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CS Energy Limited v GPS Power Pty Limited[2021] QCA 194

CS Energy Limited v GPS Power Pty Limited[2021] QCA 194

SUPREME COURT OF QUEENSLAND

CITATION:

CS Energy Limited v GPS Power Pty Limited & Ors [2021] QCA 194

PARTIES:

CS ENERGY LIMITED

ACN 078 848 745

(appellant)

v

GPS POWER PTY LIMITED

ACN 009 103 422

(first respondent)

GPS ENERGY PTY LIMITED

ACN 063 207 456

(second respondent)

SUNSHINE STATE POWER B.V.

ARBN 062 295 425

(third respondent)

SUNSHINE STATE POWER (NO. 2) B.V.

ARBN 063 382 829

(fourth respondent)

SOUTHERN CROSS GPS PTY LTD

ACN 063 779 028

(fifth respondent)

RYOWA II GPS PTY LIMITED

ACN 063 780 058

(sixth respondent)

YKK GPS (QUEENSLAND) PTY LIMITED

ACN 062 905 275

(seventh respondent)

FILE NO/S:

Appeal No 5746 of 2020

Appeal No 5749 of 2020

SC No 761 of 2018

SC No 13392 of 2017

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane – [2018] QSC 294 (Jackson J); [2020] QSC 93 (Jackson J)

DELIVERED ON:

7 September 2021

DELIVERED AT:

Brisbane

HEARING DATE:

11 September 2020

JUDGES:

Fraser, McMurdo and Mullins JJA

ORDER:

Appeals dismissed with costs.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the appellant and the respondents are parties to a long term contract concerning the supply and sale of electricity from a power station – where operative provisions of the contract contain a defined term “Station Annual Forecast” – where the contract permits a defined term to bear a meaning other than its defined meaning, if the context otherwise requires – where the defined meaning relies on another clause of the contract which prescribes a list of information to be included in the Station Annual Forecast – whether the use of the defined term incorporates only that part of the list information which is necessary for the purpose of the particular clause – where the primary judge approached the construction of the defined term in the operative provisions by considering the context and purpose of each provision and concluded that the reference to the Station Annual Forecast did not extend to part of the information included in the defined term – whether the primary judge erred in failing to apply the orthodox approach of inserting the full meaning given to the defined term into the operative clause of the contract

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the appellant and the respondents are parties to a long term contract concerning the supply and sale of electricity from a power station – where the appellant sought a declaration that Station Annual Forecast for the purpose of the relevant clause includes the upper and lower estimates – where the respondents conceded before the primary judge that the reference to Station Annual Forecast in a related clause includes the upper and lower estimates – where the primary judge did not refer to the concession in the part of the reasons that dealt with the relevant clause – where the primary judge construed the relevant clause and concluded that the lack of reference to an upper or lower estimate in the relevant schedule and the lack of any provision in the contract complementing the relevant clause explaining how a range of estimates is to be met meant that the reference to Station Annual Forecast in the relevant clause did not include the upper and lower estimates – where the failure of the primary judge to refer to the respondent’s concession in respect of the relevant clause would only be relevant if it made a difference to the construction of the relevant clause – whether the primary judge erred in failing to refer to the concession when construing the relevant clause

PROCEDURE – STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY – DECLARATIONS – APPROPRIATE FORM OF RELIEF – DISCRETION OF COURT – OTHER CASES – where the appellant and the respondents are parties to a long term contract concerning the supply and sale of electricity from a power station – where the appellant sought a declaration that Station Annual Forecast for the relevant clause includes the upper and lower estimates – where the respondents conceded before the primary judge that the reference to Station Annual Forecast in the relevant clause includes the upper and lower estimates – whether the primary judge erred in not making the declaration

PROCEDURE – STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY – DECLARATIONS – APPROPRIATE FORM OF RELIEF – DISCRETION OF COURT – OTHER CASES – where the appellant and the respondents are parties to a long term contract concerning the supply and sale of electricity from a power station – where clauses of the contract contain references to “coal stockpile forecast”, “stockpile level forecast” and “coal stockpile” – where the appellant sought a declaration that “coal stockpile” means the defined term “Actual Coal Stockpile” and “coal stockpile forecast” and “stockpile level forecast” mean a forecast of the defined term “Actual Coal Stockpile” – where the application was heard by the primary judge on the basis there were no facts in dispute – where the primary judge considered there was a lack of evidence on relevant matters which may affect the utility of a declaration construing clause – whether the primary judge erred in not making the declaration

Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; [1973] HCA 36, cited

AIG Australia Ltd v Kaboko Mining Ltd [2019] FCAFC 96, cited

BHP Petroleum (Australia) Pty Ltd v Sagasco South East Inc [2001] WASCA 159, considered

Bond v Chief Executive, Department of Environment and Heritage Protection [2018] 2 Qd R 112; [2017] QCA 180, cited

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, cited

Lahey Constructions Pty Ltd v State of New South Wales [2021] NSWCA 69, cited

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, cited

Newey v Westpac Banking Corporation [2014] NSWCA 319, cited

RMI Pty Limited v Spray Coupe Pty Ltd [2021] QCA 37, cited

COUNSEL:

A M Pomerenke QC, with J O'Regan, for the appellant

P R Franco QC, with H Clift, for the respondents

SOLICITORS:

Clayton Utz for the appellant

Minter Ellison for the respondents

  1. [1]
    FRASER JA:  I agree with the reasons for judgment of Mullins JA and the orders proposed by her Honour.
  2. [2]
    McMURDO JA:  With one exception, I agree with Mullins JA.  The exception is the question which she has discussed under the heading “Available Coal Stockpile”.
  3. [3]
    The primary judge was asked to declare that on the proper construction of the IPPA, where in cl 23.4A and cl 23.4B:
    1. (a)
      there is a reference to a coal stockpile forecast or a stockpile level forecast, that forecast is to be a forecast of the “Actual Coal Stockpile” as defined in the IPPA;
    2. (b)
      there is a reference to a coal stockpile, that is a reference to the “Actual Coal Stockpile” as defined in the IPPA.
  4. [4]
    The Actual Coal Stockpile is defined to mean:

“The amount of coal, in tonnes, that is held in a stockpile at GPS and which can be recovered from the stockpile, using normal site facilities at a continuous rate sufficient to operate GPS at its NMC.”

  1. [5]
    The contract does not stipulate how that quantity of coal is to be derived.  The mass of a stockpile may be measured by a volumetric survey.  The weight of the stockpile will vary according to its density, which may be measured.[1]  By a combination of the volumetric and density survey results, the total tonnage of coal on the stockpile is able to be estimated.[2]
  2. [6]
    There was evidence that over time, some coal becomes mixed with the earth on which the stockpile is placed.  The parties appear to agree that this coal could not be recovered using normal site facilities.  I will call this irrecoverable coal.
  3. [7]
    It is true, as the respondent continues to argue, that the expression Actual Coal Stockpile is a defined term, whereas there is no definition of the terms “coal stockpile forecast”, “stockpile level forecast” and “coal stockpile”.  It is also true that the term Actual Coal Stockpile is used only in a few places in the contract.  Nevertheless, like the primary judge, I see no obvious reason whereby the parties would have intended to exclude irrecoverable coal in cl 23.5(c)(i), but to include that coal within the “coal stockpile” and “stockpile” when used elsewhere in cl 23.[3]
  4. [8]
    The expressed purposes of cl 23 are to establish procedures for the procurement of coal for the power station to meet its needs, to minimise exposures to coal price fluctuations and to provide the respondents with the flexibility to acquire low cost coal under contract.  The references to a stockpile, including the Actual Coal Stockpile, are part of a coherent scheme under which the procuration of coal is planned and effected.  The parties must be taken to have used these different expressions to refer consistently to coal which could be recovered from a stockpile.  The respondents’ arguments to the contrary are those which they advanced to the primary judge.  For the reasons which he gave,[4] they should be rejected.
  5. [9]
    The primary judge referred to evidence, led by CS Energy, from an expert witness that he would measure the irrecoverable coal at 10 per cent of the “survey measured volumes of the stockpile”.  His Honour said that there was no expert opinion or factual basis given to support that factor.[5]  His Honour ruled, correctly, that this evidence was inadmissible on the present question, which involves the proper construction of the contract.[6]  It was that expert’s suggested factor of 10 per cent to which his Honour was referring in the second sentence of this passage of the 2018 reasons:

[211] It does not follow, therefore, that the “coal stockpile”, or equivalent, referred to in clause 23, apart from the use of Actual Coal Stockpile in clause 23.5(c)(i), is necessarily to be assessed without regard to the recoverability of the coal in the stockpile, on a survey basis only. But it also does not follow that some notional reduction of the quantity of the stockpile, as surveyed, is required based on an allowance for the amount of unusable coal that may be compacted into the pad below the stockpile.”

  1. [10]
    The judge expressed his opinions in that passage in somewhat guarded language.  I would go further.  In my view, a consistent measure should be applied to a coal stockpile forecast, a stockpile level forecast or an Actual Coal Stockpile, and one which has regard to the fact of irrecoverable coal.  There seems to be no means of measuring precisely the weight of the irrecoverable coal.  But nor can the amount of coal in a stockpile as a whole be measured precisely, because the volumetric and density survey results are used in combination to provide an estimate of the total tonnage of coal on a stockpile.
  2. [11]
    In the second sentence of the passage which I have quoted, his Honour effectively said that the contract did not mandate a certain reduction in the quantity of the stockpile as estimated by the surveys, of the kind suggested by the expert who suggested a notional reduction of 10 per cent.  I agree with that statement.
  3. [12]
    This was the final hearing of (this part of) CS Energy’s case.[7]  It involved a question of construction which the judge was to determine with such admissible evidence (if any) as the parties had then tendered.
  4. [13]
    Nevertheless, as his Honour appeared to accept, the process of estimating the number of tonnes of coal had to have regard to the presence of irrecoverable coal.  That was the point of the controversy between the parties, which CS Energy wanted resolved by the declarations which it sought.  Those declarations would not have precluded the possibility of a further controversy about the quantification of the number of tonnes.  Still, they would have some utility.  Consequently, there should have been declarations made as CS Energy had sought in paragraph 5A of its Originating Application.
  5. [14]
    MULLINS JA:  The appellant and the respondents are parties to a long term contract known as the Interconnection and Power Pooling Agreement (the IPPA) that was amended in 2009 and 2011.  Clause 1.1 of the IPPA sets out in the annex to the IPPA the definitions of the words and expressions used in the IPPA, unless the context otherwise requires.  When I refer to a word or expression defined in the annex for the first time in these reasons, it will appear commencing with capital letters and in quotation marks, but thereafter will commence with capital letters.
  6. [15]
    The appellant is the successor to Stanwell Corporation Limited and “Stanwell” is defined in the IPPA to mean “Stanwell Corporation Limited or its lawful successors and assigns from time to time”.    The respondents are referred to as the “Participants” in the IPPA.  The appellant and the respondents are the current “Parties” under the IPPA.  The “Initial Period” of the IPPA commenced on the “Date of Transfer” which is defined in the annex to mean 30 March 1994 and expires 35 years from the Date of Transfer, unless earlier terminated as set out in in clause 2.2.
  7. [16]
    The proceedings between the parties commenced with the originating application filed by the respondents in proceeding 13392 of 2017.  It was ordered on 20 December 2017 that paragraphs 1 to 5, 7, 9, 11 and 13 of that originating application be set down for hearing before Jackson J and that otherwise the originating application be adjourned to a date to be fixed.  At the same time, directions were made requiring the appellant to file an originating application seeking the relief sought in identified paragraphs of the respondent’s notice of referral of disputes dated 14 November 2017 and that originating application be heard at the same time by Jackson J.  The respondents were permitted to amend those paragraphs of the originating application that were set down for hearing.  On the first day of the hearing, leave was given by the learned primary judge to the respondents to amend further their originating application.  The appellant filed proceeding 761 of 2018 in accordance with the directions.  The appellant’s originating application was also amended on the first day of the hearing before the primary judge.  One of the amendments was to add paragraph 5A.  The appellant pursued at the hearing before the primary judge the relief sought in paragraph 5A in lieu of the relief sought in paragraph 5.  None of the deponents of the affidavits relied on before the primary judge was required for cross-examination.  The parties agreed that particular evidence would not be relied on for the purpose of the hearing (that was set out in the table marked for identification “A” before the primary judge).  There were therefore no factual disputes to be decided by the primary judge.
  8. [17]
    Although some of the directions and orders referred to the hearing before the primary judge as a preliminary hearing, it was preliminary only in the sense of being in advance of the hearing of the balance of the issues that remained to be decided in the proceedings after the hearing before the primary judge.  It was by way of final hearing that the primary judge determined in both proceedings the separate questions as to the construction of the IPPA: GPS Power Pty Ltd & Ors v CS Energy Ltd [2018] QSC 294 (the 2018 reasons).  The 2018 reasons dealt with the appellant’s amended originating application filed in proceeding 761 of 2018 and the respondents’ further amended originating application filed in proceeding 13392 of 2017.  The parties provided written submissions on the form of the relief that should be ordered, as a result of the 2018 reasons, but then asked the primary judge to defer dealing with those submissions.  The parties were unable to agree between themselves and the primary judge later determined what relief should be granted: GPS Power Pty Ltd & Ors v CS Energy Ltd [2020] QSC 93 (the 2020 reasons).  Orders were made on 1 May 2020 in both proceedings.
  9. [18]
    The appellant appeals against only some of the orders made in both proceedings.  Grounds 1 to 3 are identical in both appeals.  The notice of appeal in relation to the 2018 reasons also includes grounds 4 to 6.  The respondents have filed a notice of contention in the appeal in respect of the decision to dismiss paragraph 5A of the amended originating application in proceeding 761 of 2018 and contend that the dismissal should be affirmed on a ground other than a ground relied on by the primary judge.

Background

  1. [19]
    The respondents are the owners of the Gladstone Power Station which is referred to in the IPPA as “GPS”.  GPS is Queensland’s largest power station.  In 1982, it became the source of electricity for the Boyne Aluminium Smelter (which is referred to in the IPPA as the “Smelter”).  The Smelter is Queensland’s largest individual user of electricity.  The Smelter is owned by “BSL” which means Boyne Smelters Limited.  Since the end of 1998, electricity for the Smelter has been obtained from the National Electricity Market (NEM).  The appellant is a Queensland Government owned electricity provider and the “Nominated Generator” for GPS under the “Rules” governing the NEM.  Rules is defined in the annex to mean the National Electricity Rules under part 7 of the “National Electricity Law”, as amended from time to time in accordance with that part.  National Electricity Law is also defined in the annex and means the National Electricity (Queensland) Law as defined in the Electricity – National Scheme (Queensland) Act 1997 (Qld).
  2. [20]
    The history and the manner of operation of GPS are described in general terms at [3]-[16] of the 2018 reasons.  The operational limits of, and constraints on, the capacity of GPS are described in general terms at [17]-[19] of the 2018 reasons.  They include the specification and configuration of the six “Units” of GPS, the constraints of the coal handling and storage facilities, the availability, suitability and reliability of supplies of coal and the scheduling of trains on the rail network.  A Unit is defined in the annex to mean “any one of the six steam boiler/turbine/alternator units comprised within GPS”.
  3. [21]
    The acquisition of GPS by the Participants in March 1994, the entry by Queensland Electricity Commission (QEC) and the Participants into the original IPPA (which the primary judge sometimes referred to as the 1994 IPPA) and other contracts and the importance of the uninterrupted supply of electricity to the operation of the Smelter are referred to at [21]-[28] of the 2018 reasons.  The primary judge summarised the operation of the NEM and the resulting amendments to produce the 2009 IPPA: see [47]-[57] of the 2018 reasons.  The making of significant amendments to the IPPA in 2009 and further amendments in 2011 are outlined in [30]-[32] of the 2018 reasons.  The primary judge noted (at [59] of the 2018 reasons) that the changes made in the 2009 IPPA included new clauses 5A, 6.3, 23.4A, 23.4B and 23.4C.
  4. [22]
    The relationship between the appellant and the respondents with respect to both GPS, dealing with electricity generated at GPS, and the supply of electricity to the Smelter is regulated by the IPPA together with other contracts.  The primary judge referred (at [26] of the 2018 reasons) to the series of contracts in standard form made between QEC and each respondent that is referred to as a “Capacity Purchase Agreement” or “CPA”.  The appellant dispatches the whole of GPS’ output into the NEM in accordance with the 2009 IPPA: see [58] of the 2018 reasons.
  5. [23]
    By clause 8.1 of the IPPA, the appellant is required to purchase electricity on the NEM in an amount equivalent to the actual load of the Smelter.  That electricity is purchased by the appellant at the substation for the Smelter for delivery to the respondents and from that point it is transmitted continuously to the Smelter in accordance with clause 7.  The appellant is also required to provide “Capacity Support” to the respondents pursuant to clause 9 in the event that “Smelter Demand” exceeds “Available BSL Allocated Capacity”.  Capacity Support is defined in the annex to mean the capacity provided by the appellant “to make up any shortfall between the Available BSL Allocated Capacity and the Smelter Demand at any given time (including associated Transmission Losses)”.  Available BSL Allocated Capacity is defined in the annex to mean “the amount of the BSL Allocated Capacity that is deemed to be available to the Participants in any half-hour period as determined in accordance with Schedule 16”.  “Transmission Losses” is defined in the annex to mean “Active Energy” losses occurring in the “State System” transmission facilities.  Active Energy is defined in the annex to mean the electrical energy produced, flowing or supplied by an electrical circuit during a time interval that is measured in a specified manner.
  6. [24]
    A key benefit for the appellant under the IPPA lies in its rights in respect of “Contract Energy” generated at GPS from the “Total Contract Capacity”.  Contract Energy is defined in the annex to mean energy generated at GPS from the Total Contract Capacity and delivered to the appellant pursuant to the IPPA.  Total Contract Capacity is the amount of capacity of GPS calculated in accordance with clause 8.3.  That is, in effect, the excess capacity of GPS after providing for the Smelter which the appellant is entitled to trade for profit on its own account.  The appellant pays the respondents in respect of this capacity.  The extent to which the appellant is able to trade on its own account is a function of the “Availability” of GPS.  Availability is defined in the annex to mean “the actual operational capability of generating plant to generate and export power into the Power System regardless of whether such plant is electrically connected to the Power System, and Available and Unavailable shall be construed accordingly”.  “Power System” is defined in the annex to have the meaning given to the term power system in the Glossary of the Rules.  As the Availability of GPS decreases, the Contract Energy available to the appellant also decreases.
  7. [25]
    The generation of electricity at GPS requires the burning of coal and coal availability is relevant to the Availability of GPS.  The cost of coal used in the operation of GPS is borne principally by the respondents, subject to the operation of clause 23 of the IPPA.
  8. [26]
    There is no challenge to the primary judge’s description of the dispute between the parties that resulted in the issues agitated before the primary judge and which is set out at [62] of the 2018 reasons:

“The parties are in dispute about the operation of clauses 5A and 23. In particular, CS Energy contends that the Participants have failed to procure coal and maintain the stockpile in accordance with clause 23.4A(c) and 23.4B and that has compromised the “flexibility” of dispatch of GPS, apparently meaning that CS Energy has not been able to dispatch the Contract Capacity as Contract Energy at times when it would have been advantageous to CS Energy to do so. However, the scope of the dispute was not better defined for the purpose of this hearing, except for an assertion that because CS Energy was unable to avail itself of trading opportunities in the electricity market it has suffered revenue losses in the order of tens of millions of dollars.”

  1. [27]
    The appeal concerns the construction of aspects of clause 23 which addresses the procurement and management of coal and, more particularly, whether references to the “Station Annual Forecast” in clauses 23.4A and 23.5 are references to a discrete value, or to a range of values bounded by the upper and lower estimates referred to in clause 5A.3(b)(ii) of the IPPA.  The appeal also concerns the construction of “coal stockpile forecast” or “stockpile level forecast” in clauses 23.4A and 23.4B.

The relief sought by the appellant

  1. [28]
    Relevantly, the primary judge dismissed paragraphs 1, 2 and 5A of the amended originating application in proceeding 761 of 2018.  To the extent necessary, the appellant seeks to have those orders set aside and, in lieu, the declarations made that are set out in paragraphs 3, 4 and 5 of the notice of appeal:

“3. A declaration that on the proper construction of the IPPA, each of the following includes a reference to the Upper Estimates and the Lower Estimates:

  1. (a)
    the reference in cl. 23.4A(b) to ‘the final Station Annual Forecast pursuant to Clause 5A.6’;
  1. (b)
    the reference in cl. 23.4A(c) to ‘so that the Station Annual Forecast can be met’;
  1. (c)
    the reference in each of cl. 23.5(a)(i) and cl. 23.5(b)(i) of the lPPA to the phrase ‘to meet the Station Annual Forecast’; and
  1. (d)
    the reference in cl. 23.5(c)(i) to ‘if GPS was dispatched in accordance with the Station Annual Forecast’.
  1. A declaration that on the proper construction of the IPPA, cl. 23.4A(b) requires the Respondents to prepare the Annual Coal Procurement Plan taking into account that part of the Station Annual Forecast constituted by the Upper and Lower Estimates.
  1. A declaration that on the proper construction of the IPPA, where in cll. 23.4A or 23.4B:
  1. (a)
    there is reference to a coal stockpile forecast or a stockpile level forecast, that forecast is to be a forecast of the ‘Actual Coal Stockpile’ as defined in the IPPA;
  1. (b)
    there is a reference to a coal stockpile, that is a reference to the ‘Actual Coal Stockpile’ as defined in the IPPA.”
  1. [29]
    In proceeding 13392 of 2017, the primary judge made a declaration in the following terms:

“It is declared that upon the proper construction of the 2009 IPPA, none of the following includes a reference to the Upper Estimates or the Lower Estimates:

  1. the reference in each of clauses 23.4B(a)(i), 23.4B(a)(ii) and 23.4B(b)(i) to ‘anticipated levels of dispatch as disclosed in the Station Annual Forecast’;
  2. the reference in each of cl. 23.4B(a)(ii) and cl. 23.4B(b)(ii) to ‘the level of dispatch identified in the Station Annual Forecast’;
  3. the reference in cl. 23.4A(c) to ‘ so that the Station Annual Forecast can be met’;
  4. the reference in each of cl. 23.5(a)(i) and cl. 23.5(b)(i) to the phrase ‘to meet the Station Annual Forecast’; and
  5. the reference in cl. 23.5(c)(i) to ‘if GPS was dispatched in accordance with the Station Annual Forecast’.”
  1. [30]
    In its notice of appeal in respect of proceeding 13392 of 2017, the appellant seeks to have paragraphs (c), (d) and (e) of that declaration set aside.  The appellant does not challenge the primary judge’s conclusion (at [189] of the 2018 reasons) that the parties did not intend that either the upper estimate or the lower estimate should be taken into account in the reference to “the anticipated levels of dispatch as disclosed in the Station Annual Forecast” or “the level of dispatch identified in the Station Annual Forecast” in clause 23.4B(a) and (b).
  2. [31]
    It should be noted that both notices of appeal capitalise Upper Estimates and Lower Estimates, as those terms are defined for the purpose of each notice of appeal as commencing with capital letters.  Those terms are neither defined nor capitalised in the IPPA.

Grounds of appeal

  1. [32]
    The appellant has grouped the grounds according to topic and helpfully given many of the topics a shorthand description which I will also use in addressing the submissions on the topics:
    1. (a)
      failure to apply the definition of Station Annual Forecast;
    2. (b)
      failure to interpret clause 23.4A(c) consistently with clause 23.4A(b) and failure to distinguish clauses 23.4A(e) and (f) and clause 23.4B;
    3. (c)
      failure to address or attribute any significance to the use in clause 23.4A(c) of “Good Operating Practice”;
    4. (d)
      the significance of the phrase “can be met” in the expression in clause 23.4A(c) of “so that the Station Annual Forecast can be met”;
    5. (e)
      background facts concerning coal supply contracts;
    6. (f)
      reasoning as to risk;
    7. (g)
      other provisions supporting the appellant’s interpretation;
    8. (h)
      the relevance of the purpose of clause 23 set out in clauses 23.1(b) and (c);
    9. (i)
      error in the exercise of the primary judge’s discretion in acting on the concession made by the respondents;
    10. (j)
      clauses 23.5(a)(i), 23.5(b)(i) and 23.5(c)(i);
    11. (k)
      error in respect of Available Coal Stockpile.
  2. [33]
    All but the third last and last of the above topics are concerned with the construction of Station Annual Forecast in relevant clauses of the IPPA.

Key provisions of the IPPA

  1. [34]
    Pursuant to clause 1.6 of the IPPA, headings and recitals are ignored in the construction of the IPPA.
  2. [35]
    Under clause 5.1(b), the appellant must perform its obligations under the IPPA, where relevant, in accordance with Good Operating Practice.  There is an extensive definition of Good Operating Practice in the annex.
  3. [36]
    Clause 5.2 sets out the Participants’ duties.  Clause 5.2(a) provides:

“The Participants shall operate and maintain GPS in accordance with Good Operating Practice and Schedule 1 and in a manner suitable for operation in the Power System, including the securing of adequate fuel supplies (subject to Clause 23) and other materials, and (subject to their obligations under the relevant Transaction Documents) the disposal of by-products and waste.”

  1. [37]
    Clause 5.3 provides for the “Operator” which is authorised on behalf of the respondents to coordinate the execution of the “Performance Obligations” of the respondents and to issue invoices and receive payments on behalf of each of the respondents under the IPPA.
  2. [38]
    An “Operations Committee” was established by the Parties pursuant to clause 5A.1 and given the functions set out in clause 5A.1(b).  The function specified in clause 5A.1(b)(ii) is for the Operations Committee to make a determination pursuant to clause 23.4B(c).  Under clause 5A.3(a), the appellant must prepare and provide to the respondents no later than 6 July in each “Contract Year” a draft of the Station Annual Forecast together with such supporting material as the appellant, in its discretion, considers appropriate.  Contract Year is defined in the annex to mean relevantly a calendar year.  Clause 5A.3(b) then sets out in subparagraphs (i) to (v) the information that the appellant must ensure the Station Annual Forecast includes.  Subparagraphs (i) and (ii) provide for:
  1. “(i)
    the anticipated level of dispatch of GPS on a sent-out basis for the next year on a Monthly basis and such levels on an indicative yearly basis for the remaining four (4) Contract Years;
  1. (ii)
    (in order to assist in coal procurement and planning) the upper and lower estimates of dispatch of GPS on an annual basis for the next five (5) Contract Years (or such further period as the Parties may agree)”.
  1. [39]
    The other information required by subparagraphs (iii), (iv) and (v) of clause 5A.3(b) covers the anticipated level of “Non-market Ancillary Services” for the next year on a Monthly basis and on an indicative yearly basis for the remaining four Contract Years, the indicative number of “Units” to be committed on a Monthly basis for the next Contract Year, and an indicative profile showing the level of dispatch on a sent-out basis in each “Trading Interval” of a “Trading Day” which is representative of the average daily dispatch for each Month of the next Contract Year.  Non-market Ancillary Services is defined in the annex to have the meaning given to the term non-market ancillary service in the Glossary of the Rules.  The annex gives the respective meanings to Trading Day and Trading Interval that are given to those like terms in the Glossary of the Rules.
  2. [40]
    Clause 5A.3(b) also provides that, unless the parties otherwise agree, the appellant must ensure that information provided pursuant to clause 5A.3 is in the form provided in Schedule 8 Part 1.  The form in Part 1 of Schedule 8 has two sections.  The first section is a table for Contract Year 1.  The first column of the table is for Generated Energy (Sent Out Basis) – GPS Units in gigawatt hours, followed by a column for Details of Non-Market Ancillary Services, the next column is for Generated Energy (Sent Out Basis) – Combustion Turbine in megawatt hours and the last column is for Number of Committed Units (1 to 6).  “Combustion Turbine” is defined in the annex to mean the combustion turbine of 14 megawatts nominal capacity installed at, and associated with, GPS.  (At the hearing of the appeal, the respondents made the point that the Combustion Turbine was not a coal turbine.  There was some uncertainty as to the type of combustion turbine it actually is, but Mr Pomerenke of Queen’s Counsel who appears with Mr O'Regan of Counsel for the appellant obtained instructions that it is a diesel turbine.)
  3. [41]
    The first column has three sub-headings.  The first sub-heading requires the amount of Generated Energy on the Sent Out Basis to be completed on a monthly basis and with an annual total.  There are also sub-headings for Upper Estimate Sent Out Basis and Lower Estimate Sent Out Basis, but only annual totals are required at the end of each of the columns for those sub-headings.  In other words, there is no requirement for monthly estimates under these sub-headings.
  4. [42]
    The second section of the form deals with Contract Years 2 to 5 and only requires the Annual Generated Energy (Sent Out Basis) – GPS Units in gigawatt hours on the Sent Out Basis, the Upper Estimate Sent Out Basis and Lower Estimate Sent Out Basis for each Contract Year (and not for any shorter period than the Contract Year such as a month).  Some guidance on completing this form is given by clause 5A.3(b)(i) which requires the Station Annual Forecast to include the anticipated level of dispatch of GPS on a sent out basis on an “indicative” yearly basis for Contract Years 2 to 5.  The second column of this section of the form is headed Details of Non-Market Ancillary Services and only requires those details for each Contract Year.  The last column of this section of the form is for Generated Energy (Sent Out Basis) – Combustion in megawatt hours and again only requires those details for each Contract Year.
  5. [43]
    The reference to upper estimate and lower estimate appears in the IPPA only in the form in Schedule 8 Part 1 and clause 5A.3(b)(ii).
  6. [44]
    Pursuant to clause 5A.3(c), the appellant must prepare the Station Annual Forecast in good faith, taking into account the “GPS Forecast Data” provided to the appellant under clause 23.3, in particular the “Planned Outage Schedule” and “Major Refurbishment Outage Schedule”, and the impact of generation levels and dispatch profile on long-term Unit performance.  GPS Forecast Data is defined in the annex to mean the information prescribed in accordance with Schedule 13 for each of the succeeding five Contract Years.  Planned Outage Schedule (POS) is defined in the annex to mean “a schedule for the planned Unavailability of GPS determined in accordance Clause 17.2 for the carrying out of maintenance”.  Major Refurbishment Outage Schedule is similarly defined in the annex to mean a schedule for “Major Refurbishment” to be carried out to GPS as drawn up in accordance with clause 17.  There are related definitions in the annex for Major Refurbishment and “Major Refurbishment Outage”. In addition to the Planned Outage Schedule and Major Refurbishment Outage Schedule, the GPS Forecast Data includes forecasts of maximum demand of, and total energy sales to, the Smelter, the “NMC” for each Unit, minimum operational load on each Unit, “Heat Rate” for each Unit on a sent out basis and data that is pertinent to existing coal and coal transport contracts including expected coal delivery schedule.  NMC is short for “Net Maximum Capacity” which is defined in the annex to mean “the maximum continuous capacity of any Generating Unit, expressed in MW sent out which in the case of GPS, shall be determined in accordance with Clause 18.1”.  Heat Rate is defined in the annex to mean in relation to any generating plant, the rate at which the heat content of a given fuel is converted into a given amount of Active Energy.
  7. [45]
    The appellant is obliged under clause 5A.4 to prepare and provide to the respondents by Wednesday of each week in a Contract Year the “Commitment and Dispatch Estimate” which must provide information, on a daily basis for the first week of the following eight weeks, and on a weekly basis for the remaining seven weeks.  The information that must be included is then set out in clause 5A.4(b).  That information corresponds to the information that must be included in the Station Annual Forecast under subparagraphs (i), (iii), (iv) and (v) of clause 5A.3(b).  Clause 5A.4(b) also provides that, unless the Parties otherwise agree, the information provided pursuant to clause 5A.4 must be in the form provided in Schedule 8 Part 2.  The form in Part 2 of Schedule 8 has two sections.  The first section is a table for the Commitment and Dispatch Estimate for week 1.  For each day of that week, each of the columns must be completed.  The first column is Generated Energy (Sent Out Basis) – GPS Units in gigawatt hours, followed by a column for Detail of Non-Market Ancillary Services, the next column is for Generated Energy (Sent Out Basis) – Combustion Turbine in megawatt hours, the next column is for Number of Committed Units (1  to  6), and the last column is for Dispatch Profile for the Station.
  8. [46]
    The second section of the form deals with the Commitment and Dispatch Estimate for each of weeks 2 to 8.  The same headings for week 1 apply to this part of the form, but the form only requires the details on a weekly basis for each week.
  9. [47]
    Clause 5A.4(c) provides for the appellant to prepare the Commitment and Dispatch Estimate in good faith taking into account the matters mentioned in subparagraphs (i) to (vii).  Subparagraph (iv) requires the appellant to take into account the “Monthly Coal Procurement Plan” and the “Revised Monthly Coal Stockpile Forecast” and subparagraph (v) requires the appellant to take into account the Station Annual Forecast.
  10. [48]
    There is a process for review of the draft Station Annual Forecast provided for in clause 5A.5 that involves the Operations Committee.  Under clause 5A.5(a), no later than 10 “Working Days” after the Participants have received the draft Station Annual Forecast (or such later date as the Parties may agree), the Participants (acting reasonably) may request that the appellant provide information relevant to the physical basis of the Station Annual Forecast to assist the Participants’ review of the Station Annual Forecast.  There is an explanation of “physical basis” within the clause itself as those physical factors which the appellant “considers material to the development of the Station Annual Forecast, for example seasonal factors, new generation, load growth and transmission constraints”.  Working Day is defined in the annex to mean “a day, other than a Saturday, Sunday or public holiday, upon which banks (as that term is defined in the Banking Act 1959) are open for business in Brisbane”.
  11. [49]
    There is provision for the Participants to provide comments on the draft Station Annual Forecast under clause 5A.5(b) and, if there are comments, the Operations Committee meets to review the draft Station Annual Forecast pursuant to clause 5A.5(c).  As a result of such a meeting or otherwise at any time prior to 1 September in the relevant year, the appellant is permitted (but not obliged) pursuant to clause 5A.5(d) to amend the draft Station Annual Forecast which it must then provide to the Participants.
  12. [50]
    Confirmation of the Station Annual Forecast is then provided for in clause 5A.6:
  1. “(a)
    Prior to 15 September in the relevant year (and thereafter no later than ten (10) Working Days after the approval of an Allowed Adjustment) Stanwell shall prepare and provide to the Participants and the Operations Committee the consolidated Station Annual Forecast relevant to the Contract Year, or, (in relation to the draft Station Annual Forecast) shall confirm that the draft Station Annual Forecast is to be the Station Annual Forecast for the next Contract Year.
  1. (b)
    The Station Annual Forecast provided or confirmed by Stanwell pursuant to Clause 5A.6(a) shall be the Station Annual Forecast until such time as it is amended pursuant to Clause 5A.9.”
  1. [51]
    The meaning of “Allowed Adjustment” is found in clause 5A.7 which provides that at any time after the Station Annual Forecast for a Contract Year is established under clause 5A.6, a party by written notice to the other party may request adjustments to the Station Annual Forecast for the relevant Contract Year to reflect any material changes that affect the Station Annual Forecast for that Contract Year.  The Allowed Adjustment must therefore be concerned with Contract Year 1, as that gives a sensible interpretation to “the Station Annual Forecast for a Contract Year established under clause 5A.6” where the latter clause expressly refers to the Station Annual Forecast for the next Contract Year” which is Contract Year 1.  Clause 5A.7 further provides that the party who makes the request for an adjustment must include in the request supporting documentation sufficient to permit the other party to review and comment upon the proposed Allowed Adjustment.  The timing for a request for an Allowed Adjustment is covered by clause 5A.8.  Clause 5A.9 deals with the process of approval by the Operations Committee or the “Co-ordination Committee” of the requested Allowed Adjustment.  The Co-ordination Committee is established pursuant to clause 16.1.  Under clause 5A.9(b), either the Operations Committee or the Co-ordination Committee may decide that a requested Allowed Adjustment is not necessary or not appropriate, in which case it is not made.  Clause 5A.10 provides for the impact of an Allowed Adjustment that is made under clause 5A.9.
  2. [52]
    Clause 6.1 provides that declarations of Availability of GPS by the respondents shall be in accordance with Schedule 3.  Clause 3.1 of Schedule 3 Part 1 requires the respondents to provide the “Weekly Availability Forecast” to the appellant by 10.00 hrs on the Working Day immediately preceding each Saturday, in a form to be agreed between the parties.  Clause 3.1(b) provides:

“The Weekly Availability Forecast shall specify the anticipated Availability of each Unit and where applicable the Combustion Turbine for the period of seven (7) days from and including the relevant Saturday and shall include the following details:

  1. (i)
    the time at which any Unit will become Unavailable, the relevant Derating Condition, the extent of the Unavailability and the expected duration of the Unavailability;
  1. (ii)
    the Unit Status attributable to each Outage;
  1. (iii)
    the then current Actual Coal Stockpile at GPS and the expected delivery of coal for the next eight weeks;
  1. (iv)
    confirm any Outages in respect of Units previously arranged with Stanwell;
  1. (v)
    Departures of ramp rates from standard and nomination of Units selected to high ramp rate and Units selected to low ramp rate; and
  1. (vi)
    changes from the Notified Smelter Demand in accordance with Clause 6.2(b).”
  1. [53]
    Clause 6.2(a)(i) notes that, as the appellant is the Nominated Generator for GPS, it is “responsible for the commitment and decommitment of the Units and the Combustion Turbine”.  Clause 6.2(a)(ii) then provides for the circumstances in which the respondents may withdraw a Unit or the Combustion Turbine from service or otherwise reduce the Available Capacity of GPS in cooperation with the appellant.
  2. [54]
    Clause 6.3(a) provides:

“Subject to Clause 6.3(d), Stanwell may make GPS Dispatch Offers and GPS Rebids in respect of the Available Capacity of GPS into the Spot Market and, subject to Clause 21, Stanwell is entitled to receive all monies in relation to the Availability of GPS and dispatch of Available Capacity of GPS including:

  1. (i)
    Trading Amounts;
  1. (ii)
    monies payable by System Control for provision of Ancillary Services; and
  1. (iii)
    all other compensation, revenue and amounts in respect thereof payable by System Control or third parties under the Rules or otherwise.”
  1. [55]
    Clause 6.3(b) deals with the frequency with which the appellant may submit a Dispatch Offer and one or more Rebids.  That entitlement is at the appellant’s discretion “to maximise its overall revenue and profit position on a power station by power station or portfolio basis”, but is subject to the appellant’s compliance with the restrictions in clause 6.3(d) and taking into account the appellant’s obligations under clause 7 and the provisions of clause 23.4B.  There are constraints on the appellant in exercising the entitlement under clause 6.3 that are set out in paragraphs (c) and (d).
  2. [56]
    Clause 6.3(c) provides:

“Stanwell shall use reasonable endeavours to submit GPS Dispatch Offers, GPS Rebids and Non-market Ancillary Services Offers that:

  1. (i)
    are based upon the relevant Notified Availability for the Trading Day;
  1. (ii)
    are consistent with the operating limits established pursuant to this Agreement, including the Technical Specifications;
  1. (iii)
    have regard to the Commitment and Dispatch Estimate for the Trading Day; and
  1. (iv)
    have reasonable regard to opportunities to optimise the supply of Economy Purchase Energy to the Participants.”
  1. [57]
    The restrictions set out in clause 6.3(d) preclude the appellant from submitting GPS Dispatch Offers or GPS Rebids under clause 6.3(c) which are likely to cause a Unit or the Combustion Turbine to be dispatched where the respondents have, exercising reasonable judgement, advised the appellant that such dispatch may result in identified failures or risks such as failure to comply with the respondents’ health and safety obligations, a risk of significant loss or damage to plant and equipment or a failure by the respondents to meet the requirements of Good Operating Practice.  Under clause 6.3(e), if the appellant submits GPS Dispatch Offers or GPS Rebids in breach of clause 6.3(d), the respondents have the right to withdraw a Unit or the Combustion Turbine or otherwise reduce the available capacity of GPS to the extent that the offers or rebids are in breach of clause 6.3(d).
  2. [58]
    Clause 11.1 regulates the circumstances in which the respondents are required to or may operate the Combustion Turbine.  Clause 12.1 regulates the circumstances in which the appellant is entitled to provide Ancillary Services to “System Control”.  System Control is defined in the annex to mean “AEMO or such other entity that may at any time and from time to time operate and administer the Market in accordance with the Rules”.  Paragraph (c) of clause 12.1 deals with the circumstances where the respondents must comply with a direction or instruction from the appellant to provide a Non-market Ancillary Service.
  3. [59]
    Clause 14.1 deals with payment statements.  Under clause 14.1(a), the appellant must on each “Monthly Statement Date” prepare and submit to the Operator a statement specifying in respect of the relevant preceding Month the sums due from the respondents to the appellant in respect of the Charges specified in subparagraph (i), the Heat Rate Protection Payments due from the appellant to the respondents, the sums due from one Party to another Party for the “Stockpile Incentive Payment”, and any other charges or payments that may become due pursuant to the IPPA.  Stockpile Incentive Payment is defined in the annex as having the meaning set out in paragraph 10.11 of Schedule 16.  Paragraph 10.11 sets out a formula calculating the Stockpile Incentive Payment for any Month.  The formula requires the Stockpile Level for the relevant Month.  Schedule 16 has its own set of definitions and Stockpile Level “is the end of month coal stockpile level based on a bi-monthly physical measurement on a tonnes basis as reported in the Operators Monthly Report”.
  4. [60]
    Clause 18.1 provides that at the Date of Transfer the NMC of GPS shall be deemed to be 1613 megawatts which shall apply until a revised NMC is determined pursuant to clause 18.
  5. [61]
    The purpose of clause 23 is set out in clause 23.1:

“The purpose of this Clause 23 is to establish procedures for the procurement of coal for GPS and the management of the associated coal risks with a view to:

  1. (a)
    deleted intentionally;
  1. (b)
    minimising the long term costs of electricity generation to meet the requirements of the Smelter and Stanwell;
  1. (c)
    ensuring that there are adequate supplies of coal to meet the Station Annual Forecast and the actual generation requirements of GPS;
  1. (d)
    minimising BSL’s and Stanwell’s exposure to coal price fluctuations; and
  1. (e)
    providing the Participants with the flexibility to acquire low cost coal under contract.

Reference may be made to this Clause 23.1 in order to assist the resolution of any dispute or difference between the Parties concerning the terms or application of this Clause 23.”

  1. [62]
    There is an acknowledgement by the Parties in clause 23.2(a) of the coal supply and transport arrangements in respect of GPS that were put in place as at the Date of Transfer and that the coal forming the subject matter of those contracts and which were subject to take or pay obligations under the contracts was agreed to be “Committed Coal” for the relevant purposes.  There is an acknowledgment then in clause 23.2(b) of the fact those initial coal supply arrangements had either terminated or expired and that various other contracts had been entered into by the Participants pursuant to clause 23.5(e) for the supply of coal to GPS and that under clause 23.5(d) the minimum coal deliveries under those contracts are regarded as Committed Coal for the relevant purposes.  Committed Coal is defined in the annex to mean the coal that must be taken or paid for pursuant to contracts entered into by the respondents pursuant to the procedures established under clause 23 for use at GPS, including coal purchased as contemplated in clause 23.2.
  2. [63]
    Under clause 23.3(a), the respondents must provide the GPS Forecast Data to the appellant by 15 March of each year (or such other date as the parties agree).  Paragraphs (b) and (c) of clause 23.3 provide:
  1. “(b)
    In addition, by 15 March of each year or such other date as the Parties may agree, the Participants shall if requested by Stanwell upon not less than sixty (60) days’ written notice, and may in any event, provide to Stanwell for each of the next five (5) succeeding Contract Years, the anticipated cost of additional delivered coal for the purpose of longer range dispatch forecasting based on a range of annual coal consumption estimates notified to the Participants by Stanwell.
  1. (c)
    No later than 15 June in each year the Participants shall confirm or revise the GPS Forecast Data for the next Contract Year provided to Stanwell under Clause 23.3(a) by giving notice of the confirmation or revisions to Stanwell, together with such information supporting the GPS Forecast Data as Stanwell may reasonably require.”
  1. [64]
    The timing of the Station Annual Forecast is linked to the provision of the GPS Forecast Data, as clause 23.3(d) requires the appellant, following receipt of, and having regard to the GPS Forecast Data, to “provide the Station Annual Forecast to the [respondents] in accordance with Clause 5A to assist in coal procurement and planning, for each of the succeeding five (5) Contract Years or such longer period as the Parties may agree”.
  2. [65]
    Under clause 23.4A(a) the respondents are required to prepare and provide to the appellant by 15 October of each year (or such other date as the parties may agree) their “Annual Coal Procurement Plan” for the next Contract Year.
  3. [66]
    Paragraphs (b) and (c) of clause 23.4A then provide:
  1. “(b)
    The Participants shall prepare the Annual Coal Procurement Plan in good faith, taking into account the final Station Annual Forecast pursuant to Clause 5A.6.
  1. (c)
    It is the responsibility of the Participants to manage, at their discretion, the overall supply of coal using Good Operating Practice so that the Station Annual Forecast can be met.”
  1. [67]
    Clause 23.4A(d) provides:

“Each Annual Coal Procurement Plan shall include the following:

  1. (i)
    changes to coal information provided in the GPS Forecast Data relevant to details of maximum and minimum contracted volumes, anticipated delivery schedule and price for all contracts for the supply of coal for the next Contract Year;
  1. (ii)
    changes to coal information provided in the GPS Forecast Data relevant to anticipated delivery schedules (in tonnes per month) for deliveries of coal to GPS in the next Contract Year; and
  1. (iii)
    the Participants’ anticipated end of month coal stockpile forecasts for the next Contract Year, on a month by month basis, (‘Projected Monthly Coal Stockpile Forecast’).”
  1. [68]
    The respondents must also, pursuant to clause 23.4A(e), prepare and provide to the appellant by the last Working Day of each Month (or such earlier date as the Operations Committee may agree) a revised coal procurement plan for each of the next two Months which is the “Monthly Coal Procurement Plan”.  Under clause 23.4A(f), each Monthly Coal Procurement Plan must include an anticipated end of Month GPS coal stockpile forecast for each of the next two Months which is referred to as the “Revised Monthly Coal Stockpile Forecast”, taking into account the anticipated levels of dispatch as disclosed in the most recent Commitment and Dispatch Estimate.
  2. [69]
    Clause 23.4A(g) expressly provides that it is the respondents’ and the appellant’s intention to maintain the coal stockpile at GPS within a range between 300,000 tonnes and 800,000 tonnes which is referred to as the “Acceptable Coal Stockpile Range”.
  3. [70]
    Clause 23.4B(a) then provides for the rules for stockpile management.  It sets out what happens, subject to clause 23.4B(c), if the Revised Monthly Coal Stockpile Forecast for any given Month is less than 300,000 tonnes.  The purpose of doing so is specified in each of subparagraphs (i) and (ii) as:

“in order to ensure that so far as practicable the coal stockpile is maintained within the Acceptable Coal Stockpile Range and that in any event, the Revised Monthly Coal Stockpile Forecast is brought within the Acceptable Coal Stockpile Range by no later than the third (3rd) Month after the Month in which the relevant Revised Monthly Coal Stockpile Forecast is given”

  1. [71]
    Clause 23.4B(b) sets out what happens, subject to clause 23.4B(c), if the Revised Monthly Coal Stockpile Forecast for any given Month is greater than 800,000 tonnes.  The purpose of so doing is specified in each of subparagraphs (i) and (ii) as:

“in order to ensure that so far as practicable the coal stockpile is maintained or is brought within the Acceptable Coal Stockpile Range and in any event does not at any time exceed 900,000 tonnes and is brought within the Acceptable Coal Stockpile Range by no later than the third (3rd) Month after the Month in which the relevant Revised Monthly Coal Stockpile Forecast is given; or”

  1. [72]
    Clause 23.4B(c) provides:

“If the Revised Monthly Coal Stockpile Forecast for any Month is not within the Acceptable Coal Stockpile Range and either Party acting reasonably believes that this is attributable to a combination of:

  1. (i)
    the levels of dispatch of power at GPS (taking into account the anticipated levels of dispatch as disclosed in the most recent Commitment and Dispatch Estimate); and
  1. (ii)
    either:
  1. (A)
    the deliveries of coal arranged by the Participants; or
  2. (B)
    a reduction in the Availability of GPS below the forecast availability,

then either Party may refer the matter to the Operations Committee for a determination as to what steps should be taken by the Parties to bring the coal stockpile within the Acceptable Coal Stockpile Range having regard to the mechanisms listed in Clauses 23.4B(a) and 23.4B(b) and giving due weight to the circumstances that gave rise to the anticipated coal stockpile at GPS being outside the Acceptable Coal Stockpile Range.”

  1. [73]
    Clause 23.4B(d) then sets out the consequences for the purposes of calculating amounts payable by the appellant under the IPPA, if a Party is required to procure additional coal to satisfy the requirements of clause 23.4B(a).  Clause 23.4B(e) refers to the payment of any Stockpile Incentive Payment that is subject to clause 23.4B(f) which specifies that the appellant shall not be liable to pay the Stockpile Incentive Payment to the respondents to the extent that clause 23.4B(b)(ii) applies.
  2. [74]
    The provisions under clause 23.4B are supplemented by clause 5A.10(a)(v) in circumstances where, as a result of an Allowed Adjustment under clause 5A.9, the affected Party issues a Revised Monthly Coal Stockpile Forecast on the basis of the Allowed Adjustment.  Clause 5A.10(a)(v) then applies if, under the Revised Monthly Coal Stockpile Forecast, an anticipated end of Month GPS coal stockpile forecast is outside the Acceptable Coal Stockpile Range and that involves having regard to the relevant paragraphs to clause 23.4B and the circumstances which gave rise to the request for an Allowed Adjustment pursuant to clause 5A.7.
  3. [75]
    Clause 23.4C deals with the circumstances where the appellant may by written notice advise the respondents that it wishes to supply coal in addition to Committed Coal to GPS and that is referred to as “Stanwell Short Term Coal”.
  4. [76]
    Pursuant to clause 23.5(a), the appellant may request that the Parties meet to identify and evaluate prospective coal supply options that may be available to the respondents to meet a projected shortfall in the amount of coal under contract to meet the Station Annual Forecast, an Allowed Adjustment under clause 5A.9 or the requirements of clause 23.4B.
  5. [77]
    Clause 23.5(b) then provides:

“If the Participants first notify Stanwell, the Participants may decide to seek bids for coal for GPS:

  1. (i)
    to meet a projected shortfall in the amount of coal under contract to meet the Station Annual Forecast;
  1. (ii)
    to meet an Allowed Adjustment under Clause 5A.9 (via 5A.10(a)(iii)) or in a manner that best meets the objectives mentioned in Clauses 23.l(b) and 23.l(d); or
  1. (iii)
    to meet the requirements of Clause 23.4B.”
  1. [78]
    Clause 23.5(c) deals with coal bids in some detail. For the purpose of dealing with the arguments on this appeal, it is only necessary to refer to subparagraphs (i) and (ii) of clause 23.5(c) which provide:
  1. “(i)
    Upon receipt of a request pursuant to Clause 23.5(a) or notice under Clause 23.5(b), the Parties shall meet and discuss the impact that the purchase of additional coal may have on stockpile levels to determine whether such additional coal is required. Unless otherwise agreed, additional coal shall not be purchased that would result in the Actual Coal Stockpile level exceeding 450,000 tonnes if GPS was dispatched in accordance with the Station Annual Forecast (including any approved Allowed Adjustment).
  1. (ii)
    Subject to Clause 23.5(c)(i), if requested by Stanwell in accordance with Clause 23.5(a)(i), or if the Participants so decide in accordance with Clause 23.5(b)(i), the Participants shall seek ‘arms-length’ bids for the supply of the amount of coal agreed with Stanwell (provided that the quality of coal is suitable to be burned at GPS) and, if appropriate, seek bids for transport of such coal. Unless otherwise agreed, the bids for the supply of coal shall be based on contract terms such that the supply is for a period in the range of five (5) to twelve (12) years and with a flexibility in the annual rate of delivery of at least ten percent (10%) less than or greater than the average annual rate of delivery.”

Approach to the construction of the IPPA

  1. [79]
    The IPPA is a complex commercial arrangement between sophisticated parties and was drafted with the assistance of experienced lawyers.  The appellant’s description of the IPPA as a “sophisticated, complex, multipurpose agreement” is apt.  It was not in issue on the appeal that the approach to the construction of the IPPA must reflect that it is such a commercial contract, as explained by French CJ and Hayne, Crennan and Kiefel JJ in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]:

“Both [parties] recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’.”  (footnotes omitted)

  1. [80]
    A similar approach was expressed by Gageler J who was the other member of the court in Electricity Generation at [53]:

“Commercial parties contracting at arm’s length are free to agree on terms each considers to be to its own commercial advantage.  The terms of their agreement, however, are construed by a court to mean what reasonable commercial parties in their position can be taken together to have meant.”

  1. [81]
    This approach to the construction of a commercial contract was summarised pithily by French CJ and Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46]:

“The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.” (footnotes omitted

  1. [82]
    Even though the appellant argued separately each of eight topics relevant to the construction of Station Annual Forecast in the relevant clauses of the IPPA, the ultimate question of the construction of each relevant clause has to be determined in the context of the IPPA as a whole, and not by reference to one or two aspects relevant to the construction of the particular clause.

Approach to the use of a defined term in the IPPA

  1. [83]
    Another aspect of the construction of a commercial contract that is critical to the appellant’s case on this appeal is giving a defined term in the IPPA where it is used in a clause the meaning given to that defined term in the annex.
  2. [84]
    The appellant relies on what it describes as the proper approach of inserting the definition into the operative provision: Bond v Chief Executive, Department of Environment and Heritage Protection [2018] 2 Qd R 112 at [10]-[11] and AIG Australia Ltd v Kaboko Mining Ltd [2019] FCAFC 96 at [43].  The respondents do not dispute that these authorities reflect what they describe as the starting position of inserting the definition in the operative provision in place of the defined term.
  3. [85]
    The appellant acknowledges that clause 1.1 of the IPPA permits a defined term to bear a meaning other than as set out in the annex, if the context otherwise requires.  The appellant submits in reliance on Perry Herzfeld and Thomas Prince, Interpretation (Thomson Reuters, 2nd ed, 2020) at [21.20] that, for the context to require otherwise, the text in light of the context and purpose should clearly disclose both that the definition was not intended to apply and what meaning was intended instead.  The appellant therefore submits that, unless a finding could be made positively that the context otherwise required a meaning of a defined term other than that given in the annex, the definition in the annex must be used.  The appellant further submits that a neutral consideration is not enough to show that the contract otherwise requires the term to be given a meaning, apart from the defined meaning, as a neutral consideration should not result in the rejection of the defined meaning and the application of a different meaning.
  4. [86]
    The respondents take a different approach.  By adapting the dictum of Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 the respondents argue that, if inserting the definition in the operative provision in place of the defined term and construing the clause in context and having regard to its purpose results in more than one construction being available, or if the construction is absurd or the result “capricious, unreasonable, inconvenient or unjust”, the more commercial or business-like construction should be preferred.
  5. [87]
    ABC v APRA concerned the construction of a copyright licence agreement and did not concern the use of a defined term.  The majority in that case did not consider the clause was ambiguous.  Gibbs J dissented as he considered the agreement was ambiguous and therefore had to consider how to resolve the two possible constructions of the agreement.  The dictum has been applied recently in Lahey Constructions Pty Ltd v State of New South Wales [2021] NSWCA 69 at [37] and [65] and RMI Pty Limited v Spray Coupe Pty Ltd [2021] QCA 37 at [13].
  6. [88]
    The appellant refers to BHP Petroleum (Australia) Pty Ltd v Sagasco South East Inc [2001] WASCA 159 as illustrative of the orthodox approach to the use of a defined term in a commercial agreement.  The agreement in that case required the term “Griffin Gas” to be given its defined meaning “unless the context otherwise requires”.  The defined meaning was “natural gas produced from the Griffin Project and made available for delivery through the Project Pipelines”.  The terms “Griffin Project” and “Project Pipelines” were also defined.  The issue before the trial judge was construction of Griffin Gas in one paragraph of a particular clause, when it was common ground between the parties that there were some clauses of the agreement in which the context required Griffin Gas to be given a meaning other than the defined meaning.  The subject clause expressed in descriptive terms the quantities of natural gas to be aggregated for the component DG in a formula.  The relevant paragraphs of the clause included:
  1. “(b)
    Griffin Gas which has been made available by Sellers to Buyers during the Day in question but not taken by Buyers;
  1. (c)
    Griffin Gas which is not delivered by Sellers to Buyers during the Day in question for reasons of Force Majeure;

  1. (e)
    the quantity of Griffin Gas which would have been delivered during the permitted interruptions under Part 24, assuming delivery at a uniform rate of 25TJ per Day.”
  1. [89]
    The trial judge preferred the construction of paragraph (c) that gave Griffin Gas its defined meaning.  Reliance was placed (at [17]) on the other words in paragraph (c) and particularly the contrast between the words “which is not delivered” found in paragraph (c) and the words “which would have been delivered” found in paragraph (e), and it was observed the words “which is not delivered” made sense in conjunction with the defined meaning of Griffin Gas.  The court on appeal noted at [24] that the question therefore was whether the context did otherwise require a construction of Griffin Gas other than the defined meaning.  The court then stated at [24]:

We agree with the trial Judge’s comment to the effect that, in an agreement drawn with legal advice as part of a complex and sophisticated commercial enterprise, the deliberate use of defined words is not to be lightly passed over, even where the definition leaves open the possibility of another meaning for a defined phrase.”

  1. [90]
    The court in Sagasco concluded (at [25]) that it was open to the trial judge to find there was nothing in the context in which the defined term was used in the relevant paragraph of the relevant clause that required that term to be given anything other than its defined meaning and there was nothing absurd, uncertain or ambiguous about the application of that clause, as a result of giving Griffin Gas its defined meaning.
  2. [91]
    The appellant notes the approach of the court in Sagasco to the deliberate use of a defined term in a commercial agreement was applied in Newey v Westpac Banking Corporation [2014] NSWCA 319 at [114].
  3. [92]
    Sagasco and Newey are examples of the application of the use of a defined term in a commercial agreement where the context did not otherwise require that a meaning other than that given to the defined term be used in construing the defined term in the clause under consideration.  The dictum of Gibbs J in ABC v APRA is not apposite for resolving the issue for the construction of the defined term in an operative provision, where the contract itself specifies that the defined term applies, unless the context otherwise requires, as in such a case the issue is whether the context otherwise requires.
  4. [93]
    The effect of the use of the defined term Station Annual Forecast is one aspect of the construction of the relevant clauses in the IPPA that must be considered in the construction of those clauses within the IPPA as a whole.

The primary judge’s reasons on the Station Annual Forecast

  1. [94]
    In order to put the issue into context, it is relevant to note the primary judge’s analysis of the Capacity of GPS (at [43]-[46] of the 2018 reasons) that from the NMC of 1613 megawatts, 1104 megawatts represents the BSL Allocated Capacity which leaves 509 megawatts available as Total Contract Capacity that the appellant is able to trade for profit on its own account.
  2. [95]
    Apart from the appellant’s challenge to the primary judge’s contention that clause 23.4A(c) is concerned with the Station Annual Forecast for the Contract Year to which the Annual Coal Procurement Plan relates, there is no dispute about the primary judge’s summary (at [113]-[128] of the 2018 reasons) of the timetable discernible from the provisions in the IPPA for the forecasting of the dispatch from GPS and the planning of coal procurement.
  3. [96]
    In summary, by 15 March of the year preceding the Contract Year, the respondents provide the GPS Forecast Data to the appellant which the respondents then have until 15 June to confirm or revise the GPS Forecast Data for the next Contract Year.  The GPS Forecast Data is required by the appellant to prepare the draft of the Station Annual Forecast by no later than 6 July which is then finalised by 15 September, subject to any ongoing process for an Allowed Adjustment under clause 5A.9.  The respondents then prepare and provide to the appellant by 15 October the Annual Coal Procurement Plan for the next Contract Year.  The Station Annual Forecast for that Contract Year is then followed up by the Commitment and Dispatch Estimate prepared weekly on a rolling eight weeks’ basis and the Annual Coal Procurement Forecast is followed up by the Monthly Coal Procurement Plan prepared by the last Working Day of each Month for the next two Months in the Contract Year.
  4. [97]
    Not surprisingly, the primary judge identified (at [129] of the 2018 reasons) that the focus of the dispute between the parties as to the use of the Station Annual Forecast was on Contract Year 1 of a relevant Station Annual Forecast, as that reflected the submissions of the appellant and the respondents on the construction of clause 23.4A(c) before the primary judge.
  5. [98]
    The primary judge noted (at [130] of the 2018 reasons) that during Contract Year 1, the Station Annual Forecast has an express role to play in three groups of provisions:
    1. (a)
      provisions for the respondents to prepare and provide Monthly Coal Procurement Plans (clause 23.4A(e) to (g));
    2. (b)
      provisions for rules for coal stockpile management (clauses 23.4B(a) and (b)); and
    3. (c)
      provisions for the purchase of additional coal for GPS (clause 23.5).
  6. [99]
    The primary judge recorded (at [133] of the 2018 reasons) that the “clearest dispute between the parties” was as to the role of the upper estimate and the lower estimate for Contract Year 1 in the Station Annual Forecast.
  7. [100]
    The primary judge had regard to the information required by the form provided in Schedule 8 Part 1 for the Station Annual Forecast in dealing with the dispute between the parties as to the role of the upper estimate and the lower estimate for Contract Year 1 in the Station Annual Forecast.  (Schedule 8 was inserted at the same time as the other 2009 amendments to the IPPA.)  The primary judge also had regard to the information required by the form in Schedule 8 Part 2 for the Commitment and Dispatch Estimate, noting (at [140] of the 2018 reasons) that there were no sub-columns for the upper estimate or lower estimate in the Commitment and Dispatch Estimate Table and stating (at [140]):

“That is consistent with the Commitment and Dispatch Estimate being confined to Contract Year 1 in the relevant Station Annual Forecast, and the lack of any monthly or shorter period information as to the Upper Estimate or Lower Estimate sub-columns in the Station Annual Forecast Contract Year 1 table.”

  1. [101]
    The primary judge concluded (at [142] of the 2018 reasons) that the references in clause 23.4A(b) and (c) are directed to the ensuing Contract Year 1 of the Station Annual Forecast for which there is an annual upper estimate and annual lower estimate, but only as an annual total.
  2. [102]
    The primary judge observed (at [144] of the 2018 reasons) that there is no express provision in the IPPA which directs attention to the Contract Years 2 to 5 information as to the upper estimate or lower estimate, as part of the anticipated levels of dispatch and therefore concluded (at [144] of the 2018 reasons) that “the only possibly relevant reference to the Upper Estimate or Lower Estimate for Contract Year 1 as part of the anticipated levels of dispatch would be to the annual totals for that year, formulated as at September of the prior year”.
  3. [103]
    The primary judge noted (at [147] of the 2018 reasons) that the definition of Station Annual Forecast is “generally expressed” as “a forecast containing the material prescribed by Clause 5A.3(b)” and then stated at [147]:

“Having regard to the detailed and complex structure of the interrelated forecasting of dispatch of and coal procurement for GPS described above, in my view, the definition’s reference to the material prescribed by clause 5A.3 does not assist much in resolving the disputed constructional question as to clause 23.4A(b) and (c).”

  1. [104]
    The primary judge noted (at [149]-[151] of the 2018 reasons) the provisions in clause 23.4A that require the Annual Coal Procurement Plan and the Monthly Coal Procurement Plan to contain monthly coal stockpile forecasts, the requirement under clause 23.4B (where the stockpile level forecast is outside the Acceptable Coal Stockpile Range) for an assessment of what the level is attributable to, and that nothing in clauses 23.4A and 23.4B refers to the monthly stockpile forecast itself being a range based on the upper estimate or lower estimate information provided for Contract Year 1 (or subsequent year).  The primary judge observed (at [152] of the 2018 reasons) that there is no clear basis to convert the relevant Contract Year 1 annual estimates for the upper estimate and the lower estimate to monthly estimates.
  2. [105]
    The primary judge dealt (at [154] of the 2018 reasons) with the issue of risks in relation to coal procurement and supply to GPS:

“The risks in relation to coal procurement and supply to GPS include possible over-supply or under-supply for the actual levels of dispatch and a price risk. If there is over-supply, it is likely that the Participants would be exposed to take-or-pay liabilities under their coal supply contracts, if supplies have to be interrupted and there will likely be unnecessary holding costs of the coal before it is burnt. If there is undersupply, the parties are exposed to the risk of not being able to dispatch GPS to the extent as agreed in the 2009 IPPA. Most of CS Energy’s submissions as to clauses 23.4A(b) and (c) were predicated upon the Participants being obliged to procure coal in accordance with the Upper Estimate. Almost no attention was given by them to the Participants’ obligations or how they would be discharged in relation to the Lower Estimate.”

  1. [106]
    The primary judge noted (at [155] of the 2018 reasons) that an important contextual point was “that the operation of clause 23.4B and the rights and obligations in relation to coal procurement and payment under that clause and under clause 10 turn, in part, on stockpile levels that are to be ascertained to a particular tonnage, not to a range of tonnes”.  The primary judge also noted (at [155]) that the appellant did not address how, if the respondents were obliged to take the upper estimate into account for Contract Year 1 in procuring coal, they were to take the lower estimate into account at the same time and how that could affect their rights and obligations under clause 23.4B and Schedule 16.
  2. [107]
    The primary judge considered (at [156] of the 2018 reasons) that the expression in clause 23.4A(c) “so that the Station Annual Forecast can be met” was another indicator of the proper construction of clause 23.4A(b) and (c).  (In view of the respondent’s concession before the primary judge in respect of clause 23.4A(b), the primary judge’s reference to clause 23.4A(b) was unnecessary.)  The primary judge observed (at [156]) that there was no provision for an upper estimate or lower estimate in the weekly Commitment and Dispatch Estimate, as provided for in Schedule 8 Part 2, but only an “anticipated level of dispatch” on the “Generated Energy (Sent Out Basis)”.  The primary judge therefore concluded (at [156]) that, in context, “it is clear enough that the Monthly Coal Procurement Plan does not call for a range of estimates to be provided to meet the Station Annual Forecast”.
  3. [108]
    The primary judge relevantly observed (at [157] of the 2018 reasons):

“The detailed provisions of [clauses 5A and 23.4A, 23.4B and 23.5] in the context of the rest of the 2009 IPPA shows a close concern by the drafters with the rights and obligations and risks undertaken by the parties associated with the dispatch of and the procurement and supply of coal for GPS respectively. At no point did CS Energy grapple with the interrelationship of this broad submission with the allocation of those risks and responsibilities under clause 23.4B and clause 23.5, or the rights to payment that might be generated under clause 10, Schedule 16 and the 2009 CPAs.”

  1. [109]
    The appellant had before the primary judge relied upon the purpose provision in clause 23.1 to resolve the disputed construction of clause 23.4A(c).  The primary judge disposed of that argument (at [159] of the 2018 reasons) by noting that there were a number of purposes in clause 23.1 “some of which pull in opposite directions”, but then considered (at [160] of the 2018 reasons) that the more reliable guide to ascertaining the intended operation of clauses 23.4A and 23.4B was obtained from:

“… close analysis of the forecasting procedures for the procurement of coal, beginning with clause 23.3, continuing through the Station Annual Forecast and the Annual Coal Procurement Plan processes and culminating in the weekly Commitment and Dispatch Estimate and the Monthly Coal Procurement Plan processes, on which the rights and obligations under clause 23.4B then turn, and from which the rights to payment in accordance with clause 10 and Schedule 16 and the CPAs follow … .”

  1. [110]
    The primary judge accepted (at [163] of the 2018 reasons) that it would not be correct to conclude that the upper estimate and the lower estimate were irrelevant to coal procurement, but the appellant’s obligation to provide those estimates was intended to benefit the respondents “who are to be provided with them, to assist in coal procurement and planning, and with a view, inter alia, to providing the Participants with the flexibility to acquire low cost coal under contract”.  The primary judge then reasoned (at [164] of the 2018 reasons):

“That does not require the conclusion that the Upper Estimate and Lower Estimate are to be converted to monthly amounts, in Contract Year 1, contrary to the express provision of Schedule 8 Part 1, and must be then taken to increase the financial risk to the Participants of CS Energy varying from the forecasts in the Station Annual Forecast and the Commitment and Dispatch Estimates. It is one thing to say that CS Energy may have the right to dispatch bids at variance from its forecasts of dispatch, except as constrained by the provisions of the 2009 IPPA. It is another to say that the Participants took the financial risk that CS Energy might do so, at least to the extent of the range between the Upper Estimate and the Lower Estimate for the relevant Contract Year 1.”

  1. [111]
    The primary judge addressed (at [168]-[175] of the 2018 reasons) the issue of whether the reference to Station Annual Forecast used in clauses 23.5(a)(i), 23.5(b)(i) and 23.5(c)(i) took into account the upper estimate and the lower estimate, concluding that in each case the reference was to a single figure and not a range.  The primary judge analysed (at [168] of the 2018 reasons) the process for the purchase of additional coal for GPS through a bidding process, noting that the process may be initiated by the appellant under clause 23.5(a) or by the respondents under clause 23.5(b), but the process was then regulated by clause 23.5(c).  The primary judge then noted (at [168]) that it was of importance that, by clause 23.5(d), if the process was started by the appellant, it may require the respondents to enter into a binding contract to acquire coal from a bidding supplier, but otherwise the respondents have the power to decide on any contract of supply of coal.  The primary judge noted (at [169]) the contextual consideration that it is a “shortfall” that leads to a meeting request under clause 23.5(a)(i) or to a notification under clause 23.5(b)(i) that leads possibly to a request for bids for a supply of additional coal for a term of five to 12 years with a 10 per cent flexibility in the average annual rate of delivery under clause 23.5(c)(ii).
  2. [112]
    The focus of this part of the 2018 reasons was on clause 23.5(c)(i).  The primary judge set out (at [171]-[172]) two reasons for why the reference to Station Annual Forecast in clause 23.5(c)(i) did not include a dispatch up to the upper estimate or down to the lower estimate for Contract Year 1 of the Station Annual Forecast.  The first reason (at [171]) was the structure of stockpile forecasts that were to be made for monthly intervals in both the Annual Coal Procurement Plan and the Monthly Coal Procurement Plan would encounter the problem (identified at [152] of the 2018 reasons) of converting the annual upper estimates and the annual lower estimates to a monthly basis, in order to be able to take either estimate into account to assess whether the proposed additional coal purchase would result in the Actual Coal Stockpile exceeding 450,000 tonnes.  The second reason (at [172]) was that “if both the Upper Estimate and the Lower Estimate were taken into account, the forecast Actual Coal Stockpile level would be a range, whereas clause 23.5(c)(i) assumes that a single level will be the result”.
  3. [113]
    The primary judge explained (at [174] of the 2018 reasons) as to the shortfall that initiates action under clause 23.5:

“Under the 2009 IPPA, the coal intended to meet the Station Annual Forecast is that forecast in the Annual Coal Procurement Plan and the Monthly Coal Procurement Plans, as previously discussed. The postulated shortfall is between that coal and the (arranged deliveries of) coal under contract to the Participants.”

  1. [114]
    For similar reasons to those relied on by the primary judge (at [171 of the 2018 reasons) in construing clause 23.5(c)(i), the primary judge concluded (at [175]) that the references to meeting the Station Annual Forecast in clause 23.5(a)(i) and clause 23.5(b)(i) do not refer to meeting the upper estimate or the lower estimate.

Failure to apply the definition of Station Annual Forecast

  1. [115]
    Grounds 1, 2 and 3(a) in each appeal are addressed in the appellant’s submission that the primary judge failed to give Station Annual Forecast its defined meaning, where Station Annual Forecast is used in clauses 23.4A(b), 23.4A(c), 23.5(a)(i), 23.5(b)(i) and 23.5(c)(i).
  2. [116]
    The appellant submits that the primary judge erred in failing to apply the orthodox approach, as was done in Sagasco, to the use of a defined term and give Station Annual Forecast its defined meaning.
  3. [117]
    First, as the primary judge ultimately dealt with the issue in relation to clause 23.4A(b) on the basis of the respondents’ concession in declining (at [24] of the 2020 reasons) to order the declaration as to the construction of that clause consistent with the concession, it is not necessary to consider this topic in relation to clause 23.4A(b).
  4. [118]
    Second, as the defined meaning of Station Annual Forecast applies only if the context does not otherwise require, it is necessary to construe the defined term in each of the relevant clauses to ascertain whether the context otherwise requires.
  5. [119]
    Third, it is relevant to consider the nature of the definition of Station Annual Forecast in the annex that relies on clause 5A.3(b).  The meaning given to Station Annual Forecast in the annex is “a forecast containing the material prescribed by Clause 5A.3(b)”.  The obligation on the appellant under that clause is to ensure that the Station Annual Forecast includes the information set out in subparagraphs (i) to (v).  The defined term therefore is a forecast that sets out the information that is required to be included by clause 5A.3(b) in the forecast.  The defined term therefore has many parts.  It is an unusual aspect of the meaning given to the defined term that clause 5A.3(b)(ii) provides for one piece of information to be included in the forecast for an identified purpose.  This is a reference to the words in parentheses at the commencement of that subparagraph to the effect that the information in that subparagraph is “in order to assist in coal procurement and planning”.  It is conceivable, therefore, that if some of the information in the forecast is not relevant to the purpose of a particular clause, then the Station Annual Forecast might apply to that particular clause without regard to the information that was not relevant to that clause.
  6. [120]
    The issue that was formulated before the primary judge by the appellant and the respondents was whether Station Annual Forecast, when used in certain clauses, includes the upper and lower estimates of dispatch of GPS on an annual basis.  The question therefore posed for the primary judge started at the point of whether the context of the particular clause required Station Annual Forecast to be given its defined meaning, in the sense of making the information in the forecast specified in clause 5A.3(b)(ii) relevant for the purpose of the particular clause.  The formulation of the issue was reflected in the form of the declaration made by the primary judge in proceeding 13392 of 2017.
  7. [121]
    The appellant’s submission that a neutral consideration cannot require the rejection of a defined meaning and the application of a different meaning does not address the issue raised by a defined term that means a forecast containing the information listed as part of the forecast.  The issue raised by the use of such a defined term in a particular clause is whether the defined term incorporates all the information in the list.  It is not a question of applying a “different” meaning, but of discerning whether the context of the particular clause requires otherwise than reference to all the information listed in the forecast.  The passage from Herzfield and Prince, Interpretation at [21.20] on which the appellant relies is not applicable to this type of definition.
  8. [122]
    The short answer to the appellant’s submission that the primary judge failed to apply the orthodox approach to the use of the defined term is that the definition of Station Annual Forecast was not an orthodox definition that was amenable to the orthodox approach of substituting the full meaning for the defined term without considering the nature of the defined term and whether the context required otherwise than the incorporation of all the pieces of information included in the defined term.
  9. [123]
    The primary judge approached the question of the construction of Station Annual Forecast in clauses 23.4A(c), 23.5(a)(i), 23.5(b)(i) and 23.5(c)(i) by considering whether the context and purpose of each of the clauses required the reference to Station Annual Forecast to include the information in clause 5A.3(b)(ii) which was, in fact, the question posed by the appellant for the primary judge to answer.  It was an appropriate question in view of the nature of the definition of Station Annual Forecast.  In the circumstances, there was no error in the primary judge’s approach to the use of the defined term.

Failure to interpret clause 23.4A(c) consistently with clause 23.4A(b) and failure to distinguish clauses 23.4A(e) and (f) and clause 23.4B

  1. [124]
    The respondents conceded before the primary judge that the reference to Station Annual Forecast in clause 23.4A(b) includes the upper and lower estimates, but the primary judge did not refer to that concession in [146]-[164] of the 2018 reasons that dealt with clauses 23.4A(b) and (c).  The appellant submits the primary judge proceeded to interpret clause 23.4A(c) inconsistently with that concession and treated clauses 23.4A(e) and (f) and clause 23.4B as dominant in ascertaining the meaning of Station Annual Forecast in clause 23.4A(c).
  2. [125]
    In paragraph 1 of the amended originating application filed in proceeding 761 of 2018, the appellant  sought a declaration that Station Annual Forecast for the purposes of each of clauses 5A.4(c), 23.4A(b), 23.4A(c), 23.4B(a), 23.4B(b), 23.5(a)(i), 23.5(b)(i) and 23.5(c)(i) means all the material prescribed by clause 5A.3(b) and contained in the current Station Annual Forecast and includes the upper and lower estimates of dispatch of GPS on an annual basis described by clause 5A.3(b)(ii).  The primary judge noted (at [23] of the 2020 reasons) the reliance of the appellant on the respondents’ concession that Station Annual Forecast in clause 23.4A(b) of the IPPA includes the upper estimate and the lower estimate and that the respondents are required to take into account the Station Annual Forecast (including the upper estimate and the lower estimate) when preparing the Annual Coal Procurement Plan.  The primary judge concluded (at [24] of the 2020 reasons), however, that it was not necessary to make the form of declaration sought by the appellant in respect of clause 23.4A(b) on the basis that it was not the subject of dispute at the hearing of the application.
  3. [126]
    The respondents’ concession before the primary judge was made in their written submissions and orally.  It is relevant to note paragraphs 66 and 68 of those written submissions where the respondents use their own term of “primary forecast” for the information described in clause 5.3A(b)(i) as “the anticipated level of dispatch of GPS on a sent-out basis”:

“66 It is common ground between the parties that, for the purposes of cl. 23.4A(b) of the IPPA, references to the SAF include the upper and lower estimates of dispatch.  This is because:

  1. (a)
    cl. 5A.3(b)(ii) provides that the upper and lower estimates are provided ‘in order to assist in coal procurement and planning’; and
  2. (b)
    cl. 23.4A(b) is concerned with the preparation of the ‘Annual Coal Procurement Plan’.

  1. For present purposes, the fact that cl. 23.4A(b) requires the Participants to take into account the SAF (including the upper and lower estimates) when preparing the Annual Coal Procurement Plan simply means that the upper and lower estimates are pieces of information to be considered by the Participants as part of their long-term planning.  In the ordinary course, these pieces of information are of far less relevance to the Annual Coal Procurement Plan than the primary forecasts.
  1. [127]
    The concession was also reflected in the respondents’ submission at paragraph 93(b) of their written submissions before the primary judge that no declaration should be made in terms of whether the reference to Station Annual Forecast in clause 23.4A(b) required the respondents to take into account the upper and lower estimates “as the issue it raises is not contentious”.  The concession was repeated in the oral submissions to the primary judge, when Mr Franco of Queen’s Counsel who appeared with Mr Clift of Counsel for the respondents stated in respect of clause 23.4A(b):

“… because it’s common ground that that first time it’s mentioned it does include the upper and lower estimates, and that’s because if you go to where the upper and lower estimates first appear in clause [5A.3(b)(ii)] you will see that that stage is to be provided in order to assist and help procurement [and] planning.”

  1. [128]
    There was no application made on this appeal by the respondents to withdraw that concession.  The respondents’ submission on the hearing of the appeal that the symmetry of wording between clause 23.4A(b) and clause 23.4A(f) suggests that in clause 23.4A(b) the Annual Coal Procurement Plan is taking into account the Station Annual Forecast for Contract Year 1 and not Contract Years 1 to 5 could possibly be construed as making a suggestion that is at odds with the submission made in paragraph 68 of the respondent’s written submissions before the primary judge.  The reality is that the Annual Coal Procurement Plan relates directly to Contract Year 1 of the Station Annual Forecast, so that the anticipated levels of dispatch, including the upper and lower estimates, for Contract Year 1 are directly relevant to the Annual Coal Procurement Plan.  The same information for Contract Years 2 to 5 may have a less direct bearing on the coal procurement planning for Contract Year 1, but nevertheless clause 23.4A(b) requires the information to be taken into account in preparing the Annual Coal Procurement Plan.  The respondents’ submission that clause 23.4A(b) does not require the respondents to take into account the Station Annual Forecast for Contract Years 2 to 5 should be ignored, as it is inconsistent with the concession made before the primary judge.
  2. [129]
    Clause 23.4A is concerned with the Annual Coal Procurement Plan that is prepared by 15 October of each year for the next Contract Year (as set out in paragraph (a)) and the Monthly Coal Procurement Plan prepared by the last Working Day of each Month for each of the next two Months (paragraph (e)).  Even though paragraphs (b) and (c) are both in clause 23.4A, the reference to Station Annual Forecast is for a different purpose in each paragraph.  Under clause 23.4A(b), the respondents acting in good faith in the preparation of the Annual Coal Procurement Plan (for the ensuing Contract Year 1) must take into account the Station Annual Forecast (that relates to that Contract Year 1 and the following four years).  The respondents are not required to do anything further under clause 23.4A(b) with the Station Annual Forecast.  One purpose of clause 23.4A(b) may be to ensure that the final Station Annual Forecast pursuant to clause 5A.6 (rather than the draft Station Annual Forecast that is provided by no later than 6 July in the same year) is taken into account due to the fact that it will be available only relatively shortly prior to the date by which the Annual Coal Procurement Plan must be prepared.  In any case, there are different time periods for the Annual Coal Procurement Plan that relates to the Contract Year 1 of the Station Annual Forecast and the terms of coal supply contracts which may exceed one year.  The planning of the supply for the Annual Coal Procurement Plan that applies to Contract Year 1 of the Station Annual Forecast may have commenced years earlier and certainly five years earlier when the ensuing Contract Year 1 that is the subject of the Annual Coal Procurement Plan under clause 23.4A(b) would have been Contract Year 5 in the Station Annual Forecast prepared at that earlier time.
  3. [130]
    In contrast to clause 23.4A(b), clause 23.4A(c) imposes a responsibility or an obligation on the respondents to manage, at their discretion, the overall supply of coal using Good Operating Practice “so that the Station Annual Forecast can be met”.  That requires more than consideration of the final Station Annual Forecast when preparing the Annual Coal Procurement Plan for the enduing Contract Year 1, but the meeting of a target.  (The nature of the target is the matter in issue between the parties on the construction of clause 23.4A(c)).
  4. [131]
    Before considering in greater detail whether the primary judge erred in construing the reference to Station Annual Forecast in clause 23.4A(c), there is the threshold issue raised by the appellant’s submissions on this appeal as to whether clause 23.4A(c) is directed to Contract Year 1 only or all five years covered by the Station Annual Forecast.  The appellant submits on this appeal that clause 23.4A(c) addresses “the longest time horizon” and that it must be at least the period covered by the Station Annual Forecast of the next five years.
  5. [132]
    The primary judge (at [142] of the 2018 reasons) expressly stated that the requirement under clause 23.4A(b) for the Annual Coal Procurement Plan to take into account the final Station Annual Forecast was “for the ensuing year” and that the references in clause 23.4A(c) were also directed to the ensuing Contract Year.  It is implicit, however, in the concession that was made by the respondents that the reference to Station Annual Forecast in clause 23.4A(b) included the upper and lower estimates and should be considered by the respondents as “part of their long-term planning” that it meant the respondents should take into account the Station Annual Forecast for more than the ensuing Contract Year 1 when preparing the Annual Coal Procurement Plan.
  6. [133]
    The threshold issue may have no real consequence, as for any particular year the question of whether the supply of coal enables the Station Annual Forecast to be met will be determined by the Station Annual Forecast for that year.  Because the Station Annual Forecast is prepared annually, there is a new Contract Year 1 for each Station Annual Forecast.  In the context that clause 23.4A focuses on the preparation of the Annual Coal Procurement Plan for the ensuing Contract Year 1, the responsibility of the respondents to manage the overall supply of coal, so that the Station Annual Forecast can be met, must relate to Contract Year 1 for each Station Annual Forecast.  That is also consistent with the fact that the Station Annual Forecast under clause 5A.3(b)(i) sets out the anticipated level of dispatch for Contract Year 1 on a Monthly basis, but such levels are required for each of Contract Years 2 to 5 only on “an indicative yearly basis”.
  7. [134]
    The primary judge’s analysis otherwise as to why Station Annual Forecast does not extend to the upper estimate and lower estimate in clause 23.4A(c) is based on the lack of any monthly upper estimate or monthly lower estimate in the form in Schedule 8 Part 1 for Contract Year 1 and the lack of any provision in the IPPA complementing clause 23.4A(c) to explain how a range of estimates is to be met.  The flaw in the appellant’s submissions, as was identified by the primary judge (at [154] of the 2018 reasons), is that they focus on the upper estimate and submit clause 23.4A(c) requires the respondents to comply with the upper estimate of the anticipated level of dispatch, but have no explanation for how the lower estimate could also be met.  The primary judge also referred (at [155] of the 2018 reasons) to the context of the operation of clause 23.4B and paragraph 10.11 of Schedule 16 (referred to by the primary judge as clause 10).
  8. [135]
    The fact that the primary judge did not refer to the respondents’ concession as to clause 23.4A(b) when construing the reference to Station Annual Forecast in clause 23.4A(c) would only be relevant, if that concession made a difference to the construction otherwise given to clause 23.4A(c).
  9. [136]
    The appellant relies on the following textual indications that the primary judge’s construction of Station Annual Forecast in clause 23.4(c) is incorrect.  In contrast to clause 23.4A(c) where the expression Station Annual Forecast is used without isolating any part of it, paragraphs (e) and (f) of clause 23.4A do not use Station Annual Forecast at all and clause 23.4B isolates that part of the Station Annual Forecast that is relevant for the purpose of the relevant paragraph.  The reference in clauses 23.4B(a)(i), 23.4B(a)(ii)(A) and 23.4B(b)(i) is to “the anticipated levels of dispatch as disclosed in the Station Annual Forecast” and the reference in clauses 23.4B(a)(ii) and 23.4B(b)(ii) is to “the level of dispatch identified in the Station Annual Forecast”.  The appellant therefore submits that the difference in context and language in clauses 23.4A(e), 23.4A(f) and 23.4B should not result in the expression Station Annual Forecast in clause 23.4A(c) not extending to the information specified in clause 5A.3(b)(ii).
  10. [137]
    The respondents submit that not too much emphasis should be given to the textual considerations relied on by the appellant, as clause 23.4B is a more detailed provision than clause 23.4A which explains the more expansive language used in clause 23.4B and there are, in any case, inconsistencies within clause 23.4B in the language used to refer to the anticipated levels of dispatch as disclosed in the Station Annual Forecast.  In addition there is different language used in other parts of clause 23.4C and 23.5 which suggests “looseness in language” in the references within clause 23 to the Station Annual Forecast.  The respondents refer to “the Total Contract Energy portion of the Station Annual Forecast” in clause 23.4C(a) where there is no such information in the Station Annual Forecast, the reference to “to meet a projected shortfall in the amount of coal under contract to meet Station Annual Forecast” in clause 23.5(a)(i) and the reference to “if GPS was dispatched in accordance with the Station Annual Forecast (including any approved Allowed Adjustment)” in clause 23.5(c)(i).
  11. [138]
    Despite the inconsistencies in language relied on by the respondents, it must be taken into consideration that clause 23.4A(c) refers merely to “the Station Annual Forecast” when other provisions within cause 23.4B refer specifically to the anticipated levels of dispatch (or similar term) disclosed in the Station Annual Forecast.  The textual indications identified by the appellant as favouring its construction of Station Annual Forecast in clause 23.4A(c) are therefore relevant on the question of construction, but have to be weighed against the other indications within the text that favour the primary judge’s conclusion.  One of those indications was the operation of clause 23.4B.  This clause was inserted at the same time as clause 23.4A and is linked to clause 23.4A which provides in paragraph (f) for the Revised Monthly Coal Stockpile Forecast that is the trigger for the management of the coal stockpile pursuant to clause 23.4B.  Clause 23.4A(g) then makes the connection with clause 23.4B even more overt by acknowledging the parties’ intention to maintain the coal stockpile within the Acceptable Coal Stockpile Range that is then achieved by the operation of the rules set out in clause 23.4B.
  12. [139]
    On this appeal, the parties made differing submissions on the relationship between clause 23.4A and clause 23.4B that raised an issue that was not decided by the primary judge.  This is the issue of whether the respondents could be in breach of clause 23.4A(c) if they otherwise comply with the rules for coal stockpile management pursuant to clause 23.4B.  In fact, the respondents assert that clause 23.4B contains the machinery that gives effect to, and informs, clause 23.4A.  That was not a finding made by the primary judge.  As the submissions made by the parties on this aspect of whether clause 23.4A(c) contains an obligation independent of compliance with clause 23.4B were incidental to the submissions made on the issue of construction of Station Annual Forecast in clause 23.4A(c) without exploring fully the implications of the parties’ respective positions on this aspect of the relationship between clause 23.4A and clause 23.4B, it is not appropriate to express a definitive view on this issue that was not strictly the subject of the appeal.  It is also not necessary to resolve this issue, in order to deal with the construction of Station Annual Forecast in clause 23.4A(c).
  13. [140]
    On either view of the relationship between clause 23.4A and clause 23.4B, the maintenance of the coal stockpile is relevant to the respondents’ obligation to manage the overall supply of coal so that the Station Annual Forecast can be met.  The fact that the Annual Coal Procurement Plan for Contract Year 1 is modified throughout that Contract Year through the preparation of the Monthly Coal Procurement Plan for the next two Months of Contract Year 1 which includes the Revised Monthly Coal Stockpile Forecast by reference to the anticipated levels of dispatch disclosed in the most recent Commitment and Dispatch Estimate in respect of which no reference is made to the upper estimate or the lower estimate is compelling for construing Station Annual Forecast in clause 23.4A(c) as not extending to the upper estimate or the lower estimate for Contract Year 1: see [156] of the 2018 reasons.  That is also consistent with the qualification in clause 5A(b)(ii) that the upper estimate and lower estimates of dispatch of GPS on an annual basis is for the purpose of assisting in coal procurement and planning rather than being characterised as some type of compulsory obligation.  The omission of the primary judge to take into account the respondents’ concession in respect of the construction of clause 23.4A(b) does not detract from the reasoning that resulted in the primary judge’s conclusion in respect of the construction of clause 23.4A(c).

Good Operating Practice

  1. [141]
    The appellant submits that the primary judge failed to address the significance of the use in clause 23.4A(c) of Good Operating Practice which is defined extensively in the annex.  Before listing specific aspects of Good Operating Practice of taking reasonable steps to ensure the matters set out in paragraphs (a) to (f) of the definition, Good Operating Practice is defined in the annex to mean “the practices, methods and acts engaged in or approved by electricity generating, transmission and power system operation undertakings (whether private or public) in Australia that, at the relevant time and in the exercise of reasonable judgment in light of the facts known or that reasonably should have been known at the time a decision is made, would be expected to accomplish the desired result in a manner consistent with law, regulation, reliability, safety, environmental protection, economy and expedition”.  The definition also provides expressly that Good Operating Practice “is not intended to be limited to the optimum practice or method to the exclusion of all others, but rather to be a spectrum of reasonable and prudent practices, methods and acts”.  The appellant argues that the use of that defined expression is not surplusage and it should be given substantive effect.
  2. [142]
    The words “Good Operating Practice” are not surplusage, as they set the standard and method of operation that the respondents must apply to all aspects of their operation.  The use of those words to apply to the respondents’ management of the overall supply of coal does not assist, however, in resolving the disputed construction of “Station Annual Forecast” in clause 23.4A(c), as they apply to the respondents’ responsibility under that clause whether the term incorporates the upper and lower estimates or not.

The significance of “so that the Station Annual Forecast can be met” in clause 23.4A(c)

  1. [143]
    The focus on the requirement in clause 23.4A(c) of the responsibility of the respondents to manage the overall supply of coal using Good Operating Practice “so that the Station Annual Forecast can be met” is the subject of grounds 1, 2 and 3(f) in each appeal.  This ground challenges the finding made by the primary judge (at [156] of the 2018 reasons) that the respondents’ obligation under clause 23.4A(c) in conjunction with the respondents’ obligation in preparing and providing the Monthly Coal Procurement Plan is to take into account pursuant to clause 23.4A(f) “the anticipated levels of dispatch as disclosed in the most recent Commitment and Dispatch Estimate” and “the Monthly Coal Procurement Plan does not call for a range of estimates to be provided to meet the Station Annual Forecast”.
  2. [144]
    The appellant submits that the primary judge’s analysis overlooks the use of the words “can be” in the expression “so that the Station Annual Forecast can be met”.  The appellant submits these words are directed at capacity or ability to meet the Station Annual Forecast in the future or over the long term.
  3. [145]
    This argument of the appellant has no force when it is apparent that clause 23.4A(c) is concerned with whether the Station Annual Forecast can be met in Contract Year  1.  It makes no difference to that conclusion whether the focus is on the word “met” or the words “can be met”.
  4. [146]
    The respondents submit that it is unlikely the parties intended that the upper and lower estimates of dispatch for Contract Year 1 must be met by the respondents, where there is no detail in the relevant clauses on how the obligations could be met in relation to both the upper estimate and the lower estimate:  see [154] of the 2018 reasons.
  5. [147]
    The primary judge’s conclusion (at [156] of the 2018 reasons) that the word “met” is consistent with a discrete figure rather than a range bounded by the upper and lower estimates for the anticipated level of dispatch in Contract Year 1 is soundly based in an analysis of the context and purpose of clause 23.4A(c), even allowing for the contrary construction of the reference to Station Annual Forecast in clause 23.4A(b) in accordance with the respondents’ concession made in respect of clause 23.4A(b) due to the different purpose of paragraph (b).

Background facts concerning coal supply contracts

  1. [148]
    The appellant acknowledges that the primary judge recorded correctly (at [41] of the 2018 reasons) that at the time the parties executed the amended IPPA in 2009, the respondents had (to Stanwell’s knowledge) two contracts on foot for the supply of coal to GPS and also referred (at [18] of the 2018 reasons) to the two contracts for the supply of coal which were referred to in the IPPA itself at clause 23.2.  The 2005 Rolleston contract was for a term from 1 October 2005 to 31 December 2012 that was later extended to 31 March 2015 and the 2009 Callide contract was for a period of three years from 1 January 2011.  The appellant notes, however, that the primary judge did not advert to the fact that at least three of those contracts provided for the option of additional coal deliveries above the base tonnage.  The appellant submits the existence and terms of these contracts are relevant, as they established that there were known methods of contracting over an extended term to secure the right to additional coal deliveries over and above base tonnages should that be required.
  2. [149]
    The respondents note that there were only two coal procurement contracts on foot when the 2009 IPPA was executed and under these the respondents were locked into purchasing a minimum of 3,350 ktpa of coal under the two contracts with an option to purchase a further 900 ktpa.  Under one contract which provided for flexible additional tonnage up to 400 ktpa, the respondents had to identify that they would take the additional tonnage six months in advance of the Calendar Year which was before the date for finalisation of the Station Annual Forecast for the ensuing Contract Year 1.  The other contract allowed the respondents to elect to take one or two 250 ktpa increments, but only three months in advance of the Calendar Year which was within two weeks of the final Station Annual Forecast being available and required the respondents to nominate the actual quarter in which any portion of the option tonnage would be delivered three months before the quarter started.  The respondents therefore submit that the options offered no ability to respond within Contract Year 1 to variances in actual dispatch.
  3. [150]
    As clause 23.4B shows (consistent with the construction given to paragraphs (a) and (b) by the primary judge in the declaration made as a result of the 2018 reasons, the circumstances resulting in additional purchases of coal by the respondents are unrelated to the upper and lower estimates for the current Contract Year.  The existence of long term coal supply contracts at the time the amendments were made in 2009 to the IPPA and the fact that the parties were aware of the possibility of the respondents’ exercising an option for relatively modest additional coal deliveries, but not necessarily for Contract Year 1, does not assist in the construction of clause 23.4A(c) in resolving whether the upper estimate and lower estimate were included in the reference to Station Annual Forecast for the ensuing Contract Year 1.

Reasoning as to risk

  1. [151]
    The appellant refers to [154] and [164] of the 2018 reasons where the primary judge referred to what he described as the “financial risk” to the respondents of having to cater for a range between the upper and lower estimates, if the appellant’s construction of clause 23.4A(c) were correct.  The appellant asserts that it is implicit in this reasoning that the primary judge concluded that the respondents were unlikely to have agreed to take on that financial risk.  This is not a fair characterisation of the primary judge’s reasons (at [164]), as the primary judge makes a mere observation (at the conclusion of [164] of the 2018 reasons) directed at the consequence for the allocation of risk, if the appellant’s construction were correct.  In any case, it is a small point only and the primary judge’s observation is not critical to the primary judge’s reasoning.

Other provisions relied on by the appellant

  1. [152]
    The appellant relies on indications in other provisions in the IPPA which it submits support its interpretation that the reference to Station Annual Forecast in clause 23.4A(c) includes the upper and lower estimates.  The appellant relies on the reference in clause 5A.3(b)(ii) to the purpose of the annual estimates being “to assist in coal procurement and planning” which corresponds with the subject matter of clause 23.4A(c).  As explained above, there is a distinction between information being provided for that purpose to assist in that process and information being used as the basis of a binding obligation.
  2. [153]
    The appellant also relies on clause 23.3(a), Schedule 13, clause 23.4A(d)(i), clause 23.4A(g), clause 10.11 in Schedule 16, clause 23.5(e)(i) and clause 23.5(f) as either contemplating or consistent with accommodating a range of potential dispatch outcomes.  None of these provisions alone or in combination displaces the reasoning of the primary judge.

Relevance of purpose of clause 23.1

  1. [154]
    The appellant submits that the purposes set out in paragraphs (b) and (c) of clause 23.1 are inconsistent with a construction of clause 23.4A(c) that would allow the respondents to manage coal so as to allow only the monthly estimates in the Station Annual Forecast to be met.  The appellant submits the fact that clause 23.1 specifies other purposes that may pull in another direction (as described by the primary judge in [159] of the 2018 reasons) does not alleviate the inconsistency on which the appellant relies.  The appellant’s submission on this aspect loses force when the focus of clause 23.4A(c) is on Contract Year 1.

Conclusion on the construction of Station Annual Forecast in clause 23.4A(c)

  1. [155]
    During submissions, the appellant described the Station Annual Forecast as part of a “symbiotic process” for the exchange of information between the parties to permit the larger purposes of the IPPA to be achieved.  That is an apt description, but it does not determine the construction issue in respect of clause 23.4A(c).
  2. [156]
    The appellant has not shown that there was any error in the primary judge’s conclusion that the reference to Station Annual Forecast in clause 23.4A(c) did not include a reference to the upper estimate or the lower estimate of anticipated levels of dispatch for the ensuing Contract Year 1.

Whether the primary judge erred in not making a declaration in respect of the respondents’ concession on clause 23.4A(b)

  1. [157]
    I set out at [126]-[127] above the concession the respondents made before the primary judge in written and oral submissions to the effect that the reference to Station Annual Forecast in clause 23.4A(b) includes the upper and lower estimates. 
  2. [158]
    I set out at [125] above a summary of the reasons given by the primary judge (at [23]-[24] of the 2020 reasons) for why the primary judge refused to make the declaration sought by the appellant in respect of clause 23.4A(b).
  3. [159]
    The appellant submits that the declaration was warranted on the basis that there had been a dispute between the parties prior to the hearing before the primary judge over an extended period during which the respondents denied they were obliged to take the upper and lower estimates into account in the preparation of the Annual Coal Procurement Plan.  The appellant does not contend now that concession that was made by the respondents did not put an end to that particular dispute before the primary judge.  The appellant submits, however, that if the declaration were made, it would ensure the dispute did not re-emerge and that is particularly relevant given the long term of the IPPA and the possibility that, without a declaration, there was no impediment to future officers of the respondents who may have no historical knowledge of the concession made by the respondents in this litigation resiling from the concession.  The appellant also submits that the respondents’ argument on clause 23.4A(b) on this appeal suggests that the respondents are seeking to retract the concession as to the meaning of Station Annual Forecast in clause 23.4A(b).
  4. [160]
    First, the fact of the respondents’ concession is a matter of public record, as it is set out in the 2020 reasons and these reasons.
  5. [161]
    Second, although there were indications in their submissions on this appeal that the respondents were suggesting an approach to the meaning of Station Annual Forecast in clause 23.4A(b) that did not reflect fully the concession made before the primary judge, they fell short of resiling from the concession made before the primary judge.
  6. [162]
    There was no error on the part of the primary judge in refusing to make a declaration in respect of the construction of clause 23.4A(b) that was conceded before the primary judge.

Clauses 23.5(a)(i), 23.5(b)(i) and 23.5(c)(i)

  1. [163]
    In endeavouring to show that the primary judge erred in concluding that the reference to Station Annual Forecast in each of clauses 23.5(a)(i), 23.5(b)(i) and 23.5(c)(i) did not extend to the upper and lower estimates of dispatch, the appellant relies on its submissions that the primary judge did not adopt the correct approach to the use of the defined term of Station Annual Forecast in clause 23.4A(c).  In addition, the appellant emphasises that there was no attempt in the relevant paragraphs of clause 23.5 to isolate a particular part of the definition of Station Annual Forecast.  The appellant also relies on the subject matter of clause 23.5 to assert that clause 23.5 is addressing a “longer time horizon” and “broader scale”.  The appellant does not challenge, however, the primary judge’s interpretation of “shortfall” set out in [174] of the 2018 reasons.
  2. [164]
    The respondents embrace the reasons of the primary judge (at [168]-[175] of the 2018 reasons) for concluding that in each of the paragraphs of clause 23.5 the reference to Station Annual Forecast was to a specific figure for the anticipated level of dispatch and not the range between the upper estimate and the lower estimate.
  3. [165]
    I have rejected the appellant’s assertion that the primary judge did not adopt the correct approach to the use of the defined term.  The textual consideration relied on by the appellant that reference is made in these paragraphs of clause 23.5 to Station Annual Forecast and not to the anticipated levels of dispatch disclosed in the Station Annual Forecast has to be taken into account with the indications inconsistent with that textual consideration, particularly as explained by the primary judge at [171] of the 2018 reasons, which were relied on by the primary judge to construe the reference to Station Annual Forecast in these paragraphs of clause 23.5 as not extending to the upper estimate and lower estimate of the anticipated level of dispatch.
  4. [166]
    The key to the primary judge’s approach in construing clause 23.5 was to consider it in the context that it was triggered as a result of information that was produced for the purpose of Contract Year 1 of the Station Annual Forecast.  The appellant is not correct when it describes clause 23.5 as addressing a longer time horizon or broader scale, as each of the events that may trigger a meeting under clause 23.5(a)  to identify prospective coal supply options or action under clause 23.5(b) by the respondents to seek bids for coal for GPS relate to Contract Year 1 of the Station Annual Forecast.
  5. [167]
    The first event is a projected shortfall in the amount of coal under contract to meet the Station Annual Forecast.  The primary judge referred (at [174] of the 2018 reasons) to the meaning of “shortfall” in clause 23.5(a)(i) as determined by comparing the anticipated deliveries of coal set out in the Annual Coal Procurement Plan that applies to Contract Year 1 pursuant to clause 23.4A(d)(i) that is modified by the Monthly Coal Procurement Plan with the coal that is intended to be used to meet the anticipated levels of dispatch during the same period as disclosed in the Commitment and Dispatch Estimate that results in the Revised Monthly Coal Stockpile Forecast.  The second event is to meet an Allowed Adjustment under clause 5A.9 which pursuant to clause 5A.7 relates to Contract Year 1 of the Station Annual Forecast.  The third event is to meet the requirements of clause 23.4B.  Subparagraph (iii) of clause 23.5(a) appears to provide for a separate event.  As pointed out in the respondents’ submissions, it is apparent when a comparison is made with clause 23.5(b) that the words “in a manner that best meets the objectives mentioned in Clauses 23.1(b) and 23.1(d)” should be read as the concluding part of subparagraph (ii) of clause 23.5(a) and not as a separate subparagraph.
  6. [168]
    It does not detract from the primary judge’s conclusion that clause 23.5 focused on Contract Year 1 of the Station Annual Forecast that clause 23.5(c)(ii) proposes, unless the parties otherwise agree, that bids for the supply of coal are based on contract terms such that the supply is for a period in the range of five to 12 years.  That is consistent with the long term of the IPPA.  As the respondents also pointed out, the reference to flexibility in the annual rate of delivery of at least 10 per cent less than or greater than the average annual rate of delivery for the contract terms for the coal bids is concerned with the variance in the rate of delivery and not the variance in the tonnage of coal supplied.
  7. [169]
    Because of the relationship between clause 23.4B and clause 23.5, the conclusion of the primary judge that the reference to “the anticipated levels of dispatch as disclosed in the Station Annual Forecast” and “the level of dispatch identified in the Station Annual Forecast” in clause 23.4B did not include a reference to the upper estimates or the lower estimates is also relevant in construing the reference to Station Annual Forecast in clause 23.5.
  8. [170]
    A consideration of the language of clause 23.5 in context does not support the appellant’s approach to treating clause 23.5 as applying to events over a much longer time period than those specified in clauses 23.5(a)(i) and clause 23.5(b)(i).  When it is understood that clause 23.5 applies to Contract Year 1 of the Station Annual Forecast, the primary judge’s analysis is compelling.  The appellant has failed to show the primary judge was in error in construing Station Annual Forecast clauses 23.5(a)(i), 23.5(b)(i) and 23.5(c)(i).

Available Coal Stockpile

  1. [171]
    In paragraph 5A of the application in proceeding 761 of 2018, the appellant sought the following:

“In the alternative to paragraph 5, a declaration that on the proper construction of the IPPA, where in clauses 23.4A and 23.4B:

  1. (a)
    there is reference to a coal stockpile forecast or a stockpile level forecast, that forecast is to be a forecast of the ‘Actual Coal Stockpile’ as defined in the IPPA;
  1. (b)
    there is a reference to a coal stockpile, that is a reference to the  ‘Actual Coal Stockpile’ as defined in IPPA.”
  1. [172]
    The relief was sought by the appellant in relation to the uncapitalised references to “coal stockpile forecast” in clauses 23.4A and 23.4B.  That expression was also used within clause 23.4A to produce defined terms, the meaning of which was based on “coal stockpile forecast”.  Those defined terms of “Projected Monthly Coal Stockpile Forecast” in clause 23.4A(d)(iii) and “Revised Monthly Coal Stockpile Forecast” in clause 23.4A(f) should therefore also be considered in dealing with the construction of  “coal stockpile forecast” in clauses 23.4A(d) and (f).
  2. [173]
    The expression “stockpile level forecast” is used in clauses 23.4B(a) and (b).  The expression “coal stockpile” is used in clauses 23.4A(g) and 23.4B(b) and (c).
  3. [174]
    There is a defined term in the annex of “Actual Coal Stockpile” which means “the amount of coal, in tonnes, that is held in a stockpile at GPS and which can be recovered from the stockpile using normal site facilities at a continuous rate sufficient to operate GPS at its [Net Maximum Capacity]”.
  4. [175]
    For the reasons set out in [201]-[202] and [205]-[211] (but excluding the last sentence of [211]) of the 2018 reasons, the appellant submits that the declaration that was sought in paragraph 5A of its application should have been made.  The respondents in their notice of contention seek to affirm the primary judge’s reasons on alternative grounds that the parties objectively intended the references in clause 23 to the “coal stockpile” to be references to the entire stockpile, or alternatively, the issue would be more appropriately determined at trial, or alternatively, the declaration should have been refused on discretionary grounds.  The first alternative is based on evidence before the primary judge that identified factual matters of potential relevance to the construction of clause 23, without identifying the extent to which such matters were notorious or known to all parties.  The notice of contention provides particulars of the relevant evidence.  The second alternative, based on discretionary grounds, relies on an evidentiary matter that it was unclear whether the coal stockpile as measured and reported by the respondents was higher or lower or the same as the Actual Coal Stockpile and that the dispute raised by the relief sought in paragraph 5A was hypothetical.
  5. [176]
    Before addressing the parties’ submissions on this topic, it is appropriate to refer to how the parties dealt with this topic before the primary judge.
  6. [177]
    The respondents submitted to the primary judge that, as the definition of Actual Coal Stockpile was amended at the same time that clause 23.4B was introduced into the IPPA in 2009, the construction of coal stockpile forecast and stockpile level forecast should proceed on the basis that there was an intentional use of different language in clauses 23.4A and 23.4B.  The respondents also relied on the fact that from the respondents’ perspective the coal represented working capital that carries with it holding costs and there was a financial incentive for the respondents not to have any more coal in the stockpile than necessary.
  7. [178]
    On a practical level, the respondents also submitted that there was an existing contractual obligation under clause 3.1(b) of schedule 3 to the IPPA to include in the Weekly Available Forecast the then current Actual Coal Stockpile.  The respondents relied on the evidence before the primary judge in the affidavit of Mr C C Windsor who was the Superintendent Production Commercial & Engineering of GPS employed by the operator who reviewed the operator’s documents from 2009 and expressed the view at paragraph 55 of his affidavit that “the reporting of surveyed or estimated coal stock quantities at that time was on the basis of the entire coal stock with no allowance or deduction for ‘unrecoverable’ or ‘unusable’ quantities”.  Mr Windsor also stated at paragraph 69 of his affidavit that the process of the weekly report pursuant to clause 3.1 of schedule 3 had been adjusted over time and was undertaken by teleconference, there was no deduction or allowance for unusable coal and the operator had never made reference to unusable coal in reporting coal stockpiles.
  8. [179]
    The appellant made limited submissions before the primary judge on this issue, relying on the fact that clauses 23.4A and 23.4B were directed towards coal to be used for generation and dispatch and it made no sense to measure a stockpile which might contain a significant proportion of coal which would be excluded under the definition of Actual Coal Stockpile.
  9. [180]
    The focus of the parties’ submissions on the appeal were on [201]-[212] of the 2018 reasons, but that section of the reasons has to be read in the light of the section of the 2018 reasons (at [101]-[109]) in which the primary judge commenced the analysis of clause 23.4B and the purpose of coal stockpile management.
  10. [181]
    The primary judge observed (at [101] of the 2018 reasons) that clause 23.4B “represents an allocation of responsibility for maintaining the coal stockpile within an identified range of tonnes of coal” and that there was no corresponding provision in the 1994 IPPA.  The primary judge noted (at [104]) that the aim of maintaining the stockpile within the Acceptable Coal Stockpile Range is supported by the operation of the provisions relating to the Stockpile Incentive Payment. The primary judge noted (at [105]) the definition of Stockpile Level for the purpose of Schedule 16 which is “the end of month coal stockpile level based on a bi-monthly physical measurement on a tonnes basis as reported in the Operators Monthly Report”.  The primary judge summarised (at [106]) the respective ranges in the stockpile level that result in Stockpile Incentive Payments between the Parties calculated under paragraph 10.11 of Schedule 16:
  1. “(a)
    if the stockpile level is between 300,000 tonnes and 450,000 tonnes, a payment from the Participants to CS Energy;
  1. (b)
    if the stockpile level is between 450,000 tonnes and 600,000 tonnes, no payment by either party;
  1. (c)
    if the stockpile level is between 600,000 tonnes and 750,000 tonnes, payment from CS Energy to the Participants; and
  1. (d)
    if the stockpile level is between 750,000 tonnes and 900,000 tonnes, a higher payment from CS Energy to the Participants.”
  1. [182]
    The primary judge summarised (at [107] of the 2018 reasons) the effect of clause 23.4B where the stockpile level forecast is less than 300,000 tonnes or is greater than 800,000 tonnes.  The primary judge then concluded (at [108]-[109]):

[108] Clause 23.4B thus specifically provides for the parties’ respective responsibilities if the stockpile level forecast will fall outside the Acceptable Coal Stockpile Range within the next two months. In some circumstances, the responsibility to remedy the situation falls on CS Energy. In others, it falls upon the Participants.

[109] For present purposes, the significance is not in the detail of those respective rights or obligations but that the clause sets out a detailed code for the parties’ respective responsibilities and does so without there being any breach of contract. Similarly, the incentives provided for by the Stockpile Incentive Payment do not turn on any breach of contract.”

  1. [183]
    Although the appellant relies on [201]-[202] of the 2018 reasons, apart from a general statement in the first sentence of [201], [201] is concerned with the abandonment by the appellant of the relief sought in paragraph 5 of the amended originating application (in which the term “usable coal” was defined) and [202] merely recites the appellant’s submission.  It should be noted that the primary judge (at [203]-[204] of the 2018 reasons) rejected the appellant’s expert’s evidence (about the reporting of coal stocks by reducing the survey measured volumes of the stockpile at GPS by 10 per cent where there was no expert opinion or factual basis to support that factor of 10 per cent) as inadmissible for the purpose of construing clause 23.  There is no appeal against that ruling.
  2. [184]
    The primary judge then noted (at [205] of the 2018 reasons):

“Neither party adduced evidence as to whether measurements or forecasts of the coal stockpile made before the 1994 IPPA, or made after the 1994 IPPA but before the 2009 IPPA, included any practice of making any allowance for unusable coal or similar or that the parties knew of any such practice.”

  1. [185]
    This observation by the primary judge appears to be directed at the conclusion reached by Mr Windsor that was based on his review of the operator’s documents from 2009.
  2. [186]
    The primary judge referred (at [206]-[208] of the 2018 reasons) to the definition of “Actual Coal Stockpile”, that the defined term was used only in clause 3.1(b)(iii) (of Schedule 3 Part 1) and clauses 23.5(c)(i) and 30.6, and that the reference in clause 23.5(c)(i) was relevant to the question of the proper construction of the expressions “end of month coal stockpile forecasts”, “coal stockpile” and “stockpile level forecast”.
  3. [187]
    The primary judge expressed (at [209] of the 2018 reasons) a reservation as to whether the distinction argued by the respondents should be drawn between the meaning of “coal stockpile” in clause 23 otherwise and the meaning of Actual Coal Stockpile in clause 23.5(c)(i):

“In clause 23.5(c)(i), the question to be asked is whether additional coal would cause the Actual Coal Stockpile to exceed 450,000 tonnes. That is a forecast. I can see no obvious reason, having regard to the purpose of the respective provisions, why the parties would have intended to exclude coal that can’t be recovered at a continuous rate sufficient to operate GPS in clause 23.5(c)(i) but intended to include that coal in the meaning of “coal stockpile” when it is used elsewhere in clause 23.”

  1. [188]
    The primary judge rejected (at [210] of the 2018 reasons) the respondents’ argument that a reason for a different meaning of “coal stockpile” in clause 23 is that the stockpile maintenance incentives are related to notional holding costs that are indifferent to whether the coal can be recovered, stating (at [at 210]):

“The parties’ respective rights under clause 23.4B are not simply about notional holding costs. If anything, that is what the Stockpile Incentive Payment provided for in clause 10.11 of Schedule 16, previously discussed, is directed towards. But that provision uses the definition of “Stockpile Level” in clause 1.1 of Schedule 16, that specifically refers to the bi-monthly physical measurement on a tonnes basis as reported in the Operator’s Monthly Report, which is not used in clause 23.”

  1. [189]
    The primary judge then concluded (at [211] of the 2018 reasons):

“It does not follow, therefore, that the ‘coal stockpile’, or equivalent, referred to in clause 23, apart from the use of Actual Coal Stockpile in clause 23.5(c)(i), is necessarily to be addressed without regard to the recoverability of the coal in the stockpile, on a survey basis only.  But it also does not follow that some notional reduction of the quantity of the stockpile, as surveyed, is required based on an allowance for the amount of unusable coal that may be compacted into the pad below the stockpile.”

  1. [190]
    The primary judge’s view set out (at [212] of the 2018 reasons) was that the declaration sought by the appellant should not be made. 
  2. [191]
    The analysis (at [201]-[211]) suggests that, in the absence of evidence of what was known to the appellant’s predecessors and the respondents about the measurements or forecasts of the coal stockpile before the 2009 amendments to the IPPA, the primary judge was cautious about resolving the issue raised by paragraph 5A of the amended originating application in proceeding 761 of 2018 (which was a late addition to the application) as a matter of construction of the IPPA only.
  3. [192]
    On the hearing of this appeal, even though the respondents did rely expressly on [205], both parties tended to focus their attention on [211] of the 2018 reasons as the critical part of the primary judge’s reasoning in deciding not to make the declaration.  The issue raised by paragraph 5A was one issue amongst many issues that were being determined by the primary judge on the basis of the construction of the contractual documents without deciding any disputed questions of fact.  In this section of the primary judge’s reasons (at [201]-[212]), the conclusion (at [212]) depends on all the preceding analysis in that section of the reasons and, importantly, [205].  A fair reading of that section of the reasons reveals that the primary judge exercised the discretion to refuse to make the declaration sought by the appellant, because of the lack of evidence on relevant matters referred to in [205] which may have affected whether it was appropriate to construe clause 23.  This is similar to, but not identical with, the particulars of the first alternative basis relied on by the respondents in their notice of contention that the issue was more appropriately determined at trial.
  4. [193]
    The issue for the primary judge was therefore whether it was appropriate to make a declaration on the construction of clause 23 when there was potentially evidence that may have a bearing on whether that declaration was of utility.  In the circumstances, I am not satisfied that the appellant has shown there was an error in the primary judge’s decision not to make the declaration sought by the appellant on the basis of the material before the primary judge.

Order

  1. [194]
    Neither party made submissions on costs in their written outlines or at the hearing of the appeal or requested the opportunity to make submissions on costs after the outcome of the appeal was known.  In those circumstances, it is appropriate to dispose of the question of the costs of the appeal.  There is no reason why costs should not follow the event.  The order therefore should be:

Appeals dismissed with costs.

Footnotes

[1]Affidavit of CC Windsor, paragraph 49.

[2]Affidavit of CC Windsor, paragraph 50.

[3]The 2018 reasons [209].

[4]The 2018 reasons [206]-[210].

[5]The 2018 reasons [203].

[6]The 2018 reasons [204].

[7]Under r 483 of the Uniform Civil Procedure Rules 1999 (Qld).

Close

Editorial Notes

  • Published Case Name:

    CS Energy Limited v GPS Power Pty Limited & Ors

  • Shortened Case Name:

    CS Energy Limited v GPS Power Pty Limited

  • MNC:

    [2021] QCA 194

  • Court:

    QCA

  • Judge(s):

    Fraser JA, McMurdo JA, Mullins JA

  • Date:

    07 Sep 2021

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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