reasons that I am of the view that this is an appropriate case for the ordering of the hearing and determination of separate questions.  I will hear the parties further as to the precise formulation and wording of the proposed separate questions and as to costs.

ANNEXURE A

Part 1 - Common ground

1The Applicant (CS Energy) is the owner and operator of a coal fired electricity generation facility known as the Callide B Power Station (Callide B Power Station).[60]

2The Second and Third Respondents (Coal Mine Owners) are the owners and operators of certain coal mines known as the Callide Coal Mine (Callide Coal Mine).[61]

3The Coal Mine Owners hold their interests in the Callide Coal Mine pursuant to a joint venture agreement. The Second Respondent (Anglo Coal Callide) holds a 66.67% interest in the joint venture, and the Third Respondent (Anglo Coal Callide No 2) holds a 33.33% interest in the joint venture.[62]

4On 11 May 1998 the First Respondent (Callide Sales) (acting on behalf of Anglo Coal Callide and AMP Life Limited) and CS Energy entered into an agreement pursuant to which Callide Sales agreed to supply coal to CS Energy (Coal Supply Agreement).[63]

5On 22 August 2000:

  1. AMP Life Limited agreed to novate its interest in the Coal Supply Agreement in favour of Anglo Coal Callide No. 2;
  1. Anglo Coal Callide No. 2 agreed to undertake the obligations of, and succeed to the rights of, AMP Life Limited under the Coal Supply Agreement.[64]

6The Coal Supply Agreement commenced on 1 January 1998 and continued for an initial term of 10 years commencing on 14 August 2001.[65]

7CS Energy had the ability to extend the term of the Coal Supply Agreement by up to four successive option terms each of 5 years.[66]

8CS Energy exercised its first option to extend the term of the Coal Supply Agreement until 14 August 2016.[67]

9The Coal Supply Agreement is attached as Annexure A.

10On 6 November 2013 Callide Sales delivered a letter to CS Energy entitled "Notice of a Change Event on behalf of the Seller" (the 6 November letter).[68]

11On 12 November 2013 Callide Sales delivered to CS Energy a document entitled "Change Event Notice Callide B Coal Supply Agreement (Clause 12)" with Annexures (the 12 November notice).[69]

12In order for a notice to be a notice within the terms of, and given in accordance with, clause 12.3(b)(ii) of the Coal Supply Agreement, the notice must be "of a Change Event".[70]

Part 2 - The Applicant's claim, excluding paragraphs 14 and 15 of the defence

Construction of the Coal Supply Agreement

Background Facts

13Whether or not:[71]

  1. the following facts existed and were known by each of CS Energy, Callide Sales, Anglo Coal Callide (then Shell Coal (Callide) Pty Ltd) and AMP Life or would have been known by reasonable persons in the position of each of those parties, at the time of entry into the Coal Supply Agreement:
  1. clauses 9.1.3 and 17.6 of CS93 contained a limited review mechanism in the event of any major change to prescribed working conditions within the coal mining industry as alleged in paragraph 4A(e)(iii) of the defence;[72]
  1. the Callide Mine was (and was likely to remain) the sole (as distinct from primary) source of supply of coal to the Callide B Power Station and was likely to be the sole (as distinct from primary) source of supply of coal to the Callide C Power Station, as alleged in paragraph 4A(i) of the defence;[73]
  1. CS Energy, Callide Energy, IG Power (then Shell Coal Power) and the Original Coal Mine Owners agreed that the Contract Price for coal to be supplied under the Coal Supply Agreement and the Callide Power Project Coal Supply Agreement  was an amount that was estimated to result in CS Energy, Callide Energy and IG Power (then Shell Coal Power) on the one hand and the Original Coal Mine Owners on the other hand being competitive and profitable in their respective operations as alleged in paragraph 4A(k) of the defence;[74]
  1. during the actual or potential term of the Coal Supply Agreement and the Callide Power Project Coal Supply Agreement:
  1. there might be changes to conditions affecting the competitiveness and profitability of the Callide Mine and the Callide B Power Station and the Callide C Power Station;[75]
  1. the type, nature and extent of such changes could not accurately be predicted but might include changes to market and economic conditions, changes to working conditions, changes to input costs and prices and changes to the estimates referred to in subparagraphs 4A(k) and 4A(l) of the defence;[76]
  1. that such changes might affect the competitiveness and profitability of the Callide Mine and the Callide B Power Station and the Callide C Power Station in the manner described in paragraph 4A(n)(iiA) of the defence;[77] 
  1. that there might be changes to the mining process at Callide Mine that would have a cumulative and interdependent effect on each other;[78] and
  1. whether and the extent to which such changes might occur could not accurately be predicted,[79]

as alleged in paragraph 4A(n) of the defence. 

  1. the agreements identified in paragraphs 4A(g)(ii), (iii) and (iv) of the defence were agreements for the supply of coal from the Callide Mine (as defined in paragraph 4 of the counterclaim) or from the Callide Coal Mine;
  1. the facts alleged in paragraph 4A of the defence:
  1. may be taken into account in interpreting the Coal Supply Agreement;
  1. give rise to the inference of the objective commercial purpose of the Coal Supply Agreement alleged in paragraph 4B of the defence.[80]

"Change Event", impacts, options and alternatives

14Whether, in order for a notice to be a notice within the terms of, and given in accordance with clause 12.3(b)(ii) of the Coal Supply Agreement:

  1. the matters set out in the notice must, on the face of the notice, fall within the definition of "Change Event";
  1. the notice must, inter alia, include detailed information regarding the nature, extent and quantum of the cost and revenue impacts of the "Change Event";
  1. the notice must, inter alia, state options and alternatives identified by the Notifying Party as being available to accommodate or mitigate the Change Event;[81]
  1. strict compliance with such requirements (if any) as are found to exist is necessary for a notice under that clause to be valid.[82]

15Whether the “change in circumstances” comprising a "Change Event" within the meaning of the Coal Supply Agreement must:

  1. be an occurrence, comprised of:
  1. a single change in circumstances;  or
  1. alternatively, one or more changes in circumstances which:
  1. do not constitute more than one Change Event; and
  1. further or alternatively, are of the same nature;
  1. (subject to any express exception) be supervening or external in nature, such that a mere failure to meet one party's own expectations or forecasts would not fall within the definition.[83]

16AWhether a party can (other than in relation to the notices referred to in paragraph 9(e)(i) of the further amended statement of claim) rely on a change or changes in circumstances for the purposes of clause 12.3 of the Coal Supply Agreement in circumstances where the party either:

 

  1. notifies the other party pursuant to clause 12.3(b)(i) or submits a Change Event Notice pursuant to clause 12.3(b)(ii) in relation to an alleged Change Event that is comprised in whole or in part of the change or changes in circumstances; or
  1. forms a reasonable opinion that the change or changes in circumstances have, or will have, a material effect on the competitiveness of the Coal Mine Owners or the Buyer in relation to the industry in which it operates, and:
  1. does not notify the other party in writing promptly on the formation of the opinion that it is the party’s intention to initiate a review of the Coal Supply Agreement under clause 12.3 which may lead to an Adjustment; or
  1. does not, as soon as practicable in all the circumstances, submit a Change Event Notice within the meaning of that term as used in clause 12.3(b)(ii) in relation to an alleged Change Event that is comprised in whole or in part of the change or changes in circumstances.[84]

16Whether a Change Event was deemed to have occurred consequent upon the delivery of the Change Event Notice.[85]

 

Increases in costs

17Whether increases in costs are governed exclusively by clause 10 of the Coal Supply Agreement and do not engage clause 12 of the Coal Supply Agreement.[86]

Events of force majeure

18Whether events of force majeure are governed exclusively by clause 14 of the Coal Supply Agreement and do not engage clause 12 of the Coal Supply Agreement.[87]

Promptly - clause 12.3(b)(i)

19Whether, in order for a notice to be given in accordance with clause 12.3(b)(i) of the Coal Supply Agreement, it:

 

  1. must be given promptly when the Change Event becomes known to the Notifying Party;[88] or
  1. may be given promptly after the party giving the notice had formed the intention to initiate a review.[89]

20The meaning of "promptly" as used in clause 12.3(b)(i) of the Coal Supply Agreement.[90]

21Whether compliance with the time specified in clause 12.3(b)(i) of the Coal Supply Agreement is necessary for the valid issue of a notice under the clause.[91]

 

As soon as practicable in all the circumstances - clause 12(b)(ii)

22The meaning of "as soon as practicable in all the circumstances" as used in clause 12.3(b)(ii) of the Coal Supply Agreement.[92]

23Whether compliance with the time specified in clause 12.3(b)(ii) of the Coal Supply Agreement is necessary for the valid issue of a notice under the clause.[93]

 

The 12 November notice

"Change Event"

24Whether or not the matters set out in the 12 November notice, on the face of the notice, fall within the definition of Change Event as alleged in:[94]

 

  1. [13(b)(i), (ii) and (iiA)] SOC and also having regard to [13(a) and 13(ca)] D – allegedly not asserting that there was an occurrence comprised of a single change in circumstances, or alternatively, one or more changes in circumstances which do not constitute more than one Change Event, and further or alternatively, are of the same nature;
  1. [13(b)(v)] SOC and also having regard to [13(a) and 13(ca)] D – allegedly based on an alleged initial failure to appreciate features of the geology, not based on any alleged change in actual geology, not entailing an occurrence or a matter of a supervening or external nature and entailing a mere failure to meet expectations;
  1. [13(b)(vi)] SOC and also having regard to [13(a) and 13(ca)] D – allegedly not entailing an occurrence and entailing a mere consequence or effect without identification of the underlying occurrence;
  1. [13(b)(vii)] SOC and also having regard to [13(a) and 13(ca)] D – allegedly not entailing an occurrence or a matter of a supervening or external nature and entailing a mere failure to meet expectations.

25Whether or not the matters set out in the Change Event Notice fall, in substance, within the definition of a “Change Event”.[95]

26Whether the matters referred to in paragraph 24(a) above are discernible by a reasonable reader of the Change Event Notice in the position of the applicant.[96]

27Whether, if some of the matters set out in the 12 November notice do not, on the face of the notice, fall within the definition of Change Event, the notice is invalid.[97]

 

Matters addressed by clauses 10 and 14

28Whether the matters referred to in [13(c)(ii)] SOC entail matters that are, on the face of the notice, mere alleged increases in costs.

29AWhether, if some or all of the matters referred to in [13(c)(ii)] SOC entail matters that are, on the face of the notice, mere alleged increases in costs, the notice is invalid.[98]

29Whether the matters referred to in [13(c)(i)] SOC entail matters that are, on the face of the notice, alleged events of force majeure.

30AWhether, if some or all of the matters referred to in [13(c)(i)] SOC entail matters that are, on the face of the notice, alleged events of force majeure, the notice is invalid.[99]

 

Impacts

30Whether the 12 November notice identifies or includes detailed information regarding the quantum of the cost and revenue impacts of:

  1. a "Change Event";[100]
  1. the alleged Change Event.[101]

31Whether, if the 12 November notice is to be read as encompassing some only of the changes in circumstances it describes, it sets out or includes detailed information regarding the quantum of the cost and revenue impacts of those changes in circumstances.[102]

32Whether, if the 12 November notice is to be read as encompassing some only of the changes in circumstances it describes and does not set out or include detailed information regarding the quantum of the cost and revenue impacts of those changes in circumstances, it is invalid.[103]

 

Options and alternatives

33Whether, if the 12 November notice is to be read as encompassing some only of the changes in circumstances it describes, it states any options and alternatives as being available to accommodate or mitigate those changes in circumstances.[104]

34Whether, if the 12 November notice is to be read as encompassing some only of the changes in circumstances it describes and it does not state any options and alternatives as being available to accommodate or mitigate those changes in circumstances, it is invalid.[105]

Timing and engagement of clause 12- issues of fact[106]

35As to the 6 November letter:

 

  1. When did the Change Event become known to Callide Sales?[107]  In view of the definition of “Change Event” this potentially involves issues about Callide Sales’ knowledge of the change in circumstances and the formation of a reasonable opinion that it has, or will have, a material effect on the competitiveness of the Second and Third Respondents in relation to the industry in which they operate.  The Respondents allege the knowledge was acquired not earlier than around 27 May 2013.  The Applicant has not nominated a date but has delivered separate particulars of its allegation of knowledge which are expressed to be the best particulars that can be provided prior to the completion of interlocutory steps.
  1. Whether the notice was given promptly within the meaning of clause 12.3(b)(i) of the Coal Supply Agreement.[108]  The Respondents allege that the notice was given promptly after they formed the intention to initiate a review under clause 12 on or around 6 November 2013, or alternatively, after the Change Event described in the Change Event Notice became known to Callide Sales not earlier than around 27 May 2013.  The Applicant has not nominated a date but has delivered separate particulars of its allegation of lack of prompt delivery which are expressed to be the best particulars that can be provided prior to the completion of interlocutory steps.  On the Applicant’s case this issue includes (but is not limited to) whether not giving notice in the period between March 2013, or alternatively May 2013, and 6 November 2013 means that the notice was not given promptly within the meaning of clause 12.3(b)(i) of the Coal Supply Agreement.[109]
  1. Whether:
  1. the parties agreed that during the term of the Deed of 28 June 2013, they would not take any steps in or initiate any legal proceedings in respect of any claim, dispute or issue between the parties related to the terms of, or performance of obligations under, the Coal Supply Agreement or Callide Power Project Coal Supply Agreement; and
  1. CS Energy is precluded from relying upon Callide Sales not giving notice during the period between about May 2013 and 29 October 2013.[110]

36As to the 12 November notice:

 

  1. Whether it was given as soon as practicable in all the circumstances within the meaning of clause 12.3(b)(ii) of the Coal Supply Agreement.[111]  The Respondents allege that the notice was given as soon as practicable in all the circumstances after Callide Sales formed the opinion that it wished to proceed with the review of the Coal Supply Agreement on 12 November 2013.  The Applicant has not nominated a date but has delivered separate particulars of its allegation of lack of prompt delivery which are expressed to be the best particulars that can be provided prior to the completion of interlocutory steps.
  1. Whether:
  1. the parties agreed that during the term of the Deed of 28 June 2013, they would not take any steps in or initiate any legal proceedings in respect of any claim, dispute or issue between the parties related to the terms of, or performance of obligations under, the Coal Supply Agreement or Callide Power Project Coal Supply Agreement; and
  1. CS Energy is precluded from relying upon Callide Sales' not giving notice during the period between about May 2013 and 29 October 2013.[112]

37AAs to the matters referred to in paragraphs 4.4(f), (g) and (h) and sections 10, 11 and 12 of the 12 November Notice:

 

  1. whether those matters were the subject of a Change Event Notice pursuant to clause 12.3(b)(ii) delivered on or about 21 December 2006;
  1. whether those matters, either wholly, or to the extent that they rely upon the period between 1998 and 21 December 2006, engage clause 12 of the Coal Supply Agreement;
  1. whether, if some or all of those matters do not engage clause 12 of the Coal Supply Agreement, the 12 November Notice is invalid.[113]

37BAs to the alleged changes in circumstances described in paragraphs 4.4(a), (e), (f), (g), (h), (i) and (j) and sections 5, 9, 10, 11, 12, 13 and 14 of the 12 November Notice:

 

  1. whether by 2012 at the latest, Callide Sales had in relation to each of those changes in circumstances, formed a reasonable opinion that the change in circumstances has, or will have, a material effect on the competitiveness of the Coal Mine Owners in relation to the industry in which they operate;
  1. whether Callide Sales notified CS Energy in writing promptly on the formation of those opinions that it was its intention to initiate a review of the Coal Supply Agreement under clause 12.3 which may lead to an Adjustment;
  1. whether Callide Sales submitted a “Change Event Notice” within the meaning of that term used in clause 12.3(b)(ii) of the Coal Supply Agreement as soon as practicable in all the circumstances; 
  1. whether those changes in circumstances engage clause 12 of the Coal Supply Agreement;
  1. whether, if some or all of those changes in circumstances do not engage clause 12 of the Coal Supply Agreement, the 12 November Notice is invalid.[114]

Part 3 - The Respondents' counterclaim and paragraphs 14 and 15 of the defence[115]

Coal Supply Agreement

37Whether the terms and proper construction of the Coal Supply Agreement are as alleged in [3]-[8], including the background facts and objective commercial purpose pleaded in paragraphs [4A] and [4B] of the defence respectively.

 

Whether alleged changes occurred

38Whether the changes alleged in the following paragraphs in fact occurred as alleged therein: [9], [10]-[13], [16]-[23], [26]-[45], [46]-[58], [59]-[65], [67]-[72], [75]-[80], [83]-[86], [89]-[94], [97]-[100], [103]-[104], and [105]-[108].

 

Passing on cost increases

39Whether the Respondents have not been able to pass on the full amount of cost increases as alleged in the following paragraphs: [14], [24], [73], [81], [87], [95] and [101].

40Whether other participants in the coal mining industry have been able to recover increased costs as alleged in the following paragraphs: [15], [25], [74], [82], [88], [96] and [102].

  

Likely cash margin in the future

41Whether the cash margin is likely to remain as alleged in [66], with the likely consequences alleged therein.

 

Alleged impact of coal prices on competitiveness

42Whether the matters pleaded in [105]-[108] have the impact pleaded in [109].

 

Alleged impact of all alleged changes on competiveness

43Whether the changes in circumstances alleged in the counterclaim have had a material effect on the competiveness of the Coal Mine Owners as alleged in [110] and [111].

 

The First Respondent's intention

44Whether the First Respondent:

  1. formed the intention alleged in [112] as alleged therein;
  1. took the steps alleged in [112A] as alleged therein;
  1. formed the intention alleged in [114A] as alleged therein;
  1. formed the opinion in [116] as alleged therein.

Costs and revenue impacts of the changes in circumstances

45Whether the cost and revenue impacts of the alleged changes in circumstances were as pleaded in [121].

 

Options and alternatives proposed by Callide Sales

46Whether the effect of the five alternatives was as pleaded in [125].

 

Breach of the Coal Supply Agreement

47Whether CS Energy's refusal to attend the meeting proposed for 18 December 2013 was a breach of contract as alleged in [135] and [137].

48Whether CS Energy's commencement of proceedings without first engaging in dispute resolution procedures was a breach of contract as alleged in [136] and [137].

49Whether the parties were unable to agree on adjustments to the Coal Supply Agreement as a consequence of CS Energy's refusal to attend the said meeting as alleged in [132].

50Whether, but for the alleged breaches, or acting in accordance with its obligations, CS Energy would have agreed to the adjustments suggested in one of the alternatives proposed by the respondents, as alleged in [138] and [139].

51Whether the respondents have otherwise suffered loss and damage by and resulting from CS Energy's alleged breaches as alleged in [138].

Frustration

52Whether Coal Supply Agreement was frustrated as alleged in [14] – [15] of the defence and/ or as alleged in [140]-[142] of the counterclaim.

 

Relief

53Whether the Respondents are entitled to any of the relief claimed in [143].

 

Part 4 – The Applicant’s claim and the Respondents’ counterclaim

54Because:

  1. Paragraphs [14] and [15] of the Respondents' defence rely on 'the changed circumstances identified in the Respondents' counterclaim' in support of the Respondents' frustration argument;
  1. the Respondents' counterclaim is premised on the Notice of Intention and the Change Event Notice being valid;

all of the real issues identified in Parts 2 and 3 above are issues that arise on both the Applicant's claim and the Respondents' counterclaim.

55The Respondents contend that:

  1.  as to order 6(a), there are no issues that arise only on the Applicant’s claim (excluding the issues that arise in respect of paragraphs [14] and [15] of the Respondent’s defence);
  1. as to order 6(b), the only issues which arise only on the Respondent’s counterclaim (including paragraphs [14] and [15] of the defence) are those set out in paragraphs 47 to 51 above;
  1. as to order 6(c), all issues that arise on the Applicant’s claim also arise on the Respondents’ counterclaim.

56As a part of resolving the issue identified in paragraph 35(a) above, the Applicant considers it may be necessary first to resolve one or more of the issues identified in paragraphs 38 to 44 above.  The Respondents:

 

  1. consider that the issues identified in paragraphs 35(a) and 36(a) are likely to involve the issues identified in paragraphs 38 to 45 above, which in turn involve the majority of the issues raised in the counterclaim as to the occurrence of events, the consequences of events, the timing of those matters and the Respondents’ knowledge of those matters;
  1. note however that the precise extent of any overlap will depend ultimately on how the Applicant finally particularises its case in relation to the issues identified in paragraphs 35(a) and 36(a) and that is yet to occur.

Footnotes

[1] Affidavit of Colleen Anne Platford sworn 27 March 2015, [9].

[2] Applicant’s outline of Submissions dated 2 April 2015, [10].

[3] Callide Power Management Pty Ltd & Ors v Callide Coalfield (Sales) Pty Ltd & Ors; CS Energy Ltd  v Callide Coalfields (Sales) Pty Ltd & Ors [2014] QSC 216, [5].

[4] Callide Power Management Pty Ltd & Ors v Callide Coalfields (Sales) Pty Ltd & Ors; CS Energy Ltd v Callide Coalfields (Sales) Pty Ltd & Ors [2014] QSC 216, [63].

[5] Callide Power Management Pty Ltd & Ors v Callide Coalfields (Sales) Pty Ltd & Ors; CS Energy Ltd v Callide Coalfields (Sales) Pty Ltd & Ors [2014] QSC 216, [63].

[6] Callide Power Management Pty Ltd & Ors v Callide Coalfields (Sales) Pty Ltd & Ors; CS Energy Ltd v Callide Coalfields (Sales) Pty Ltd & Ors [2014] QSC 216, [21] - [23].

[7] Affidavit of Colleen Anne Platford sworn 27 March 2015.

[8] Callide Power Management Pty Ltd & Ors v Callide Coalfields (Sales) Pty Ltd & Ors; CS Energy Ltd v Callide Coalfields (Sales) Pty Ltd & Ors (No 2) [2015] QSC 142.

[9] Affidavit of Colleen Anne Platford sworn 31 August 2015.

[10] Fourth further amended defence filed 6 August 2015.

[11] Respondents’ supplementary outline of submissions dated 14 September 2015, [34] - [35].

[12] Applicants’ outline of submissions (Callide Power Management Pty Ltd) undated, [17].

[13] Applicants’ outline of submissions (Callide Power Management Pty Ltd) undated, [17].

[14] Respondents’ outline of submissions dated 9 April 2015, [76].

[15] Respondents’ outline of submissions dated 9 April 2015, [76].

[16] [2009] WASCA 176, [19].

[17] (2009) 73 ACSR 86, 95-96 [27]. See also, Murphy v Victoria (2014) 313 ALR 546, [28] (Nettle AP, Santamaria and Beach JJA); Tepko Pty Ltd v Water Board (2001) 206 CLR 1, 55-56 [168]-[171] (Kirby and Callinan JJ).

[18] [2000] FCA 1451, [8].

[19] Affidavit of John David Powell sworn 12 March 2015, paras 33-38; 40-46.

[20] Affidavit of Michael John Kimmins sworn 12 March 2015, [13].

[21] Affidavit of Michael John Kimmins sworn 12 March 2015, [14].

[22] Affidavit of Colleen Anne Platford sworn 31 August 2015, [18].

[23] Affidavit of Colleen Anne Platford sworn 27 March 2015, [47].

[24] Affidavit of Colleen Anne Platford sworn 31 August 2015, [18].

[25] Applicant’s supplementary outline of submissions dated 4 September 2015 (CS Energy Ltd), [6].

[26] Applicant’s outline of submissions dated 2 April 2015 (CS Energy Ltd), [2(a)], [10(a)], [11], [21]; and applicants’ outline of submissions undated (Callide Power Management Pty Ltd), [2(b)], [14], [42].

[27] Affidavit of Colleen Anne Platford sworn 27 March 2015, [12(d)].

[28] Respondents’ outline of submissions dated 9 April 2015, [3].

[29] Respondents’ outline of submissions dated 9 April 2015, [94].

[30] Affidavit of Colleen Anne Platford sworn 27 March 2015, [41]-[45].

[31] Respondents’ outline of submissions dated 9 April 2015, [43], citing Tepko Pty Ltd v Water Board (2001) 206 CLR 1, 55 [170].

[32] Callide Power Management Pty Ltd & Ors v Callide Coalfields (Sales) Pty Ltd & Ors; CS Energy Ltd v Callide Coalfields (Sales) Pty Ltd & Ors [2014] QSC 216, [21].

[33] See, for example, fourth further amended defence filed 6 August 2015, [4A]-[4B].

[34] Respondents’ outline of submissions dated 9 April 2015, [84].

[35] Affidavit of Colleen Anne Platford sworn 27 March 2015, [15(b)], [15(c)], [15(d)].

[36] Fourth further amended defence filed 6 August 2015, [4A(n)(iiA)], [4A(n)(iiB)].

[37] Affidavit of Colleen Anne Platford sworn 31 August 2015, [12]-[13].

[38] Applicants’ supplementary outline of submissions dated 7 September 2015, [23].

[39] Amended counterclaim filed 6 August 2015, [2].

[40] Respondents’ outline of submissions dated 9 April 2015, [100], citing Australian National Industries Limited v Spedley Securities Limited (in liq) (1992) 26 NSWLR 411, 442; Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215, [7].

[41] [2008] QCA 408, [54]. See also, footnote 12 to the Agreed List of Issues.

[42] Affidavit of Michael John Kimmins sworn 12 March 2015, [8].

[43] Affidavit of Colleen Anne Platford sworn 27 March 2015, [33].

[44] Respondents’ outline of submissions dated 9 April 2015, [92].

[45] Affidavit of Colleen Anne Platford sworn 27 March 2015, [24]-[40]; affidavit of Colleen Anne Platford sworn 31 August 2015, [16].

[46] Applicants’ outline of submissions undated (Callide Power Management Pty Ltd), [61].

[47] Affidavit of John David Powell sworn 12 March 2015, [40]-[53].

[48] Amended counterclaim filed 6 August 2015, [139], [140], [143(a)].

[49] Amended counterclaim filed 6 August 2015, [141], [143(b)].

[50] Amended counterclaim filed 6 August 2015, [126]-[132].

[51] Amended counterclaim filed 6 August 2015, [133]-[134].

[52] Amended counterclaim filed 6 August 2015, [135]-[138].

[53] City of Swan v Lehman Brothers Australia Ltd (2009) 73 ACSR 86, 95-96 [27].

[54] Affidavit of John David Powell sworn 10 April 2015, [8].

[55] Affidavit of John David Powell sworn 10 April 2015, [12].

[56] Applicant’s outline of submissions dated 2 April 2015 (CS Energy Ltd), [20]; applicants’ outline of submissions undated (Callide Power Management Pty Ltd), [36].

[57] Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334, 358 [53] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ); Jacobson v Ross [1995] 1 VR 337, 341 (Brooking J).

[58] Respondents’ supplementary outline of submissions dated 14 September 2015, [23].

[59] Respondents’ supplementary outline of submissions dated 14 September 2015, [24].

[60] [1] Further Amended Statement of Claim (SOC), [1] Fourth Further Amended Defence (D)

[61] [3] SOC, [3] D, [1] Amended Reply (R)

[62] [3] SOC, [3] D

[63] [4] SOC, [4] D, [2] R

[64] [5] SOC, [5] D

[65] [6] SOC, [6] D, [3] R

[66] [6] SOC, [6] D

[67] [7] SOC, [7] D

[68] [10] SOC, [10(a)] D

[69] [11] SOC, [11(a)] D

[70] [9(c)(i)] SOC, [(9(c)] D

[71]At [4A] D, the Respondents plead extrinsic facts said to support the commercial objective pleaded in [4B].  The Applicant asserts that there should not be a real issue as to the commercial objective given that there has already been a finding about this by the Court of Appeal in Callide Coalfields (Sales) Pty Ltd v CS Energy Ltd [2008] QCA 408 at [54]. The Applicant further contends that in any event, the facts pleaded in [4A] would not be admissible in aid of construction, and do not rationally lead to the inference pleaded in [4B]. The Applicant asserts that the result is that those paragraphs should not be treated as raising real issues.  The Respondents disagree with these assertions but note that many of the facts alleged in 4A are admitted. The Respondents also note they have delivered separate particulars of the allegation of knowledge in [4A(o)] D by reference to [4A(a)] to [4A(n)] D.

[72] [4A(e)(iii)] D, [3(b)(ii)] R

[73] [4A(i)] D, [3(f)] R, The Applicant has admitted that at the time of entry into the Coal Supply Agreement it was likely that the Callide Mine (comprising three pits, namely Dunn Creek, Trap Gully and The Hut) would be the primary source of supply of coal to the Callide B Power Station and the Callide C Power Station. The Applicant otherwise denies this allegation because the Applicant alleges that the Coal Supply Agreement and the Callide Power Project Coal Supply Agreement provided for the supply of coal to the Callide B Power Station and the Callide C Power Station respectively from the Callide Coal Mine (comprising four pits, namely Dunn Creek, Trap Gully, The Hut and Boundary Hill). The key point of contention is therefore only whether coal was also likely to be supplied from a fourth pit within the Callide Coal Mine, namely Boundary Hill.

[74] [4A(k)] D, [3(h)] R

[75] [4A(n)(i)] D, [3(k)] R

[76] [4A(n)(ii)] D, [3(k)] R

[77] [4A(n)(iiA)] D, [3(k)] R

[78] [4A(n)(iiB)] D, [3(k)] R

[79] [4A(n)(iii)] D, [3(k)] R

[80] [4B] D, [3(m), 4] R

[81] [9(c)(iv)] SOC, [9(c)(ii)(C)] D

[82] [9(c)(ii)(A), 9(c)(ii)(B)(iii), 9(c)(ii)(B)(iv)] D

[83] [9(d)] SOC, [9(d)] D

[84] [9(e)] SOC, [9(e)] D

[85] [11(c)] D, [8] R.

[86] [13(c)(ii)(B)] SOC, [13(b)(i)(C)] D

[87] [13(c)(i)(B)] SOC, [13(b)(i)] D

[88] [12] SOC, [12(a)] D

[89] [12] SOC, [12(a)] D

[90] [12] SOC, [12] D

[91] [12A(a)] D

[92] [13(e)] SOC, [13(d)] D

[93] [13(d)(iv)] D

[94] In relation to the references to subparagraph 13(a) of the Respondents’ defence in paragraph 24 of the list of issues, it is noted that on 10 April 2015, the Applicant served an amended application in which it sought, among other things, an order that subparagraph 13(a)(iii)(D) of the Respondents’ Third Further Amended Defence be struck out.  That application has been adjourned to a date to be fixed. Since that time, in consequence of the Applicant’s further amended statement of claim, subparagraph 13(a)(iii)(D) has been amended and the separate particulars in respect of it have been struck through.

[95] [9(c)(ii)(A), 13(a)(iia)] D

[96]  [13(a)(iii)(D)] D. While formally in issue on the pleadings, the Applicant’s position is that [13(a)(iii)(D)] D does not add anything to the issues raised by [13(a)(iii)(A) and 13(a)(iii)(BA)] D and therefore should not be treated as raising a real issue. The Respondents do not accept this characterisation.

[97] [13(a)] SOC, [9(c)(ii)(A), 13(a)(iia), 13(c)(i)] D

[98] [13(c)(ii)] SOC, [13(b)(i) and 13(ca)] D

[99] [13(c)(i)] SOC, [13(b)(i) and 13(ca)] D

[100] [13(d)(i)] SOC, [13(c)] D

[101] [13(d)(ii)] SOC, [13(c)] D

[102] [13(da)(i)] SOC, [13(da)(i)] D

[103] [13(da)(i)] SOC, [13(da)(ii)] D

[104] [13(da)(ii)] SOC, [13(da)(i)] D

[105] [13(da)(ii)] SOC, [13(da)(ii)] D

[106] The issues in paragraphs 35 and 36 of this section arise in a similar way on both the claim and counterclaim : see [112] – [116] Amended Counterclaim (CC), [110] – [115] Amended Answer (A)

[107] [12] SOC, [12] D

[108] [12] SOC, [12] D

[109] [12(b)] D

[110] [12A(b)] D

[111] [13(e)] SOC, [13(d)] D

[112] [13(d)(iv)(B)] D

[113] [13(f)] SOC, [13(e)] D

[114] [13(g)] SOC, [13(f)] D

[115]In this part, a reference to a paragraph number is a reference to paragraph number of the Amended Counterclaim unless stated otherwise.

Close

Editorial Notes

  • Published Case Name:

    Callide Power Management Pty Ltd & Ors v Callide Coalfields (Sales) Pty Ltd & Ors; CS Energy Ltd v Callide Coalfields (Sales) Pty Ltd & Ors (No 3)

  • Shortened Case Name:

    Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd (No 3)

  • MNC:

    [2015] QSC 295

  • Court:

    QSC

  • Judge(s):

    Flanagan J

  • Date:

    28 Oct 2015

Litigation History

No Litigation History

Appeal Status

No Status