Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd (No 2)
[2015] QSC 142
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- Unreported Judgment
- Appeal Discontinued (QCA)
- Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd (No 2)[2015] QSC 142
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Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd (No 2)[2015] QSC 142
Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd (No 2)[2015] QSC 142
SUPREME COURT OF QUEENSLAND
CITATION: | Callide Power Management Pty Ltd & Ors v Callide Coalfields (Sales) Pty Ltd & Ors; CS Energy Ltd v Callide Coalfields (Sales) Pty Ltd & Ors (No 2) [2015] QSC 142 |
PARTIES: | CALLIDE POWER MANAGEMENT PTY LTD (first applicant) (second applicant) (third applicant) v CALLIDE COALFIELDS (SALES) PTY LTD (first respondent) (second respondent) (third respondent) CS ENERGY LIMITED (applicant) v |
FILE NOS: | SC No 12122 of 2013 SC No 12138 of 2013 |
DIVISION: | Trial Division |
PROCEEDING: | Application |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 29 May 2015 |
DELIVERED AT: | Brisbane |
HEARING DATES: | 13 April; 5 May; 15 May 2015 |
JUDGE: | Flanagan J |
ORDER: |
|
CATCHWORDS: | PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PRECEDESSORS – PLEADING – PARTICULARS – where the respondents in two separate but related proceedings applied to have paragraphs in each respective statement of claim struck out or alternatively particulars of specific paragraphs in each respective statement of claim be struck out and further and better particulars be provided – where a coal supply agreement was entered into between the parties which provided a process for adjustment of the agreement upon a “Change Event” occurring – where the respondents contend that a series of events together and cumulatively constitute a single “Change Event” – where the applicants allege that a Change Event is required to be a single event or a closely related series of events – where the applicants’ particulars state that all of the events and circumstances must be of the same nature and must form part of one “chain of facts” or “one transaction” as the phrase is used in O'Leary v The King – where the respondents allege the amended statements of claim, and the respective particulars, disclose no reasonable cause of action and are too vague to enable the respondents to know the case they have to meet and thus have a tendency to prejudice a fair trial – where the applicants, in their respective submissions, refer to aspects of the coal supply agreement and argue that where multiple events or circumstances are said to comprise a Change Event, the events or circumstances, as distinct from their effects, must have the same essential quality or constitution – whether paragraphs of the amended statements of claim ought to be struck out – whether the particulars of certain paragraphs of the amended statements of claim ought to be struck out due to vagueness and a consequence to prejudice or delay a fair trial Uniform Civil Procedure Rules 1999 (Qld), r 161, r 162, r 171 Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1, cited General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69, cited O'Leary v The King (1946) 73 CLR 566; [1946] HCA 44, cited |
COUNSEL: | P L O'Shea QC, with D O'Brien QC, for the applicants in SC No 12122 of 2013 J C Bell QC, with A Pomerenke QC, and J O'Regan, for the applicant in SC No 12138 of 2013 D G Clothier QC, with S R R Cooper, and S J Webster, for the respondents in SC No 12122 of 2013 and SC No 12138 of 2013 |
SOLICITORS: | Johnson Winter Slattery for the applicants in SC No 12122 of 2013 Corrs Chambers Westgarth for the applicant in SC No 12138 of 2013 Gilbert + Tobin Lawyers for the respondents in SC No 12122 of 2013 and SC No 12138 of 2013 |
Introduction
- In two separate but related proceedings, by applications filed 6 May 2015 the respondents apply, pursuant to r 171 of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”), to strike out certain paragraphs of the applicants’ statements of claim. Alternatively, the respondents seek, pursuant to r 162 of the UCPR, that the applicants’ further and better particulars of the amended statement of claim both dated 22 April 2015 be struck out and, pursuant to r 161 of the UCPR, the applicants provide further and better particulars.
Background
- Some of the applicants are owners of power stations located in Central Queensland. The coal for the operation of these power stations is supplied by some of the respondents pursuant to Coal Supply Agreements entered into on or about 11 May 1998. Whilst there are two sets of proceedings on foot, namely BS12138/13 and BS12122/13, the issues which arise are, for all practical purposes, the same. The Coal Supply Agreements are also substantially identical. For the purposes of determining these applications I will refer to the pleadings and particulars in BS12138/13. CS Energy Limited is the named applicant in those proceedings. The Coal Supply Agreement was for an initial term of 10 years. The applicant, however, had four successive options to extend the term of the Coal Supply Agreement, each option being for a period of five years. In or about 2009, the first option was exercised.
- Clause 12 of the Coal Supply Agreement, entitled “Review of Agreement”, contains a procedure for the possible adjustment of the terms of the Coal Supply Agreement consequent upon the occurrence of a “Change Event”. It relevantly provides:
“12.3Change Events
- A ‘Change Event’ is a change in circumstances which has, or will have, a material effect on the competitiveness of either the Coal Mine Owners or the Buyer (in the reasonable opinion of a Party) in relation to the industry in which it operates, and includes, without limitation:
(i)the Commercial Load Date of Unit 2 occurring more than 18 months after the Effective Date;
(ii)if the Buyer reasonably demonstrates, by the elimination of other relevant factors, that there is a change in coal prices being paid by other power stations. The Parties acknowledge that the Buyer must reasonably demonstrate, by the elimination of other relevant factors, that there is a material adverse change in the competitive position of the Power Station which is due to changes in coal prices being paid by other power stations, before the Parties will be obliged to review this Agreement against the principle set out in Clause 12.1(a)(iii).
(iii)major changes to working conditions within the coal mining industry, including, without limitation, advances in technology which were not foreseen at the date of this Agreement;
(iv)a demonstrated (by the Seller) increase in the long term (being at least five years) trend in electricity price occurring during the whole or any part of any period when an EMI is not operative; and
(v)a change in governmental policy, or a change in a law or regulation, relating to environmental standards and compliance with those standards.
- If at any time after the date of execution of this Agreement there occurs, or either Party considers there may occur, a Change Event, then:
(i)a Party (the ‘Notifying Party’) may notify the other (the ‘Receiving Party’) in writing promptly when that Change Event becomes known to the Notifying Party that it is the Notifying Party’s intention to initiate a review of this Agreement which may lead to an Adjustment;
(ii)if it wishes to proceed with a review of this Agreement, the Notifying Party must, as soon as practicable in all the circumstances, submit a formal notice of a Change Event (the ‘Change Event Notice’) to the Receiving Party, which will include:
- all data which the Notifying Party holds which is relevant both to the Change Event including detailed information regarding the nature, extent and quantum of the cost and revenue impacts of the Change Event and to calculating those costs and revenue impacts as they relate to all of the options and alternatives identified by the Notifying Party available to accommodate or mitigate the Change Event; and
- options and alternatives identified by the Notifying Party and the Notifying Party’s recommended option,
and a Change Event will be deemed to have occurred;
(iii)As soon as possible after a Notifying Party becomes aware that an estimate of the financial effect is likely to be incorrect, the Notifying Party must amend that estimate and give copies of the amended estimate and the estimate it amends to the Receiving Party;
(iv)The onus is upon the Notifying Party to establish the impact of the Change Event;
(v)The Parties must use their best endeavours to review and to attempt to agree an Adjustment generally in accordance with the principles set out in Clause 12.1.”
- The principles governing any review pursuant to clause 12.3 are set out in clause 12.1:
“12.1Principles
- Each Party acknowledges and agrees:
(i)subject to Clause 12.1(a)(ii), the Coal Mine Owners and the Buyer have an expectation of benefiting under this Agreement;
(ii)subject to Clause 12.1(a)(iii), each Party supports the process of review set out in this Clause 12 to ensure both the Coal Mine Owners and the Buyer remain competitive in relation to their respective industries; and
(iii)during the Initial Term, the competitive position of the Power Station relative to other power stations operating in the Power Station’s industry in Queensland as at the Effective Date should be restored, having regard to the viability of the Coal Mine Owners’ mine in its industry.
- Each Party agrees that circumstances may change during the Term of this Agreement which may require the terms of this Agreement to be reviewed to ensure those terms remain consistent with the principles set out in Clause 12.1(a).”
- Clauses 12.4 to 12.8 of the Coal Supply Agreement then detail a regime requiring the parties to meet in an attempt to agree on the nature and quantum of the financial effect of the Change Event and the “Adjustment” (if any) to the terms of the Coal Supply Agreement.
- On 6 November 2013, the relevant respondents delivered to the applicant a document described as a “Notice of Change Event” purportedly pursuant to clause 12.3(b)(i) of the Coal Supply Agreement (“the First Notice”). By the First Notice, the respondents purported to notify the applicants that a Change Event had occurred and that it was the respondents’ intention to initiate a review under Clause 12 which may lead to an Adjustment. The First Notice continued:
“Briefly, and without prejudice to the Change Event Notice, since the time of entry into the CSA [Coal Supply Agreement], there have been a number of changes in circumstances which, in the Seller’s reasonable opinion, have had, and continue to have, a material effect on its competitiveness in the coal mining industry such that a Change Event within the meaning of clause 12.3(a) has occurred. The effect of these changes is that the cost of production at the Callide Mine has substantially increased in circumstances where the Contract Price has remained relatively stable.
The Seller will, pursuant to clause 12.3(b)(ii), submit a formal Change Event Notice as soon as practicable in all the circumstances.
As required under clause 12.3(b)(v), the Seller will use its ‘best endeavours’ to review and attempt to agree an Adjustment generally in accordance with the principles set out in clause 12.1. We expect that the Buyer will do the same.
The terms used in the CSA bear the same meaning in this letter.”
- On 12 November 2013, the relevant respondents delivered to the applicant a second notice described as a “Change Event Notice” purportedly pursuant to clause 12.3(b)(ii). This Change Event Notice:
- provided by [4.2] – [4.6] that:
“4.2Since the time of entry into the CSA [Coal Supply Agreement], there have been a number of changes in circumstances (identified below in this Notice) which, in the Seller’s reasonable opinion, have had, and continue to have, a material effect on the Coal Mine Owners’ competitiveness in the coal mining industry.
4.3The effect of these changes in circumstances is a substantial increase in the cost of producing coal from the southern areas of Callide Coalfields (referred to as the Callide Mine), in circumstances where a significant proportion of the coal from the Callide Mine is sold to the Buyer under a contract which fixes the coal price paid by the Buyer at a rate far lower than market value. These changes in circumstances together and cumulatively constitute a Change Event, being a Change Event within the meaning of clause 12.3(1) [sic].
4.4The Seller identifies the following changes in circumstances, the nature and extent of each of which is described in sections 5 to 16 of this Notice:
(a)Changes to market and economic circumstances;
(b)Changes to the mine planning conditions;
(c)Extensive and ongoing rainfall initially constituting Force Majeure Events under the CSA, together with the frequency of such rainfall Force Majeure Events and their immediate, cumulative and ongoing effects;
(d)Significant reduction in operating flexibility due to changes in government regulation resulting in changes to the mine’s water discharge and storage requirements;
(e)Significant increases to the overall costs of production of coal at the mine;
(f)Increases in labour and contractor costs at the mine;
(g)Increases in the cost of diesel incurred by the mine;
(h)Increases in the cost of explosives incurred by the mine;
(i)Increases in maintenance costs incurred by the mine;
(j)Increases in the cost of electricity incurred by the mine;
(k)The Coal Mine Owners ceasing to benefit under the CSA; and
(l)Significant change in the coal prices paid by other power stations.
4.5Pursuant to clause 12.3(2)(2) [sic] upon the issuing of this Notice, a Change Event will be deemed to have occurred.
4.6If any part of this Change Event Notice is determined to be ineffective or invalid for any reason whatsoever, such ineffectiveness or invalidity will not affect the validity or operation of the remainder of this Change Event Notice and such ineffective or invalid part will be deemed to be deleted from this Change Event Notice.”
- described the nature and extent of each change in circumstances set out in [4.4] in [5] – [16] the Change Event Notice;
- provided by [17] of the Change Event Notice, the quantum of the cost and/or review impacts of the changes in circumstances.
- provided by [18.1] of the Change Event Notice:
“18Options and Alternatives Identified by the Seller
18.1The Seller has identified five possible options or alternatives to take account of the changed circumstances described in this Notice. Four of the possible alternatives proposed by the Seller contain a number of adjustments to the CSA relating to:
- Options terms;
- Tonnage requirements and notice;
- Coal quality; and
- Contract and Invoice Price.”
- set out in [18.2] – [18.6], four of the five alternatives referred to in [18.1] (identified as Alternatives 1 and 2 and 1A and 2A) and proposed by [18.7], as Alternative 3, the early and orderly termination of the Coal Supply Agreement;
- identified in [19.1] of the Change Event Notice, the quantum of the costs and/or review impacts of the options and alternatives; and
- provided by [20] of the Change Event Notice, that the Seller’s recommendation was Alternative 2 as described in Annexure 2 to the Notice.
- The narrative part of the Change Event Notice runs approximately 80 pages. As identified above it refers to 12 matters which are alleged to constitute a “Change Event” within the meaning of the Coal Supply Agreement. The Notice includes approximately 60 annexures which, when printed single-sided, occupy more than seven lever arch volumes.[1]
- The Change Event Notice also annexes detailed cost models, which were served in electronic, Excel spreadsheet form, which set out:
(a)historical physical and financial data, including costs and revenue data, for the Callide Mine for the period 1998 until 2013;
(b)forecast physical and financial data, including costs and revenue data, for the Callide Mine for the period from 2014 until 2031; and
(c)separate forecast physical and financial data, including costs and revenue data, for the Callide Mine for the period from 2014 until 2031, assuming that the options and alternatives proposed in the Change Event Notices were implemented.
- In or about December 2013 the applicant commenced proceedings by way of originating application seeking declarations that the Change Event Notice was not a Notice given in accordance with the relevant clauses of the Coal Supply Agreement. The applicant’s case is that the Change Event Notice on its face, was not of the kind required by the Coal Supply Agreement and was therefore ineffective to engage the clause 12 process. Further, that even if the Notice was of the kind required by the Coal Supply Agreement it was not given within the time stipulated in the Agreement and was therefore ineffective to engage the clause 12 process.[2]
- The nature of these grounds asserting invalidity of the Change Event Notice are expanded in the written submissions of the applicants in BS12122/13. The grounds on which the applicant contends that the Change Event Notice is invalid are:
- the matters set out in the Second Notice are not, on the face of the notice, capable of comprising a “Change Event” as it is identified in clause 12.3(a) of the Coal Supply Agreement. In particular:[3]
- the Second Notice does not identify a single event (or closely related series of events) that constitutes the “Change Event”, but rather identifies 12 different categories of alleged changes in circumstances which “together and cumulatively” constitute a single “Change Event”. Clause 12.3(a) of the Coal Supply Agreement requires a change in circumstances, rather than an accumulation of changes in circumstances, to have a material effect on the competitiveness of a party in order to constitute a “Change Event”; and
- some of the specific categories of alleged changes in circumstances (in particular, those specified in paragraphs 4.4(b), (c), (e) to (j) and (k) of the Second Notice) do not, on the face of the Change Event Notice, fall within the definition of a “Change Event”;
- the Second Notice does not identify the quantum of the cost and revenue impacts of the “Change Event” or state the alternatives and options to mitigate the “Change Event”. In particular, as the Second Notice does not describe a “Change Event”, it follows that it does not set out the quantum of the cost and revenue impacts or proposed alternatives and options to mitigate a “Change Event”; and
- in order to bring about the consequences provided for in clauses 12.3 to 12.8 of the Coal Supply Agreement:
- the Notice referred to in clause 12.3(b)(i) must be given promptly when the Change Event became known to the notifying party, and that did not occur;
- the Notice referred to in clause 12.3(b)(ii) must be submitted “as soon as practicable in all the circumstances” and that did not occur.
- the matters set out in the Second Notice are not, on the face of the notice, capable of comprising a “Change Event” as it is identified in clause 12.3(a) of the Coal Supply Agreement. In particular:[3]
- The originating application was filed in circumstances where a meeting of executives to discuss the Change Event Notice had been nominated for 18 December 2013. The applicant did not attend this meeting expressly on the basis that it disputed that the Change Event Notice was a valid notice under the Coal Supply Agreement.
- By way of defence, the respondents allege that:
(a)none of the alleged grounds of invalidity in respect of the Change Event Notice can be substantiated; and
(b)if the Notice is invalid so that no adjustment to the Coal Supply Agreement can be made, then in the circumstances identified in the counterclaim, the Coal Supply Agreement has been frustrated and the respondents have been discharged from further performance under the agreement.
Some procedural history
- The respondents’ present applications arise in the context of an earlier application by the applicant for the determination of separate questions. That application was heard on 13 April 2015. The application for separate questions has in effect been adjourned until the present applications are determined. This is because the present applications may have a significant impact on the extent of any factual disputes that may arise in respect of the proper construction of the Coal Supply Agreement and the Change Event Notice.
- A further application before the Court on 13 April 2015 was the respondents’ application seeking particulars of certain paragraphs of the amended statement of claim. In the course of the hearing on 13 April 2015 it became clear that what the applicants were seeking to plead was in effect points of law as to the proper construction of the Coal Supply Agreement and the Change Event Notice. As matters transpired at the hearing, the applicant agreed that it would provide further and better particulars of the amended statement of claim to clarify that the plea was more by way of points of law relevant to the construction of the Coal Supply Agreement and the Notice rather than raising any factual dispute.
- On or about 22 April 2015 the applicant provided the further and better particulars.
- Subsequently the respondents applied to have certain paragraphs of the amended statement of claim struck out or, alternatively, the further and better particulars struck out. The applicant also renewed its previous application to have the respondents’ particulars to paragraph 13(a)(iii)D of the third further amended defence struck out. These applications were heard by the Court on 15 May 2015.
The respondents’ application to strike out certain paragraphs of the amended statement of claim or, in the alternative, certain particulars.
- The respondents seek to strike out paragraphs 9(d)(i), 13(b)(i) and 13(b)(ii) of the applicant’s amended statement of claim dated 22 October 2014. Paragraph 9(d)(i) pleads:
“9.Upon the proper construction of the Coal Supply Agreement:
…
(d)a ‘Change Event’ within the meaning of the Coal Supply Agreement must:
(i)be an occurrence, comprised of a single event or circumstance, or closely related set of events or circumstances …”
- The applicant, by the further and better particulars delivered 22 April 2015, particularised paragraph 9(d)(i) as follows:
“The relationship or relationships which the applicant alleges one event or circumstance must bear to another event or circumstance to make them a ‘closely related set of events or circumstances’ is as follows:
- each of the events or circumstances must be of the same nature; and
- the events and circumstances must together form part of one ‘chain of facts’ (as that phrase is used by Starke J in O'Leary v The King (1946) 73 CLR 566 at 577) or alternatively ‘should be considered as one transaction’ (as that phrase is used by Dixon J in O'Leary v The King (1946) 73 CLR 566 at 577).”
- Paragraph 13(b)(i) and (ii) of the applicant’s amended statement of claim dated 22 October 2014 pleads:
“13.The 12 November Notice was not a notice within the terms of, or given in accordance with, clause 12.3(b)(ii) of the Coal Supply Agreement because:
…
(b)the matters set out in the notice do not, on the face of the Notice, fall within the definition of ‘Change Event’, in that:
(i)the notice does not assert that there was a single event or circumstance, or closely related set of events or circumstances, that constituted the alleged ‘Change Event’;
(ii)instead, the notice deals with 12 different categories of alleged changes in circumstances which are disconnected from one another on the basis that they ‘together and cumulatively’ constitute a single ‘Change Event’.”
- The applicant’s further and better particulars of these paragraphs are as follows:
“The applicant alleges that each of the 12 categories is disconnected from each of the other categories.
The applicant:
- relies upon ‘the matters set out in the notice’ pleaded in paragraph 11 of the amended statement of claim; and
- alleges that the notice does not, on its face, identify any connection between any of the 12 categories such that they would meet the description of ‘a single event or circumstances, or closely related set of events or circumstances’.”
- The respondents advance two bases for the strike out of the relevant paragraphs of the amended statement of claim. First, that they disclose no reasonable cause of action and secondly they are too vague to enable the respondents to know the case they have to meet. Accordingly, the paragraphs have a tendency to prejudice a fair trial of the proceeding.[4]
- The respondents submit that the two tests propounded by the applicant, namely that events or circumstances must be of the same nature and must together form part of one “chain of facts” or “should be considered as one transaction”, involves an impermissible limitation upon the ordinary meaning of the Coal Supply Agreement. This is in circumstances where these limitations are not found in the language of the Agreement itself. The respondents seek to make good these submissions by reference to a number of clauses of the Coal Supply Agreement.
- By clause 3.2 the Agreement may be extended (at the buyer’s option) beyond the initial term for up to four successive option terms. A notice must be given to the seller by the buyer setting out the buyer’s intention to enter into negotiations. Within a specified period the parties are required to meet and negotiate all terms and conditions including price. This requirement is, however, made subject to the price review procedures set out in clause 12.[5]
- Similarly, the method of calculating the Contract Price and any escalation of the Contract Price in clause 10.2(a) is also made subject to the review provisions set out in clause 12. This, according to the respondents, is simply a reflection of the principle identified in clause 12.1(b) whereby the parties agree that circumstances may change during the term of the Agreement which may require the terms to be reviewed to ensure that they remain consistent with the principles set out in clause 12.1(a).
- Clause 12.2 contemplates five yearly review meetings in order to review the consistency of the operation of the Agreement against the principles set out in clause 12.1(a). The respondents submit that the notion that there be a review at five yearly intervals suggests that a “Change Event” is not confined to anything which may be considered to be a sudden event but is concerned with things which might occur over time. This is reinforced when one has regard to the definition of “Change Event” in clause 12.3. A “Change Event” is not simply a change in circumstances but a change in circumstances which has, or will have, a material effect on the competitiveness of either of the parties. Thus, according to the respondents, a “Change Event” is the combination of the change in circumstances and formation of the opinion that those circumstances will have a relevant effect. The respondents submit therefore that the definition of “Change Event” does not, as a matter of construction, require a “closely related set of events or circumstances” or a “closely related series of events”. These words are not found in the Agreement. A “Change Event” is not defined to mean either a change in circumstances of the same nature or a change in circumstances that together form part of the one “chain of facts” or “should be considered as one transaction”.
- The respondents highlight the difference between the definition of a “Change Event” in clause 12.3(a) and an “Event of Force Majeure” in clause 14.1 which is specifically defined to mean “an event”.
- The applicant’s propounded test that the events or circumstances must be of the “same nature” appears to rely on the examples of a “Change Event” identified in clause 12.3(a)(i) to (v). These examples are not exhaustive and are expressly stated to be “without limitation”. The respondents submit that the examples do not support either test. The first example “the Commercial Load Date of Unit 2 occurring more than 18 months after the Effective Date” according to the respondents is a result which makes no judgment as to the causes of those results. That is, there is no requirement that the circumstances that caused that result are of the same nature or closely related. The same may be said, according to the respondents, of the examples in clauses 12.3(a)(ii) and (iv).
- As to the example in clause 12.3(a)(iii), this contemplates a “Change Event” to include “major changes to working conditions within the coal mining industry, including, without limitation, advances in technology which were not foreseen at the date of the Agreement”. There is no suggestion in this example that the “major changes” must constitute the one “chain of facts” or should constitute the “one transaction”.
- The respondents’ strike out application pursuant to r 171 of the UCPR proceeds, in part, on the basis that the relevant paragraphs of the amended statement of claim “as now particularised” fail to disclose a cause of action.[6] As I understand the respondents’ submissions, the thrust of the respondents’ complaint is more directed to the further and better particulars dated 22 April 2015.
- The respondents’ analysis of the clauses of the Coal Supply Agreement does not, in my view, provide a sufficient basis for striking out the relevant pleaded paragraphs. The power to summarily dismiss an action as disclosing no reasonable cause should be exercised with extreme caution and only in the clearest cases.[7] Even if one considers the tests propounded by the applicant to be vague, the applicant is otherwise able to support their construction of the Coal Supply Agreement, and thus their pleaded grounds of invalidity of the Change Event Notice, by reference to the actual terms of the Agreement. For example, as to the first test that for events or circumstances to constitute a Change Event they must be of the same nature, the applicant submits that the examples of a Change Event in clause 12.3(a) group together events or circumstances of the same nature. In none of these examples of a Change Event are events or circumstances of a differing nature combined to form a Change Event. Further, the applicant submits that each matter in clause 12.3(a) is given as an individual Change Event. The applicant therefore submits that the natural reading of the clause is not to the effect that the different matters in those subparagraphs may be grouped together as a combination or compound event or occurrence.[8]
- The applicant also submits that its construction is not inconsistent with clauses 3.2(a), 10.2(a) and 12.2 of the Coal Supply Agreement as submitted by the respondents. This is because none of those clauses has as a pre-condition to its engagement the existence of a Change Event. As such, the applicant’s construction, which addresses the content of a Change Event, cannot be inconsistent with those clauses.[9]
- It cannot be said that the applicant’s construction is so clearly untenable that it should be summarily struck out before full argument is heard as to the proper construction of the Agreement and the Change Event Notice.
- The respondents’ analysis of the relevant clauses of the Coal Supply Agreement are however, in my view, sufficiently compelling to lead to the conclusion that the two tests as propounded by the applicant in its particulars are so vague as to prevent the respondents from knowing the case they have to meet.
- The difficulty is not with the way paragraphs 9(d)(i), 13(b)(i) and 13(b)(ii) of the amended statement of claim are pleaded but rather with how they are particularised.
- Senior Counsel for CS Energy Limited, in the course of oral submissions, helpfully offered to refine the applicant’s case if I was to find that the particulars were in effect vague.
- Whilst the two tests propounded by the applicant do not themselves allege facts, the tests do in my opinion, raise unnecessary factual issues. The applicant seeks to establish that the Change Event Notice is not a notice contemplated by clause 12.3(b)(i) as a matter of proper construction of the Agreement and Change Event Notice. The applicant seeks to have the Court determine the question of validity on the face of the documents. It does not rely on any extrinsic facts for the purpose of construction. The two tests propounded in the particulars to paragraph 9(d)(i) as presently drafted are however, in my view, sufficiently vague as to potentially raise unintended factual enquiries. As identified by the respondents, the terms “same nature”, “chain of facts” and “considered as one transaction” are broad. They point to the conclusion which the applicant says must be reached, but do not reveal the type or sufficiency of connections which are required to reach that conclusion.[10]
- The applicant’s submissions however, go some way in seeking to address these concerns. The applicant asserts that where multiple events or circumstances are said to together comprise a Change Event the events or circumstances themselves (as distinct from their effects) must have the same essential quality or constitution. That is, they must be the same type of event or circumstance.[11] (my emphasis)
- The applicant seeks to demonstrate this proposition by reference to the words of the Coal Supply Agreement, in particular clause 12.3(a)(iii) which, in the applicant’s submission, provides an example where multiple changes can be grouped together because they are of the same nature. Whilst this clause expressly refers to multiple changes, they must all be changes in working conditions within the coal mining industry.
- The applicant further submits that all the examples of a Change Event refers to only one type of change. In none of them are different changes but with similar effects grouped together to form a Change Event.[12] The applicant also relies on the ordinary meaning of the word “event” in clause 12.3. The applicant submits that the term “event” is used to denote an occurrence. Both an “event” and an “occurrence” are singular in nature.[13]
- These points of construction of the relevant documents constitute points of law. The pleading of a point of law is of course permissible pursuant to r 149(2) of the UCPR provided the applicant also pleads the material facts in support of the point. Here the relevant material facts pleaded are the parties entering into the Coal Supply Agreement, its terms, the issuing of the Change Event Notice and its terms.
- It is important for the management and conduct of the proceedings that these points of law are precisely articulated by reference to the terms of the Agreement and the Notice. Consistent with the applicant’s submission that the question of the validity of the Notice should be determined within the four corners of the relevant documents, the points of construction should be able to be particularised by reference to the terms of the documents rather than by reference to the tests propounded. As I have already observed, neither test is rooted in the words of the Coal Supply Agreement. The second test is founded upon statements from O'Leary v The King[14] which was a case concerned with the concept of res gestae. I accept the respondents’ submission that the statements which the applicant has taken from O'Leary v The King have been developed and formulated in the context of res gestae, derived their meaning from this context and are to be applied in this context.[15]
- Both the tests propounded by the applicant, but especially the second test, invites unnecessary factual enquiries rather than pure questions of construction. The vagueness of the particulars therefore has, in terms of r 162(1)(a) of the UCPR, a tendency to prejudice or delay the fair trial of the proceedings.
The applicant’s strike out application of the particulars to paragraph 13(a)(iii)(D) of the third further amended defence.
- The applicant, by its amended application filed 10 April 2015, seeks orders that the particulars to paragraph 13(a)(iii)D of the third further amended defence be struck out.
- In the course of the hearing on 15 May 2015 the parties accepted that this application should be adjourned if the applicant’s further and better particulars of 22 April 2015 were struck out and leave granted to deliver fresh further and better particulars.
- The provision of fresh particulars (whereby the applicant’s construction is more precisely articulated) may ultimately result in it being unnecessary to determine the applicant’s amended application filed 10 April 2015.
- The applicant initially sought to strike out certain paragraphs of the respondents’ defence. The paragraphs of the defence in question allege:
(i)substantial compliance;[16] and
(ii)the knowledge of a reasonable recipient of the Change Event Notice in the position of the applicants.[17]
- As to the paragraph dealing with substantial compliance, the respondents prior to the hearing of the application on 13 April 2015 amended the relevant paragraph. As a result of this amendment the applicant does not persist with the strike out application in respect of this amended paragraph.
- In paragraph 13(a)(iii) of the third further amended defence, the respondents plead that on the face of the Change Event Notice it:
(a)asserts a single event or circumstance or, alternatively, a series of events or circumstances, which are closely related and connected with one another in their impacts upon the principles stated in clause 12.1 and the competitiveness of the Coal Mine Owners stated in clause 12.3(a) of the Coal Supply Agreement and in other respects;
(b)identifies, or permits the identification of, the time at which the Change Event occurred; and
(c)permits analysis of the distinct effect of the Change Event and of the individual matters to which it refers.
- The respondents further plead in paragraph 13(a)(iii)D that each of these matters are discernable by a reasonable reader of the Change Event Notice in the position of the applicant. The respondents, on 27 March 2015, served eighteen and a half pages of particulars asserting facts said to be relevant to what the Change Event Notice would have conveyed to a reasonable reader in the applicant’s position.
- The applicant does not now seek to strike out paragraph 13(a)(iii)D but only the particulars to that paragraph.
- The essence of the respondents’ particulars is:
(a)a reasonable reader of the Change Event Notice in the applicant’s position would have understood that the matters listed in paragraph 4.4 of the Notice were closely related and connected to one another having regard to their impacts upon the financial performance of the respondents;[18] (my emphasis)
(b)a reasonable reader of the Notice in the applicant’s position would have been able to identify the time at which the Change Event occurred;[19] and
(c)a reasonable reader of the Notice in the applicant’s position would have been able to identify the distinct effect of the Change Event and each of the individual changes and circumstances listed in it.[20]
- Detailed particulars of (a) are provided, but not (b) or (c).
- The matters in (a) are addressed:[21]
(a)at a general level, namely that the interconnecting factor – financial performance – is affected by:
(i)changes to market and economic conditions;
(ii)changes to mine and planning conditions;
(iii)changes resulting from extensive and ongoing periods of rainfall;
(iv)changes to a mine’s water discharge and storage requirements;
(v)increases in overall costs of production, including increases in labour costs, maintenance costs, diesel costs, explosive costs and electricity costs;
(vi)significant changes in coal prices paid by other customers in the domestic and international thermal coal markets; and
(b)thereafter in more detail.
- As already identified above, the applicant’s submissions make it clear that to constitute a Change Event it is not enough that the effects of the event or circumstance are the same. According to the applicant the definition of “Change Event” draws a clear distinction between the event or change and its effects (on competition). If the applicant’s case is ultimately particularised in this way it is important that the respondents respond to the actual case sought to be agitated by the applicant. The applicant is not contending as a matter of construction that the effects of a Change Event are relevant.
- Accordingly, the particulars in paragraphs 21(a)(i) of the respondents’ particulars may not as presently drafted, ultimately be responsive to the applicant’s case as articulated in its recent submissions.
Disposition
- I therefore order that the applicants’ further and better particulars dated 22 April 2015 in BS12138 of 2013 and in BS12122 of 2013 be struck out. All applicants are granted leave to deliver fresh further and better particulars by 12 June 2015. The respondents are to deliver any amended particulars to paragraph 13(a)(iii)D of the third further amended defence (and equivalently in S12122 of 2013) by 26 June 2015.
- The only order I make in relation to the applicant’s amended application filed 10 April 2015 in BS12138/13 and the applicants’ application filed 13 March 2015 in BS12122/13 is that both applications be adjourned to a date to be fixed.
- The applicants in both proceedings are to file any further written submissions in respect of the separate questions application (not to exceed 5 pages) by 3 July 2015.
- The respondents in both proceedings are to file any further submissions in respect of the separate questions application (not to exceed 5 pages) by 10 July 2015.
Footnotes
[1] Affidavit of Colleen Anne Platford sworn 27 March 2015, [9].
[2] Applicant’s outline of submissions dated 2 April 2015, [10].
[3] Applicants’ outline of submissions undated, [14].
[4] Respondents’ outline of submissions dated 11 May 2015, [2].
[5] Coal Supply Agreement dated 11 May 1998, [3.2](a)(ii).
[6] Respondents’ outline of submissions dated 11 May 2015, [12].
[7] Dey v Victorian Railways Commissioners (1949) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125.
[8] Applicant’s outline of submissions dated 14 May 2015, [21](h), [21](i).
[9] Applicant’s outline of submissions dated 14 May 2015, [25].
[10] Respondents’ outline of submissions dated 11 May 2015, [22].
[11] Applicant’s outline of submissions dated 14 May 2015, [12].
[12] Applicant’s outline of submissions dated 14 May 2015, [14] – [15]; applicants’ outline of submissions undated, [37] – [38].
[13] Applicant’s outline of submissions dated 14 May 2015, [21](a) – (f).
[14] O'Leary v The King (1946) 73 CLR 566.
[15] Respondents’ outline of submissions dated 11 May 2015, [18].
[16] Third further amended defence dated 31 March 2015, [13](a)(iia).
[17] Third further amended defence dated 31 March 2015, [13](a)(ii)D.
[18] Further amended particulars of the second further amended defence dated 27 March 2015, [21](a).
[19] Further amended particulars of the second further amended defence dated 27 March 2015, [21](b).
[20] Further amended particulars of the second further amended defence dated 27 March 2015, [21](c).
[21] Applicant’s outline of submissions dated 2 April 2015, [41].