In this case, a dispute arose as to which of the three joint venture parties was entitled to monies payable by the buyer under a contract for the sale of nickel product. The court found that the general rule that a contract entered into by an agent on behalf of a principal does not create privity with the agent, was in this case displaced by the objective intention of the parties as expressed in the contract.
6 November 2017
In 2009 Glencore entered into a contract with Queensland Nickel (the applicant), QNI Metals and QNI Resources for the purchase of nickel produced at a refinery near Townsville. . The refinery and its production were owned by a joint venture of QNI Metals and QNI Resources, but managed and operated by Queensland Nickel. –. In early 2016 Queensland Nickel was placed into administration and became subject to a winding up. . Glencore was aware that there was a dispute as to who was entitled to the monies which it owed under the contract, so by originating application had the monies (AU$5,028,430.17) paid into Court before being excused from further participation. –. The question for the Court was:
As at the time that Glencore paid the monies into Court, which of:
(1) Queensland Nickel Pty Ltd;
(2) QNI Metals Pty and QNI Resources Pty Ltd; or
(3) Queensland Nickel Sales Pty Ltd;
had the legal right to recover from Glencore amounts owing by it under the contract …
For reasons explained below, Justice Bond concluded that the answer was Queensland Nickel. .
Justice Bond noted that contracts entered into by an agent on behalf of a principal are generally construed as being entered into by the principal only, with the consequence that the agent cannot sue on the contract (citing Montgomerie v United Kingdom Mutual Steamship Association  1 QB 370 per Wright J). However, “the fundamental question in every case must be what the parties intended”, and where the parties have expressed themselves in writing, what the proper construction of that writing is. . The respondent companies argued that, consistent with the principle expressed in Montgomerie, because Queensland Nickel had contracted as a disclosed agent, the only privity of contract was between QNI Metals / QNI Resources and Glencore.
Justice Bond concluded that an analysis of the contract revealed that the objective intention was that “Queensland Nickel had the legal right to recover from Glencore amounts owing by it under the contract”. . Particular emphasis was placed on two factors: firstly, Queensland Nickel was designated by use of the expressions “Manager” and “Seller”, while Glencore was designated by the expression “Buyer”. . The various conditions were expressed in terms generally consistent with there being only two parties to the transaction (the “Buyer” and the “Seller”) and there was no mention of QNI Metals or QNI Resources in the operative terms. –. The creation of rights and obligations by reference to those terms strongly suggested that Queensland Nickel was intended to owe obligations to Glencore personally. . Secondly, that intention was also demonstrable by a reference in the recitals to Queensland Nickel being provided with an interest free line of credit in the form of a pre-payment mechanism. .
Finally, having earlier noted that a Court generally approaches the task of construing a commercial contract with an assumption that the parties “intended to produce a commercial result”, his Honour considered what the point was of making QNI Metals and QNI Resources parties to the contract. , , . His Honour concluded that, from Glencore’s perspective, the purpose was to obtain certainty that it had the benefit of a promise by these other companies that Queensland Nickel would do the things they promised. . From the perspective of the other companies, the purpose was to have certainty as to the benefit of Glencore’s promise, which they could then enforce. .