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- Unreported Judgment
SUPREME COURT OF QUEENSLAND
Wagners Cement Pty Ltd & Anor v Boral Resources (Qld) Pty Limited & Anor  QCA 79
WAGNERS CEMENT PTY LTD
ACN 126 029 481
WAGNERS QUEENSLAND PTY LTD
ACN 122 170 745
BORAL RESOURCES (QLD) PTY LIMITED
ACN 009 671 809
ACN 008 421 761
Appeal No 7375 of 2020
SC No 4294 of 2019
Court of Appeal
General Civil Appeal – Further Orders
Supreme Court at Brisbane –  QSC 124;  QSC 163 (Bond J)
23 April 2021
Heard on the papers
Fraser and Philippides JJA and Crow J
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – ISSUES AND COUNTERCLAIMS – FORM AND SETTLING OF COSTS ORDERS – where the appellants’ appeal and respondents’ cross-appeal each succeeded to some extent – where the parties were given leave to make submissions about the orders that are appropriate to give effect to the Court’s reasons – where the parties disagree about the amount of the monetary judgment that should be ordered against the first respondent in favour of the first appellant – where the parties are also in dispute about the order for costs – where the appellants submit that their measure of success in the proceeding, particularly in the substantial money judgment to which they are entitled, justifies an order that the respondents pay between 60 per cent and 75 per cent of the appellants’ costs of the entire proceeding – where the respondents submit that the appellants should be ordered to pay 80 per cent of the respondents’ costs of the trial and the appellants should either be ordered to pay 85 per cent of the respondents’ costs of the appeal or there should be no order as to the costs of the appeal – where the question of costs is to be decided by the exercise of discretion under the Uniform Civil Procedure Rules 1999 (Qld)
Uniform Civil Procedure Rules 1999 (Qld), r 681, r 766(1)(d)
Speets Investment Pty Ltd v Bencol Pty Ltd (No 2)  QCA 39, cited
J D McKenna QC, with D E F Chesterman, for the appellants
L F Kelly QC, with S Eggins, for the respondents
Norton Rose Fulbright Australia for the appellants
Herbert Smith Freehills for the respondents
 FRASER JA: The appellants’ appeal and the respondents’ cross-appeal each succeeded to some extent. The parties were given leave to make submissions about the orders that are appropriate to give effect to the Court’s reasons. The parties agree upon the form of orders 1-3, 5, and 8-9 set out at the end of these reasons. Orders 1-3 and 5 are appropriate to resolve the parties’ disputes about the proper construction and the application of provisions of a long-term contract between them for the supply of cement by the first appellant to the first respondent. It is appropriate also to make orders 8-9. The written submissions and affidavits referred to in those orders contain sensitive confidential information which, consistently with orders made at trial and for the hearing of the appeal, should not be published without further order.
- The parties disagree about the amount of the monetary judgment that should be ordered against the first respondent in favour of the first appellant. The parties are also in dispute about the orders for costs.
- The background to the litigation is summarised in the Court’s reasons for allowing the appeal and cross appeal, and it is set out in more detail in the trial judge’s reasons for judgment. It is necessary here to give only a broad (and thus necessarily imprecise) summary. A “take-or-pay” clause in the parties’ contract obliged the first respondent to pay for any shortfall in the first respondent’s purchase of a stipulated minimum quantity of cement during an “Agreement Year”. The first respondent was entitled to give the first appellant a “Pricing Notice” specifying a price at which it could purchase cement from a third-party supplier unrelated to the respondents. In response, the first appellant could elect to suspend supply. If the first appellant did not suspend supply within a stipulated time, the price payable by the first respondent would be reduced to the lower price stated in the Pricing Notice. If the first appellant did suspend supply, the resulting “Suspension Period” would endure for six months unless it was prematurely terminated. Premature termination would occur if the first respondent ceased to be able or chose not to procure supply from a third-party supplier unrelated to the respondents at the price specified in the Pricing Notice. The length of a Suspension Period would be substantially reflected in the length of an “Affected Period”, during which the first respondent would not be bound by the contractual take-or-pay obligation. There were ambiguities in those contractual provisions.
- The appellants claimed:
- (1)Damages for breach of contract, or monies payable under the Agreement, in any one of eight different amounts, ranging between about $4.8 million and about $11.66 million.
Each claimed amount was the first appellant’s pleaded quantification of the first respondent’s alleged take-or-pay liability in respect of the Agreement Year ending 30 June 2019 under one of the available permutations of possible decisions about the construction and application of the ambiguous contractual provisions. The parties agreed upon the quantification of each of the possible permutations which might result in a monetary judgment for the first appellant.
- (2)Declarations of right which, if granted, would negate the validity of contentions by the respondents that the appellants’ claim was not maintainable (or maintainable only in a reduced amount).
- The respondents defended the appellants’ claim and counter-claimed for declarations in its favour. The respondents did not make any monetary claim.
- The trial judge identified eight issues that had arisen between the parties. The same issues were relitigated on appeal, with the following results:
- (1)The first respondent’s purported Pricing Notice of 1 March 2019 was invalid when it was given (issue 1). (The trial judge’s finding to this effect was affirmed.)
- (2)The first appellant had not waived the defect in the purported Pricing Notice or elected to treat it as valid, with the consequence that the first appellant’s letter of 18 March 2019 did not create a Suspension Period (issue 2). (The trial judge’s finding to the contrary effect was set aside.)
- (3)It was not necessary to resolve the question whether that claimed Suspension Period was prematurely terminated (issue 3). (It was not necessary for the Court to consider the trial judge’s finding that the Suspension Period found by the trial judge was not prematurely terminated, but in the context of issue 6 the Court affirmed the trial judge’s construction of the relevant contractual provision and its application to the facts.)
- (4)The first respondent’s Pricing Notice of 1 April 2019 was valid (issue 4). (The trial judge’s finding that this Pricing Notice was invalid was set aside in accordance with the appellants’ concession that this Pricing Notice was valid if issue 2 was decided in the appellants’ favour.)
- (5)The first appellant’s notice of 1 May 2019 electing to suspend supply created a Suspension Period (issue 5). (The trial judge’s finding to contrary effect – that the Suspension Notice was invalid because of the invalidity of the Pricing Notice – was set aside in accordance with the appellants’ concession that this Pricing Notice was valid if issue 4 was decided in the respondents’ favour.)
- (6)The Suspension Period created by the first appellant’s notice of 1 May 2019 was not prematurely terminated (issue 6). (It was not necessary for the trial judge to decide this issue because of his decision upon issue 5.)
- (7)The first respondent’s Pricing Notice of 2 October 2019 was valid (issue 7). (The trial judge’s finding to this effect was affirmed.)
- (8)The Court rejected the first respondent’s alternative defence to the first appellant’s claim under the take-or-pay provision that the first appellant had suspended supply on 18 March 2019 in a way that was unauthorised and in breach of its contractual obligations (issue 8). (It was not necessary for the trial judge to decide this issue because of his finding upon issue 2.)
- In consequence of the trial judge’s resolution of issue 2–3, the trial judge found that despite the invalidity of the first Pricing Notice there was a Suspension Period of six months commencing on 18 March 2019 which was not prematurely brought to an end. There was therefore an Affected Period of a similar length. For that reason, the trial judge found that the appellants failed to establish any liability in the first respondent under the take-or-pay clause in respect of the only period under claim, the Agreement Year ending 30 June 2019. That was the most significant factor in the trial judge’s decision that the appellants should pay the respondents’ costs of the proceeding in the Trial Division.
- It is common ground that an effect of the Court’s reasons on appeal is that the first respondent incurred liability to the first appellant under the take-or-pay clause in the sum of $4,671,683.83 in respect of the Agreement Year ending 30 June 2019. The appellants submit that the first respondent should be ordered to pay that sum to the first appellant.
- The respondents submit that there should be a deduction of $2,481,364.50 to reflect the amount it overpaid the first appellant in respect of the Agreement Year ending 30 June 2020. The respondents adduced affidavit evidence to the following effect in support of their submissions upon this topic. The first respondent paid an amount for the Agreement Year ended 30 June 2020 calculated upon the footing that there was an Affected Period during that year between 1 July and 21 September 2019 as found in the trial judge’s judgment of 10 June 2020, but the Court’s reasons establish that the Affected Period was instead between 1 May and 22 October 2019. In consequence, instead of the first respondent’s liability for a take-or-pay penalty under the Agreement for the Agreement Year ending 30 June 2019 being zero, as had been determined by the trial judge, the first respondent’s liability for the take-or-pay penalty for that Agreement Year is $4,671,683.83. Another effect of the shift forward in the Affected Period is that the first respondent’s liability for a take-or-pay penalty for the Agreement Year ending 30 June 2020 is reduced by $2,481,364.50 less than the amount that the first respondent had paid in accordance with the trial judge’s decision.
- The fact and amount of the overpayment in the Agreement Year ended 30 June 2020 are not in dispute. The appellants have acknowledged that they are obliged to ensure that credit is given for the overpayment in that Agreement Year.
- The respondents submit that that there is no sensible reason why the overpayment should not be reflected by setting it off against the judgment sum. The appellants submit that the overpayment should not be taken into account in the monetary judgment in this matter because that is not practically necessary, the only claim for a monetary judgment was made by the appellants, and that claim was confined to the Agreement Year ending 30 June 2019.
- The appellants’ submission should be accepted. As the trial judge observed, although the declarations sought by the parties allowed for determinations of end dates of an Affected Period which “may well affect any take-or-pay calculation which applies during the next Agreement Year, no claim was advanced in the proceeding for the amount of any take-or-pay penalty payable by the Purchaser in respect of that year.” There being no such claim or any dispute about the appellants’ liability to give the respondents credit for the overpayment in the Agreement Year ended 30 June 2020, no occasion arises for the Court to adjudicate upon it. The monetary judgment should be for the amount proposed by the appellants, as is reflected in order 4 of the orders at the end of these reasons. The appellants agree with the respondents’ submission that $169,499.56 should be awarded for interest.
- The appellants submit that their measure of success in the proceeding, particularly in the substantial money judgment to which they are entitled, justifies an order that the respondents pay between 60 per cent and 75 per cent of the appellants’ costs of the entire proceeding. The respondents submit that the appellants should be ordered to pay 80 per cent of the respondents’ costs of the trial and the appellants should either be ordered to pay 85 per cent of the respondents’ costs of the appeal or there should be no order as to the costs of the appeal. The parties’ competing submissions are taken into account in the following reasons for the costs orders I propose.
- Costs are discretionary. My analysis of the parties’ arguments about the applicable provisions of UCPR and appropriate guidance in the exercise of the discretion in this case accords with the following passage in the reasons of Bond J (Sofronoff P and Callaghan J agreeing) in a recent judgment in Speets Investment Pty Ltd v Bencol Pty Ltd (No 2):
“ The applicable general rule is that costs of a proceeding are in the discretion of the Court but follow the event unless the court orders otherwise: r 681 Uniform Civil Procedure Rules 1999 (Qld). The rule which specifically relates to appeals is r 766(1)(d). It provides that the Court may make the order as to the whole or part of the costs of an appeal it considers appropriate. However that rule is not regarded as altering the general rule: see Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd (No 2)  QCA 239 at – and Allianz Australia Insurance Ltd v Swainson  QCA 179 at .
 The policy considerations which underly both rules are those McHugh J explained in Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 -, namely:
‘… the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is granted in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice.’
 The word “event” in the general rule is to be approached distributively with the consequence that it refers to the event of an issue or of each separate issue, if there is more than one, in the proceeding: Thiess v TCN Channel 9 Pty Limited (No 5)  1 Qd R 156 at 207–8; Interchase Corporation Limited (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 3)  1 Qd R 26 at 60-1 –; Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd (No 2) at –; Allianz Australia Insurance Ltd v Swainson at –.
 It is important to recognise, however, that it does not follow from the foregoing that the application of the general rule should usually lead to costs orders which reflect different results on separate events or issues. The Court is given a broad discretion and is specifically empowered to determine that some other order is more appropriate.
 In practice, courts often take the approach of identifying heads of controversy or “units of litigation” (rather than what might technically be regarded as issues on the pleadings) regarding success or failure on the head of controversy or unit of litigation as the criterion for awarding costs: see Thiess v TCN Channel 9 Pty Limited (No 5) at 207-8 and Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd  QCA 168 at .
 The general approach is that there must be special or exceptional circumstances to warrant depriving a successful party of its costs and the mere fact that the successful party has been unsuccessful on some issues will ordinarily not be sufficient to do so: Courtney v Chalfen  QCA 25 at . On an appeal, for example, where a party has succeeded on one of two ways to the same outcome, the Court of Appeal might well regard the costs of the second way on which that party failed as not so distinct conceptually or practically as to warrant making a costs order which reflected that party’s failure: Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd at . On the other hand, one circumstance in which it might be appropriate to award costs of a particular question or part of a proceeding is where that matter is definable and severable and has occupied a significant part of the proceeding: see Courtney v Chalfen, in which the Court of Appeal referred with approval to the decision of McMurdo J (as his Honour then was) in BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2)  QSC 64 at .
 Of course, it does not follow that an issues-based costs order should always be made in circumstances analogous to those described by McMurdo J in BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2). Where there are multiple issues which are determined in different directions as between the parties, a court might form an overall impression having regard to the significance of the issues, the way they were determined, and the amount of time and cost spent on them, and order one party to pay a proportion of another party’s costs as a way to reflect fairly the parties’ comparative success or failure in the outcome which was obtained. Courts often prefer to avoid the complicated form of costs assessment that would follow if different issues are determined in different directions as between the parties and costs were to be awarded in respect of issues. In this regard, in Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (No 2)  NSWCA 173, the New South Wales Court of Appeal observed at  where taking such an approach might result in a protracted assessment process:
“… It is more efficient, and fairer, for the court simply to net-off [orders for issues in different directions as between the parties], which it is entitled to do (see Day v Humphrey  QCA 321 at  per the court). Such an assessment will, undoubtedly be ‘rough and ready’ (Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2)  FCAFC 107 at ), and that is entirely permissible.”
- Because the trial judge’s decision about costs was referable to substantive orders that are now to be varied in significant respects, it is necessary for the Court to set aside the trial judge’s costs order and exercise afresh the discretion to award costs of the proceedings in the Trial Division.
- The appellants were required to bring proceedings in the Trial Division, and to appeal from the trial judge’s decision, to vindicate their claim that the first respondent was liable under the take-or-pay provision in respect of the Agreement Year ended 30 June 2019. The fact the first appellant is entitled to judgment against the first respondent for an amount exceeding $4.6 million justifies orders for the costs of the trial and the appeal that favour the appellants.
- It is necessary next to consider the relative significance of the matters upon which each side succeeded. The substantial monetary judgment to which the appellants are entitled mirrors their success upon three matters. Issue 8 seems to have attracted comparatively little attention in the litigation, but issue 1, and particularly issue 2, were significant. Litigation of those issues must have attracted the expenditure of substantial legal costs.
- The respondents’ success upon matters other than issue 6 does not justify a significant diminution in the costs awarded to the appellants. Issue 3 fell away because of the appellants’ success on issues 1 and 2. Whilst issues 4 and 5 were resolved in favour of the respondents, concessions made by the appellants at trial and on appeal support the appellants’ argument that the costs of litigating those issues might have been avoided if the respondents had not required the appellants to vindicate their claims upon issues 1 and 2.
- Resolution of issue 7 in the respondents’ favour was important for the parties in so far as it resolved a question about the effect of the long term contract in a way that is likely to produce (and has already in fact produced) a substantial economic benefit for the respondents. In support of the respondents’ costs argument, they adduced affidavit evidence to quantify the effect of that success in the 2020 Agreement Year. Their conclusion is that the difference in the cost of supply of a product, had the October Pricing Notice not been issued in respect of the current Agreement Year would have been $5,854,863.30. The respondents submit that there would be a significant and similar impact over future years of the Agreement, subject to the impact of price reviews as provided for elsewhere in the Agreement.
- However, other factors substantially reduce the significance of the respondents’ success upon issue 7 in relation to the appropriate costs orders: it did not bear upon the quantum of the only monetary claim litigated at the trial, which concerned only the Agreement Year ended 30 June 2019; it involved a question of contractual construction; and it was a late addition to the litigation. Overall, the appellants’ submission that the parties will not have incurred much legal expense litigating issue 7 accords with my own impression.
- The respondents’ success on issue 6 is significant for the costs orders. The resolution of this separable and important issue in the respondents’ favour established that the first appellant was entitled to recover under the take-or-pay provision a much smaller amount than had been claimed. Litigation of the issue required the tender and analysis of detailed evidence. The respondents’ success on this issue should be reflected by a notional award in their favour of a substantial amount of costs.
- The respondents submit that the parties unnecessarily incurred costs in litigating in the Trial Division about extrinsic material sought to be adduced by the appellants as evidence bearing upon the proper construction of the Agreement. The extrinsic material was extensive; the brief description of it in a schedule to the trial judge’s reasons occupies seven pages in the record book. The trial judge found that the extrinsic material was not admissible in aid of construction, primarily because it was “drenched in subjectivity”. In addition, the trial judge found that the proposed evidence was irrelevant, the appellants not being able “sufficiently to articulate how it had any bearing on the process of ascertaining the legal meaning of any of the parts of the Agreement which were in contest”.
- The trial judge did not find, however, that it was unreasonable for the appellants’ lawyers to investigate the question whether extrinsic evidence might promote the construction of the disputed contractual provisions propounded for the appellants. Notwithstanding the emphatic language in which the trial judge’s conclusions are expressed, the trial judge also did not find that it was unreasonable for the appellants to argue that the extrinsic evidence was relevant and admissible. In these circumstances, whilst the ruling that the extrinsic material was irrelevant and inadmissible as evidence in the construction of the parties’ contract may be relied upon by the respondents in an endeavour to reduce the amount recoverable upon an assessment of the appellant’s costs, I would not treat the ruling as the event of a distinct issue within the litigation upon which costs should be awarded to the respondents.
- Applying the approach to the costs orders already described, the respondents should be ordered to pay 60 per cent of the appellants’ costs in the Trial Division and on appeal.
- I propose the following orders:
- The appeal and cross appeal are allowed to the extent provided in orders 2 and 3.
- Orders numbered 2 to 7 and 10 made in the Trial Division on 10 June 2020 be set aside.
- In addition to the orders numbered 1, 8 and 9 made in the Trial Division on 10 June 2020:
- (2)It is declared that the notice of 1 April 2019 from the First Respondent to the First Appellant was a valid and effective Pricing Notice under clause 7.2 of the Agreement.
- (3)It is declared that the notice of 1 May 2019 from the First Appellant to the First Respondent was a valid and effective notice under clause 7.4 of the Agreement.
- (4)It is declared that, pursuant to clauses 7.4 and 7.5 of the Agreement, the effect of the notice of 1 May 2019 from the First Appellant to the First Respondent was that the supply of Products under the Agreement was suspended for six months, from 1 May 2019.
- (5)It is declared that, for the purposes of clauses 3.4 and 3.5 of the Agreement, the period which should be treated as an Affected Period is the period commencing on 1 May 2019 and ending on 22 October 2019.
- The First Respondent pay the First Appellant the sum of $4,671,683.83 in respect of the Agreement Year ending 30 June 2019, plus interest in the amount of $169,499.56 pursuant to the Agreement.
- The appeal and cross appeal are otherwise dismissed.
- The Respondents pay 60 per cent of the Appellant’s costs of the proceeding in the Trial Division.
- The Respondents pay 60 per cent of the Appellant’s costs of the appeal.
- The parties’ written submissions and any further affidavit material filed after the delivery of judgment of the Court of Appeal on 15 December 2020 be placed on the Court file in a sealed envelope marked “Confidential – Not to be opened without further Court order.”
- Copies of the written submissions and affidavit material referred to in paragraph 8 above, from which confidential information has been redacted be placed on the Court file and made publicly available.
- PHILIPPIDES JA: I agree with the reasons of Fraser JA and the orders proposed by his Honour.
- CROW J: I agree with the reasons of Fraser JA and the orders proposed by his Honour.
 Wagners Cement Pty Ltd v Boral Resources (Qld) Pty Limited  QCA 289.
 Wagners Cement Pty Ltd & Anor v Boral Resources (Qld) Pty Ltd &Anor  QSC 124.
 Wagners Cement Pty Ltd & Anor and Boral Resources (Qld) Pty Ltd & Anor (No 2)  QSC 163, Order 5 (Bond J).
Wagners Cement Pty Ltd & Anor v Boral Resources (Qld) Pty Limited & Anor (No 2)  QSC 163 at .
  QCA 39 at –.
 QSC 124 at – and .
 QCA 289 at  and .
 See  QSC 163 at footnote 4.
  QSC 124 at –.
 Chartbrook Ltd v Persimmon Homes Ltd  AC 1101 at  (Lord Hoffmann).
  QSC 124 at .
- Published Case Name:
Wagners Cement Pty Ltd & Anor v Boral Resources (Qld) Pty Limited & Anor
- Shortened Case Name:
Wagners Cement Pty Ltd v Boral Resources (Qld) Pty Limited & Anor
 QCA 79
Fraser JA, Philippides JA, Crow J
23 Apr 2021