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[2019] QSC 163
In this case, Jackson J provided, amongst other things, an extensive and scholarly discussion of the principles relating to the admissibility of extrinsic evidence in aid of contractual construction.
Jackson J
27 June 2019
Background
This proceeding concerned six contracts made between the plaintiff on the one part, and the defendants on the other, each styled the "Wiggins Island Rail Project Deed (2011)" ("WIRP Deed"). [1]. Under each of the six WIRP Deeds the plaintiff was styled "QR Network" and the other party was styled "Customer". [1]. There were two other WIRP Deeds which were entered into between the plaintiff on the one part and Cockatoo Coal Pty Ltd and Springsure Creek Coal Pty Ltd on the other. [1]. The underlying subject matter of the WIRP Deeds was the funding and construction by the plaintiff of works to upgrade the capacity of the plaintiff’s rail infrastructure network for the transport of coal from the mines of the defendants to a new coal ship loading terminal. [3].
Under each of the WIRP Deeds, the scope of the works to be funded and constructed by the plaintiff was identified by reference to five particular sections of railway track, termed "Segments". [6]. Each Customer was identified as a Customer in respect of each Segment it proposed to access or use for the additional capacity. [6]. Each such Segment was termed a “Customer’s Segment” for that Customer. [6]. Clause 6 of each WIRP Deed provided for variations to the scope of the works to be carried out for a Segment. [10]. If it was proposed to change the Segment Customers without any variation to the scope of works for a Segment, cl 6.1(c) provided that in certain circumstances the Customer could notify QR Network and each Other Customer that a Segment was to cease being a Customer's Segment. [10].
Issue
The plaintiff sought to establish the liability of each defendant for amounts payable under the WIRP Deed for what was termed the "WIRP Fee". [2]. The defendants alleged that each defendant had notified the plaintiff and each Other Customer under cl 6.1(c) that every relevant Customer’s Segment for that defendant was to cease being a Customer’s Segment, with the effect of throwing the burden of the WIRP Fee for the Customer’s Proportion for the Segment onto any remaining Segment Customers for the Segment and reducing that defendant’s liability to pay the WIRP Fee to nil. [2], [12]. The collective effect was to throw the whole of the burden onto Springsure, as the remaining Customer for all the relevant Customer Segments. [12]. The plaintiff contended that none of the defendants was entitled to give such a notice. [2]. It contended that the notices were invalid on three grounds. [13].
Judgment
One of the plaintiff's three grounds was that, on the proper construction of cl 6.1(c), a notice could not be given for a Customer Segment that was necessary to enable the plaintiff to provide what were termed the “Aggregate Access Rights” for the relevant defendant. [13]. The plaintiff also contended that there was an implied term of the WIRP Deed to the same effect. [13]. Jackson J ultimately rejected this ground. His Honour's judgment is complex, and merits reading in full. In particular, the judgment contains an extensive and scholarly discussion of the principles relating to the admissibility of extrinsic evidence in aid of contractual construction. [59]–[122]. For present purposes, what follows are seven points determined by his Honour that may be of interest to practitioners:
(1) The defendants’ submissions assumed that the requirement that an ambiguity or susceptibility to more than one meaning be identified before extrinsic evidence of surrounding circumstances is admissible ("the ambiguity gateway") is a gateway that must be passed through in every case of disputed construction of a contractual term. [63]. Jackson J held that the ambiguity gateway does not apply to a case where something has clearly gone wrong with the language, such that words may generally be supplied, omitted or corrected where it is clearly necessary in order to avoid absurdity. [64], [100]–[114], [177].
(2) His Honour held that an extrinsic fact that is mutually known may be relevant if it tends to prove a fact that is relevant to a constructional question that is in issue. [182].
(3) His Honour held that while an extrinsic fact may go some way towards supporting a particular construction – in the same way that knowledge of the mischief that a statutory provision was introduced to meet will be relevant to the proper construction of a statute – that is no licence to ignore the text. [197]. In the contractual context, it is not permissible simply to use mischief to justify a particular construction that is at odds with the text, where there could be other reasons for the text that was adopted. [197].
(4) His Honour held that where something has clearly gone wrong with the text so that words may generally be supplied, omitted or corrected where it is clearly necessary in order to avoid absurdity, the words to be supplied, omitted or corrected must be clear. [198].
(5) His Honour held that the mere fact that the contract was subject to the approval of a third party government authority did not render extrinsic evidence inadmissible in aid of construction. [206]–[207].
(6) His Honour held that Queensland Power Co Ltd v Downer Edi Mining Pty Ltd [2010] 1 Qd R 180 is not a definitive statement of all the relevant cases where a draft contract may be admissible in aid of construction. [199]–[200].
(7) His Honour considered an entire agreement clause that provided that all previous negotiations, understandings, representations, warranties, memoranda or commitments concerning the subject matter of the deed were merged in and superseded by the deed and were of no effect, and that no party was liable to another party in respect of those matters. His Honour concluded that the clause did not preclude the admission of extrinsic evidence in aid of construction because the clause did not purport to have an evidentiary effect. [208]–[211].
Disposition
Ultimately, his Honour found in favour of the plaintiff on the ground that it was an implied term of the WIRP Deed that the Customer had a duty to act in good faith towards and deal fairly with the plaintiff in respect of giving notice under cl 6.1(c), and that the duty was breached. [13]–[14].
M J Hafeez-Baig