//
[2021] WASCA 193
General information, not legal advice.
Court of Appeal (WA)
2021-11-17
Quinlan CJ
Original judgment source is linked above.
1 This appeal concerns a single question of construction of a price review clause in a long-term gas supply contract: does failure, in giving notice to initiate a price review, to comply with a time stipulation mean that the attempt to invoke the price review clause is ineffectual?
2 The appellants are joint venture participants in the Gorgon Gas Project. The respondents are entities in the Rio Tinto Iron Ore Group and operate iron ore mines in the north west of Western Australia. Under a contract between the parties, the appellants (Sellers) agreed to supply the first respondent (Buyer) gas over a period of [number redacted][1] years. The second and third respondents guaranteed the Buyer's obligations.[2]
3 The gas supply contract between the parties provides that, every [number redacted] years, either party may initiate a review of the price of the gas by issuing a notice within a stipulated time frame. Clause 14, which contains 19 subclauses, creates an elaborate regime for a Price Review, defined by cl 14.1 as a price review in respect of the Base Reference Gas Price (BRGP). By cl 14.3, either party may initiate a Price Review by issuing the other side 'a notice which complies with Clause 14.4 ('Price Review Notice') not more than 120 days nor less than 90 days prior to a Price Review Date'.
4 In [month redacted] 2020, the Buyer issued a notice some three weeks late, outside that time frame. In the primary proceedings, the Buyer claimed that the notice was effective to initiate a Price Review, notwithstanding that it was issued outside the time frame. It sought a declaration to that effect. The Sellers counterclaimed and sought a declaration to the contrary.
6 The judge discussed numerous factors relied on by the parties for and against the competing constructions. The primary judge concluded that the time stipulation was not essential and that a Price Review Notice could be issued until the Price Review Date (defined in cl 14.2, set out in [28] below) but not after that date. Her Honour considered the factors of particular signifi[5]ance to be:5
(1) the way in which 'Price Review Notice' is defined, so as to exclude the time stipulation, when that term is read into cl 14.5;
(3) the limited termination rights in the context of a take or pay contract;
(4) the absence of a deeming provision setting out the consequences of non-compliance with the time stipulation; and
(5) the uncommerciality of a construction of cl 14 under which the right to a Price Review in respect of a Price Review Date may be lost simply by a failure to issue the notice within the timeframe stipulated in cl 14.3.
7 The Sellers appeal against the primary decision on two grounds. In substance, the grounds contend that the Sellers' construction is to be preferred and the words 'not more than 120 days nor less than 90 days prior' in cl 14.3 of the contract should be construed as being essential, so that a notice given outside the notice window would be ineffective to initiate a Price Review under cl 14.
8 For the reasons that follow, we prefer the Sellers' construction and so would uphold the appeal. In our view, time is of the essence of the time stipulation in cl 14.3. In other words, the power under cl 14.3 to initiate a Price Review can be invoked only by giving notice within the period stipulated in it. In short, consideration of the text of cl 14.3, in the context of cl 14 as a whole, seems to us to demand that conclusion. The competing constructions give no work to the time stipulation in cl 14.3 and create intractable disharmony with other provisions of cl 14.
9 On or about [date redacted], the parties entered into an agreement entitled Agreement for Sale and Purchase of Gas (GSA). The GSA is a long‑term contract for the sale of gas by the Sellers to the Buyer from the Start Date to the End Date.
10 The Start Date (Start Date) under the GSA was [date redacted], but, following amendment of the GSA by five deeds of amendment, the Start Date was varied to be [date redacted]. The End Date is [number redacted] years from the Start Date.
11 Under cl 14, at [number redacted]‑year intervals after the Start Date, either the Buyer or the Sellers may initiate a Price Review. When that occurs, a revised price is to be determined by negotiation or, failing agreement, by arbitration.
12 The first Price Review Date was [date redacted] 2020. Consequently, the notice window for that Price Review expired on [date redacted] 2020. The Buyer issued a notice on [date redacted] 2020, after the notice window had expired. The notice otherwise complied with the terms of cl 14.
13 As already noted, the parties advanced competing contentions as to whether the notice was effective to initiate a Price Review.
14 The terms of the GSA reveal, among other things, the following contextual matters:
(1) The GSA was entered into before construction of the facilities for the Gorgon Project, hence the [number redacted] years between the Execution Date and the Start Date (prior to its amendment).
(2) The Sellers had, or intended to have in place, other agreements for the supply of Gas to other buyers within Western Australia.
(3) The Buyer buys Gas to generate power for iron ore operations that are owned and operated by companies within the Rio Tinto Group and their joint venturers in Western Australia.
15 The Sellers are members of a joint venture. The GSA is a separate agreement between the Buyer and each Seller for the sale and purchase of that Seller's proportionate share of the quantity of Gas[6] to be sold to the Buyer: cl 3.3(a).
16 On and from the Start Date and until the end of the Term, each Seller agrees to sell and make Gas available to the Buyer at the Delivery Point, and the Buyer agrees to purchase and pay for, or to pay for if not taken, Gas in the quantities, at the price and in accordance with the terms specified under the GSA: cl 5. The Term runs for [number redacted] years from the Start Date.
17 The Sellers make the Gas available to the Buyer at the Delivery Point, which is the point where the Sellers' facilities meet the Dampier to Bunbury Natural Gas Pipeline (DBNGP): cl 5, cl 7.1. The Buyer takes title to the Gas at the Delivery Point and is responsible for arranging its transportation from the Delivery Point: cl 7.5, cl 8. For this purpose, the Buyer is required to procure and maintain a right to transport Gas on the DBNGP: cl 18.4.
18 The GSA is a take or pay contract: cl 5, cl 11, cl 12.7.
19 There is no clause purporting to limit the freedom of the Buyer to onsell any gas supplied to it under the GSA. The prospect of such onselling is explicitly contemplated by cl 8(g) and cl 8(h) which provide:
(g) The Buyer will use reasonable endeavours to include in all Gas supply agreements entered into after the Execution Date with any Business Customer a requirement for the Business Customer to take reasonable precautions to minimise the risk of, and to insure against, Loss to any equipment, premises or business of the Business Customer which may result from variations in quality or interruptions to Gas supply.
(h) To the extent permitted by law, the Buyer agrees to use reasonable endeavours to obtain an acknowledgment from its customers that:
(i) the quality and continuity of supply of Gas is subject to a variety of factors outside of the Buyer's control, for example, accidents, weather and the acts of third parties; and
(ii) the Buyer does not guarantee the quality or continuity of supply of Gas to the customer and does not vary or exclude any immunity, limitation of liability or indemnity which may be provided under Government regulations.
20 Clause 11 requires the Buyer to give the Sellers information as to the amount of Gas to be taken by the Buyer in good faith, in the form of a staggered series of notifications providing advanced notice to the Sellers of the Buyer's intentions and requirements.
21 The judge adopted the Sellers' summary of the effect of cl 11 in the following terms:[7]
... the amount of gas to be supplied for any day is between [number redacted]% and [number redacted]% of [number redacted] [terajoules], subject to the Annual Contract Quantity and the supply of Make-Up Gas, and:
(a) the Buyer is required to provide in good faith its best estimates on a yearly basis, then updated quarterly;
(b) the Buyer is required to nominate its precise supply requirements in good faith at 2 pm each Friday for each day of the following week;
(c) that nomination can be altered for a particular day by 2 pm the previous day; and
(d) in the absence of any nomination, the supply amount for a day may be set by the [GSA] at the Sellers' discretion.
The effect of clause 11 is that the [GSA] provides for a graduated process pursuant to which the Buyer's prospective estimates evolve into the Buyer's advance nomination of its requirement for the precise quantity of gas for each particular day. That figure is then referred to in clause 12 as the 'Buyer's Nominated Quantity'.
22 Clause 12 deals with the quantities of Gas which the Sellers are obliged to supply. There are detailed provisions governing shortfalls in supply entitling the Buyer to claim additional costs incurred in securing alternative supplies in respect of any Shortfall Gas Quantity. There are also provisions dealing with interruption to supply due to maintenance of the Sellers' facilities.
23 Clause 13 deals with price. The following summary of the effect of cl 13 was common ground at trial:[8]
The amount to be paid for the Gas supplied in each Month, called the 'Gas Quantity Payment' is calculated by reference to the 'Reference Gas Price' applicable to that Month: clause 13.1(a); clause 13.2. Any Take‑or‑Pay Payment payable in a Contract Year under clause 12.7 is calculated by reference to 'the mean of all Reference Gas Prices applicable during that Contract Year': clause 12.7(a); Item 6 of the Key Commercial Terms.
Item 3 of Key Commercial Terms sets out how the Reference Gas Price is to be calculated. In effect, it is calculated by reference to the Base Reference Gas Price applicable in that Month adjusted according to a formula for changes in CPI. The formula is expressed as follows:
[formula redacted]
Clause 13.1(b) provides 'Unless and until revised amounts have first been agreed, established or determined under Clause 14, the amount of the Base Reference Gas Price shall be BRGP0 as set out in Item 2 of the Key Commercial Terms'.
The Base Reference Gas Price that applies for the period from the Execution Date until Price Review number 1, is the confidential $/GJ figure set out in Item 2 of the Key Commercial Terms.
24 Thus, by cl 13.1(b), unless and until the BRGP that applies as at the execution date, namely BRGP0, is altered following a Price Review, it will remain the same.
25 'Market Price' is defined to mean a representative wholesale market price of Gas under Long Term Contracts that have been entered into, amended on price or have had a price review in the last [number redacted] years for supply to the Relevant Gas Market (whether arising from price reviews, new supplies or otherwise) adjusted (by either adding or subtracting transportation costs) as though delivered to the Delivery Point.
26 'Long Term Contracts' is defined to mean contracts for the wholesale supply of gas for a term of [number redacted] years or greater and an average quantity of [number redacted] TJ or more per Day, but excluding the GSA.
27 'Relevant Gas Market' is defined to be the wholesale market for gas under contracts for supply for resale to gas customers in Western Australia and as direct sales by gas producers to end users in Western Australia for whose business gas retailers and/or other gas producers would normally be expected to compete.
28 Clause 14 of the GSA, the construction of which is the issue in the appeal, is in the following terms:
(a) The purpose of this Clause 14 is to enable the Buyer or the Sellers to request a price review in respect of the BRGP ('Price Review') if the Buyer or the Sellers believe the Market Price has moved compared with the Market Price prevailing:
(i) at the Execution Date; or
(ii) when a revised BRGP was most recently agreed or determined in a previous Price Review.
(b) The Base Reference Gas Price applicable in a Month is:
(i) unless Clause 14.1(b)(ii) applies, BRGP0; or
(ii) the most recent BRGP to apply pursuant to Clause 14.17.
(c) The BRGP established at Price Review number 'r' (expressed in dollars/GJ[9]) shall be referred to as 'BRGPr'. For example, the BRGP established at Price Review number 2, is referred to as BRGP2.
(a) [redacted]
(b) [redacted].
Any revised BRGP arising from a Price Review will apply in accordance with Clause 14.17.
The Buyer or the Sellers may initiate a Price Review by issuing, in the case of the Buyer, to the Sellers and the Sellers' Representative and in the case of the Sellers, to the Buyer, a notice which complies with Clause 14.4 ('Price Review Notice') not more than 120 days nor less than 90 days prior to a Price Review Date.
A Price Review Notice shall be issued in accordance with Clause 28[10] and shall state:
(a) the BRGP at the Price Review Date;
(b) the proposed new BRGP (in the dollars/GJ of the Contract Year of the Price Review Date);
(c) reasons for the proposed new BRGP; and
(d) any other matters the Party or Parties issuing the Price Review Notice consider relevant in determining the proposed new BRGP.
Upon receipt of the Price Review Notice by the Buyer or the Sellers, the Buyer and the Sellers ('Reviewing Parties') shall meet and, in good faith, discuss the proposed new BRGP and seek to agree on a new BRGP prior to the Price Review Date.
In establishing the revised BRGP, the Reviewing Parties will consider only the factors outlined in this Clause 14.6.
(i) at the Execution Date, BRGP0 is deemed to be equal to the Market Price; and
(ii) they intend the BRGP will remain a price equal to the Market Price through Price Reviews conducted under this Clause 14.
(b) For the purposes of determining the Market Price regard shall be had to the terms for the supply of Gas under Long Term Contracts[11] that are in existence and unconditional as at the Price Review Date and the corresponding prices that would apply if such Gas was made available under the terms of this Agreement ('Standard Terms'). These terms will include:
(i) [redacted];
(ii) [redacted];
(iii) [redacted];
(iv) [redacted];
(v) [redacted];
(vi) [redacted];
(vii) [redacted];
(viii) [redacted];
(ix) [redacted];
(x) [redacted];
(xi) [redacted];
(xii) [redacted];
(xiii) [redacted]; and
(xiv) the capability and/or reliability of seller's facilities.
(c) For the avoidance of doubt, no account shall be taken of:
(i) [redacted];
(ii) [redacted];
(iii) [redacted];
(iv) [redacted];
(v) [redacted];
(vi) [redacted]; and
(vii) [redacted].
For the purposes of the matters specified above, 'contract' means a Long Term Contract.
(d) In determining the Market Price the weighting given to different Long Term Contracts (converted to Standard Terms) will be determined by:
(i) how recently they were entered into, amended on price or experienced a price review; and
(ii) their significance in establishing the wholesale price of Gas in the Relevant Gas Market[12].
(e) The adjustments for pipeline tariffs used to determine (by either adding or subtracting transportation costs) the Market Price shall be taken to be the lower of:
(i) [redacted]; and
(ii) [redacted].
If the Reviewing Parties have not agreed a revised BRGP by the Price Review Date then, within 3 days of the Price Review Date, each Reviewing Party must submit to the other Reviewing Party in writing a proposed final value for the revised BRGP ('Final Price'). The Final Price must be expressed as a number in $/GJ and not require calculation from variables.
If the Reviewing Parties are unable to agree on a revised BRGP within 7 days of each Reviewing Party submitting its Final Price, then either Reviewing Party may refer the matter to arbitration by giving Notice to the other Reviewing Party ('Arbitrating Parties').
The arbitration shall be heard and determined by three arbitrators. Each Arbitrating Party shall appoint an arbitrator of its choice within 20 days of receipt of a Notice by either Reviewing Party requiring arbitration. The Party‑appointed arbitrators shall in turn appoint a presiding arbitrator within 10 days of the appointment of the last of the Party‑appointed arbitrators. If the Party‑appointed arbitrators fail to agree on a presiding arbitrator or an Arbitrating Party fails to appoint its own arbitrator within the prescribed periods, then either Arbitrating Party may request the President of the Bar Council of the Western Australian Bar Association (Inc) to appoint an independent arbitrator as the presiding arbitrator or for that Arbitrating Party as applicable.
14.10 Arbitrators to be independent and impartial
The arbitrators shall be and remain at all times wholly independent and impartial.
(a) Each Arbitrating Party shall make a written submission ('Price Review Submission') to the arbitrators within 10 Business Days of the appointment of the presiding arbitrator. The Price Review Submission shall contain:
(i) the Arbitrating Party's proposed Final Price together with:
(A) reasonably substantiated reasoning for its Final Price;
(B) an explanation of all methodologies used to calculate its Final Price;
(C) all relevant data and information to support its Final Price; and
(D) indications of confidentiality issues associated with any of the information and data provided in the Price Review Submission; and
(ii) in relation to the Arbitrating Party who initiated the Price Review, reference to the Price Review Notice.
(b) Within 5 Business Days of an Arbitrating Party sending a Price Review Submission to the arbitrators, the arbitrators shall provide a copy of that Arbitrating Party's Price Review Submission, excluding any confidential information and data, to the other Arbitrating Party. Within 10 Business Days following the receipt of the other Arbitrating Party's Price Review Submission, the receiving Arbitrating Party may submit to the arbitrators a written response ('Price Review Response') to that Price Review Submission and may also submit a revised Final Price. Within 5 Business Days of an Arbitrating Party sending a Price Review Response to the arbitrators, the arbitrators shall provide a copy of that Party's Price Review Response to the other Arbitrating Party excluding any confidential information and data.
(c) Once each Arbitrating Party has received a copy of the other Arbitrating Party's Price Review Submission, or, if a Price Review Response has been submitted by both Arbitrating Parties, a copy of that Price Review Response, the arbitrators will hear oral argument and evidence led from each Arbitrating Party in support of its Price Review Submission and, if any, Price Review Response and in reply to any Price Review Response submitted by the other Arbitrating Party.
14.12 Arbitrators to determine revised Base Reference Gas Price only
The arbitrators must determine a revised BRGP in accordance with this Clause 14 and shall only have regard to:
(a) Clause 14.1 and the pricing principles described in Clause 14.6; and
(b) facts, data and information included in the Price Review Submissions, Price Review Responses or oral arguments and evidence led at the hearing (including documents obtained by way of discovery or by the issue of subpoenas) that support, and are consistent with, the matters specified in Clause 14.12(a) above.
The arbitrators are obliged to check the validity of the data supplied in the Price Review Submissions and Price Review Responses to the extent that the confidential nature of the data means either that it is not fully included or described in the Price Review Submissions or Price Review Response or the other Arbitrating Party is not able to critique the data.
The arbitrators shall issue their decision as soon as possible, and must take all available steps to issue their decision within nine months of the Price Review Date.
The decision of the arbitrators shall be final and binding and each Arbitrating Party irrevocably waives its right to any form of appeal, review or recourse.
Except as expressly modified by this Clause 14, arbitrations conducted pursuant to this Clause 14 shall be conducted in accordance with the provisions of Clause 24 and Exhibit E. In the event of any conflict between the provisions of this Clause 14 and the provisions of Clause 24 and Exhibit E, this Clause 14 will prevail to the extent of the inconsistency. To avoid doubt, Items E.8, E.9 and E.10 of Exhibit E are not inconsistent with the provisions of this Clause 14.
(a) Each Party will bear all of its own costs incurred prior to the commencement of arbitration.
(b) Subject to Clause 14.16(c), the allocation of the Arbitration Costs between the Arbitrating Parties shall be determined by the arbitrators and stated in the arbitral decision. In reaching their decision on the allocation of Arbitration Costs the arbitrators will have regard to the relative magnitude of the difference between each Arbitrating Party's Final Price and the value of BRGP determined by the arbitrators.
(c) The Sellers will be treated as one party for the purpose of allocation of costs.
(a) Following agreement between the Reviewing Parties or issuance of an arbitral decision, the revised Base Reference Gas Price shall be used in the calculation of the Reference Gas Price under Item 3 of the Key Commercial Terms from time to time for each Month commencing on and from the Price Review Date for that Price Review.
(b) Within 30 days of an arbitral decision or the agreement of the Parties, each Seller shall issue a statement to the Buyer showing any sum which becomes owing pursuant to the calculation in Clause 14.17(a); provided that if the Sellers have been recovering costs from the Buyer for new or varied Taxes pursuant to Clause 15.l, then such recovered costs shall be taken into account in determining any sum owing. Such sum shall be paid by the Buyer or the Seller (or Sellers) (as the case may be) in accordance with Clause 17.7 not later than 30 days after issue of the statement to the Buyer. Interest on that sum will be calculated daily at an annual rate equivalent to the Interest Rate plus [number redacted]% and will be compounded at 30 day intervals starting from the Price Review Date and ending on the date of payment.
If, and for as long as, no agreement has been reached between the Reviewing Parties in respect of a Price Review and no arbitral decision has been issued or taken effect, the rights and obligations of the Parties and the prevailing BRGP under the Agreement shall continue in full force and effect.
14.19 Base Reference Gas Price fully inclusive of Taxes
The BRGP agreed by the Reviewing Parties or determined as a result of a Price Review is and will be fully inclusive of all Taxes prevailing at the time of its establishment.
29 There is a force majeure clause: cl 27. Under that clause, either party may terminate where there is prolonged force majeure: cl 27.9. However, by cl 27.3, the following events do not constitute force majeure events:
(2) loss of customers, loss of market share, reduction in demand for gas or electricity;
(3) failure or inability to perform attributable to the Reference Gas Price, or currency devaluation.
30 Each of the Buyer and the Sellers may terminate the GSA if the other party does not cure certain defaults within stipulated periods: cls 31.1 ‑ 31.6. There is no termination for convenience clause. Clause 31.10 provides that the only rights of the parties to terminate the GSA are those expressly provided in cl 31, namely uncured defaults and - in cl 27.9 - prolonged force majeure.
31 Clause 30 establishes an elaborate regime limiting the liability of the parties, and the Sellers in particular, as to any shortfall in supply. Clause 30.4 establishes an exclusive remedial regime for any provision that creates a payment obligation in respect of a breach.
...
(c) No failure to exercise or delay in exercising any right or remedy arising from this Agreement shall operate or be construed as a waiver of a right or remedy.
(d) If a Party does not exercise a right or remedy fully or at a given time, the Party may still exercise it later.
(e) A Party may exercise a right or remedy or give or refuse its consent in any way it considers appropriate (including by imposing conditions), unless this Agreement expressly states otherwise.
(f) A Party is not liable for loss caused by [among other things] delay in exercising a right or remedy under this Agreement.
33 Her Honour began analysis of the issue by considering the text of cl 14.3, then cl 14 generally, including its purpose. Next, the judge considered the GSA as a whole, identifying other clauses within the GSA capable of bearing on the construction of cl 14. Finally, the judge considered issues of certainty, and the consequences and commerciality of the competing constructions.
34 The primary judge concluded that the time stipulation was not essential and that a Price Review Notice could be issued until the Price Review Date but not after that date, and not before the start of the window provided in cl 14.3. Her Honour considered the factors of particular significance to be:[13]
(1) the way in which 'Price Review Notice' is defined, so as to exclude the time stipulation, when that term is read into cl 14.5;
(3) the limited termination rights in the context of a take or pay contract;
(4) the absence of a deeming provision setting out the consequences of non-compliance with the time stipulation; and
(5) the uncommerciality of a construction of cl 14 under which the right to a Price Review in respect of a Price Review Date may be lost simply by a failure to issue the notice within the timeframe stipulated in cl 14.3.
35 We will outline the more material aspects of the primary judge's reasons.
36 The judge considered that the definition of 'Price Review Notice' in cl 14.3, read with cl 14.5, is a particularly significant indicator that the time stipulation is not essential. In essence, her Honour accepted the Buyer's submissions to the following effect.
37 The term 'Price Review Notice' in cl 14.3 is defined as a notice which complies with cl 14.4 - the definition being before reference to the time stipulation - and, therefore, the time stipulation is not part of the definition of this term. Clause 14.5 effectively says that the parties must engage in good faith negotiations about price upon receipt of a Price Review Notice. Therefore, when the definition of Price Review Notice is inserted into cl 14.5 - as is required by the principles set out in Black Box Control Pty Ltd v TerraVision Pty Ltd[14] - that clause provides that the parties must engage in good faith negotiations about price upon receipt of a notice that complies with cl 14.4. Clause 14.4 itself only contains requirements about the content of a notice and makes no reference to timing.
38 Accordingly, on its plain terms, the obligation in cl 14.5 to engage in Price Review negotiations is conditioned upon the issue of a Price Review Notice regardless of when the notice is issued; it is not conditioned upon the issue of a Price Review Notice within the time stipulation in cl 14.3.[15]
39 The Sellers submitted that cl 14.3 is a non‑promissory condition precedent. The judge said that whether cl 14.3 is a non‑promissory condition precedent asks the same question as the key issue in this case ‑ namely, 'whether the parties intended that the obligation to engage in the price review process would be conditional upon a notice being issued within' the time stipulated in cl 14.3.[16]
(1) Clause 14.3 does not use words such as 'on the condition that' or 'subject to'.
(2) There is no provision which sets out what is to happen if the notice is not issued within the time stipulated.
(3) It is the issuing of a Price Review Notice that triggers the review process in cl 14.5. The obligation to seek to agree arises on receipt of a notice that complies with cl 14.4. It is not conditional on the Price Review Notice being issued within the stipulated period.
41 The judge considered that the principles enunciated in United Scientific Holdings Ltd v Burnley Borough Council[19] could be applied in this case because the circumstances of this case were sufficiently analogous to the rent review context. The judge reasoned that, first, like rent reviews, the Price Review process in cl 14 can benefit either party (Market Price could rise or fall).
42 Secondly, like a rent review, a Price Review does not create a new contract and the obligation to pay the revised price, as determined by the rent review process, is an obligation to which the parties agreed when they entered the GSA.
43 Finally, the judge accepted that the party receiving the Price Review Notice could be prejudiced by it being issued outside the time stipulated. But, she said, '[n]evertheless, the nature of that prejudice is not of the quality of the prejudice that could be suffered by a failure to comply with a clause that stipulated the time for delivery in a contract for the sale of a wasting asset or of a perishable commodity or something likely to change rapidly in value'.[20]
44 Her Honour added that, though she found that the principles from United Scientific v Burnley could apply to this case, that would not be determinative of the construction of cl 14.[21]
45 The Sellers submitted that, if the time stipulation in cl 14.3 were not essential, it would have no work to do.[22] The judge disagreed and found that if not essential, cl 14.3 would still have work to do in two senses.
46 First, her Honour said, if the time stipulation were not essential, a notice issued outside of the time stipulation would be effective to initiate a Price Review but would 'still be a breach of cl 14.3'.[23]
47 Secondly, the judge said that, if non‑essential, the time stipulation would have work to do in that it fixes the date after which a party could issue what the judge referred to as a 'deadline notice'. A deadline notice is a notice given after the elapsing of a non‑essential time period that sets out a reasonable time within which the relevant right must be performed or exercised. The effect of a deadline notice is, the judge explained, to make time of the essence.[24] The judge considered and rejected each of the Sellers' submissions to the contrary.
Textual considerations outside of cl 14.3 but within cl 14
48 Next, the judge turned to textual considerations arising from the other subclauses of cl 14.
49 The judge noted that, given the time stipulation in cl 14.3, the GSA contemplates that the parties would have three to four months to perform their obligation under cl 14.5, that is, to meet and, in good faith, discussed the proposed new BRGP and seek to reach agreement prior to the Price Review Date. The judge observed that if, as the Buyer contended, the time stipulation were not essential, the time available for negotiations pursuant to cl 14.5 could be significantly curtailed (by one party issuing a Price Review Notice late). Accordingly, the judge said, a factor that bears on whether the time stipulation is essential is whether the parties would have entered the GSA had they not been assured of strict or substantial compliance with it.[25]
(1) cl 14 as a whole demonstrates the parties objectively placed a value on the opportunity to reach an agreement through good faith negotiation, in the hopes of avoiding an arbitration;
(2) during the negotiations pursuant to cl 14.5, the parties are expressly required to act in good faith;
(3) the negotiations during that period are not intended to be merely commercial bargaining as to price;
(4) the parties are required to undertake as much of the task required by cl 14.6 as the information that they have permits;
(5) the GSA does not presume that the parties will be unable to meaningfully undertake that task;
(c) undertake the task together, or to meet, discuss or negotiate for any period of time or in any particular manner; and
(7) the parties objectively intended to give themselves sufficient time to undertake the task required by cl 14.6 and to seek to reach an agreement prior to the Price Review Date or at least before the date on which either party would have the power to refer the matter to arbitration by providing notice to the other party (see cl 14.8).
51 The judge accepted that the GSA appears to contemplate that the parties would have sufficient time to reach an agreement by negotiating in good faith prior to the review date and that, on the Buyer's construction, the opportunity for the parties to do that could be significantly curtailed.[27] The judge also accepted that the GSA evidently contemplates that the parties would have sufficient time to seek to reach agreement by negotiation in good faith prior to the Price Review Date. These matters supported the Sellers' construction, the judge found. However, that support was limited by the fact that the parties would continue to negotiate after the Price Review Date and that there is no fixed start date for any arbitration ‑ the GSA, by cl 14.8, merely sets a date from which either party can refer the matter to arbitration.[28] The judge also found that the reduction in time available for negotiation was not outside the control of the parties as a party concerned about delay could issue a Deadline Notice.[29]
52 The judge rejected the Sellers' submission that the purpose of cl 14 was to enable a party to request a Price Review if they believe the Market Price has changed. The judge found, in effect, that the purpose of the Price Review in cl 14 was to enable the parties to ensure that, if the Market Price changes, the price will be adjusted at regular intervals so that the BRGP remains a price equal to the Market Price.[30] The judge concluded that this strongly supported the Buyer's construction.[31]
53 The judge observed that although, at a high level the purpose of cl 14 is to enable a request for a Price Review, the purpose of enabling a request is to enable the parties to have the price adjusted to reflect Market Price at regular intervals if either party believes the Market Price has changed. The judge pointed out some of the factors to which she had regard in considering the purpose of cl 14:[32]
(1) the length of time between reviews;
(2) that a party needs, at most, a belief that the Market Price has changed;
(3) that the right to initiate a review is the right of both parties;
(4) the express statement in cl 14.6(a)(ii) that the parties intend the BRGP will remain a price equal to the Market Price through Price Reviews conducted under cl 14; and
(5) the [GSA] as a whole, including the take-or-pay obligation on the Buyer, the limited termination rights, and the nature of the commercial relationship established under the [GSA].
54 The judge said that the fact there are limited rights to terminate the contract weigh against an objective intention that (as the Sellers contended) the right to engage a Price Review would be lost ‑ and a party would have to continue paying a price it did not believe reflected the Market Price ‑ if the Price Review Notice were sent outside the time stipulation. According to the judge, the fact the contract is a take or pay contract weighs further against the Sellers' construction.[33]
55 Clause 31.1 and cl 31.3 give the Buyer and the Sellers (respectively) the right to provide the other side a notice if the other side does not perform on time and as required by the agreement, other than an obligation to make available or take gas, where the non‑performance is material in the context of the GSA as a whole.
56 The judge said this contemplates that not all failures to perform on time will be material. This supported the Buyer's construction but, her Honour said, it is of relatively little weight.
57 The Buyer submitted that cl 32.1(c), (d) and (e) show that delay in the exercise of a right is not fatal.
58 Ultimately, the judge said it was unnecessary to decide whether cl 32.1(d) applies to cl 14.3 because her ultimate conclusion was that the time stipulation in cl 14.3 is not of the essence.
59 The judge observed there was no deeming provision that sets out what is to follow if a notice is not issued within the time stipulation, but that the GSA provided deeming clauses in other contexts. This weighed in favour of the Buyer's construction. Her Honour rejected the Sellers' submission that cl 13.1(b) is a type of deeming provision for cl 14.3.[34]
60 The judge did not accept the Sellers' submission that the Buyer's construction gave rise to uncertainty for a party concerning whether there would be a Price Review and that the value evidently placed by the parties on certainty, reflected most clearly in cl 11, favoured the Sellers' construction.[35]
61 The judge found that to construe cl 14 so that the time stipulation in cl 14.3 is essential gives rise to uncommercial or harsh results that are unlikely to have been intended by the parties. The judge considered it highly unlikely that, reading cl 14 and the GSA as a whole, the parties objectively intended that the opportunity to initiate a Price Review could be lost by failing to issue a notice within the stipulated period.[36] The judge considered this a significant factor in support of the Buyer's construction.[37]
62 The judge concluded that on a proper construction of the GSA, the time stipulation in cl 14.3 is not essential.
63 The Sellers appeal the judge's decision on two grounds:
1. The primary judge erred in law by declaring that the notice dated [date redacted] 2020 issued by the first respondent to the first to seventh appellants, and received on [date redacted] 2020, pursuant to clause 14 of the [GSA] (Notice) was effective to initiate a Price Review for the purposes of clause 14 of the GSA: Order 1 of the orders of the [primary judge] made on 21 August 2020.
(a) The trial judge erred in law by finding that the words 'nor less than 90 days prior' in cl 14.3 of the GSA were not of the essence: J[317] - [320].
(b) The trial judge erred in law by finding that:
(i) cl 14.3 of the GSA contained an obligation capable of breach: J[12]; and
(ii) rejecting the appellants' submission that cl 14.3 of the GSA was a non-promissory condition precedent: J[113] ‑ [120].
(c) The trial judge erred in law by finding that United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 (United Scientific) was analogous and thus applied to the present case: J[134].
(d) The trial judge erred in law by failing to find that the presumption in United Scientific was not rebutted by the text of the GSA: J[278] and [318(4)].
(e) The trial judge erred in law by finding that the concept of a 'Deadline Notice' supported a construction that time was not of the essence in respect of cl 14.3 of the GSA: J[161] ‑ [162].
(f) The trial judge erred in law by finding that the time stipulation in cl 14.3 of the GSA has effect because a breach results in damages: J[136] and [138].
(g) The trial judge erred in law by failing to find that if time was not of the essence in cl 14.3 of the GSA then a notice could be issued at any time: J[16] - [17]; J[293].
(h) The trial judge erred in law by failing to find that the negotiation period provided for in cl 14 of the GSA supported a construction requiring compliance with the time stipulation in cl 14.3 of the GSA: J[194] - [196], J[210] - [214], J[226].
(i) The trial judge erred in law by finding that the limited rights of termination in the GSA supported a finding that the time stipulation was not of the essence: J[250] - [252] and [318(3)].
(j) The trial judge erred in finding that a construction which rendered a late notice under cl 14.3 of the GSA of no effect was uncommercial and/or that the consequences of [sic] were so harsh that the parties could not have intended such a notice to have effect: J[310], [314], [316] and [318(5)].
2. The primary judge erred in law by failing to declare that the Notice was ineffective to initiate a Price Review for the purposes of clause 14 of the GSA: Order 2 of the orders of the [primary judge] made on 21 August 2020.
Particulars
(a) The appellants repeat the particulars to Ground 1 above.
64 In substance, grounds 1 and 2 amount to a single proposition - the judge erred on the question of whether time was of the essence of the time stipulation in cl 14.3.
The parties' submissions The Sellers' submissions
65 The Sellers submit that, on a proper construction of the GSA, the temporal limit in cl 14.3 - in its words 'not more than 120 days nor less than 90 days prior to a Price Review Date' - is of the essence, so that notice given outside the stipulated period is ineffective.
66 The Sellers point to five textual indicators favouring their construction.
67 First, the language of the time stipulation is clear. Nothing in the surrounding circumstances or commercial purposes or objects of the GSA indicates that anything other than the meaning of the plain language of cl 14.3 was intended.[38]
68 Secondly, the Sellers submit that, properly construed, cl 14.3 is a non‑promissory condition precedent to the duty to perform an obligation. The language used is not that of a promise ‑ cl 14.3 says that either party 'may' issue a Price Review Notice, not that either party 'must' or 'will' do so.[39]
69 With reference to Perri v Coolangatta Investments Pty Ltd,[40] Tricontinental Corporation Ltd v HDFI Ltd[41] and GR Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd,[42] the Sellers submit that the consequence of cl 14.3 being a non‑promissory condition precedent is that this endows it with the character of essentiality. They say this is implicit in Mason J's judgment in Perri v Coolangatta.[43]
70 The Sellers reiterate that the time stipulation in cl 14.3 is not concerned with performance of an obligation. Rather, cl 14.3 confers a 'true Hohfeldian power on the parties' (original emphasis) - the power to issue a notice within the time stipulation which, if exercised, triggers cl 14.5, thereby altering the parties' rights and obligations. The time stipulation 'defines the extent of the power'.[44]
71 Thirdly, the Sellers submit that the parties objectively intended to prescribe when a Price Review can be initiated, thereby preventing the possibility that a costly, time‑consuming Price Review could be initiated at any time of one party's choosing.
72 Further, they submit, limiting the opportunity to initiate a Price Review to the time period in cl 14.3 provides the parties certainty as to the significance of other third‑party gas supply contracts on the price of gas under the GSA. Under cl 14.6 of the GSA, in establishing the revised BRGP it is mandatory to consider other Long Term Contracts that are in existence and are unconditional as at the Price Review Date. The more recently those other contracts are entered into, the more significant they are likely to be in a Price Review. Accordingly, the parties objectively desired certainty as to when a party could initiate a Price Review and when the opportunity to do so has ended.[45]
73 Further, the GSA clearly contemplates that the Buyer may onsell gas it acquires; see cl 8(g). The Buyer thus has an evident interest in certainty as to whether there will be a Price Review, which interest would be defeated if it is open to a party to initiate a Price Review outside the stipulated period.[46]
74 Fourthly, the Sellers submit that, by the time stipulation in cl 14.3, the parties agreed they would have three to four months for negotiations. If time were not of the essence, that negotiation period would fall away. They point to features of the requirements of cl 14 from which, they submit, the rationale for the prescribed negotiation period is apparent.[47]
75 Fifthly, cl 14.1 states that cl 14 enables a party to 'request' a review. The GSA does not make Price Reviews automatic and, unless a review is engaged, the existing price continues. The Sellers reiterate their submission that maintaining the price at Market Price is not an overriding objective of the GSA or the purpose of cl 14.[48]
76 The Sellers' particulars of ground 1 and their submissions assert nine errors by the primary judge in reaching her construction.
77 First, they say the judge erred in finding that cl 14.3 was capable of breach and erred in rejecting their submission that cl 14.3 is a non‑promissory condition precedent.
78 In so submitting, the Sellers respond to a point of evident significance in the primary judgment ‑ namely, the placement of the definition of 'Price Review Notice' before the time stipulation. They advance the following reasons why weight should not be placed on that definition to conclude in favour of the Buyer's construction. First, the time stipulation is contained in the clause which sets out the power to issue a Price Review Notice. Unless and until the temporal element is complied with, one need not consider the contents of the notice (cl 14.4) or the negotiation obligation (cl 14.5). Secondly, they submit, to rely on the placement of the definition of Price Review Notice to say that a notice can be issued any time before the Price Review Date would leave the time stipulation no work to do.
79 The Sellers assert that the judge's failure to accept cl 14.3 as a non‑promissory condition precedent led her Honour to erroneously apply the test from Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd[49] to determine whether the time stipulation is 'essential'. They submit that this was in error because there is no promise in cl 14.3 that can be substantially or strictly performed ‑ there is only a power to be exercised. The test in Tramways v Luna Park, they submit, by its very language applies only to promissory terms. Its purpose is to determine whether non‑performance justifies termination. No question of a right to terminate arises in relation to a clause that is merely a condition precedent. Quoting Samuels JA in Tricontinental,[50] the Sellers say that 'it is meaningless to speak of the substantial performance of a condition precedent'.[51]
80 Secondly, the judge erred in finding that this case was sufficiently analogous to the rent review context such that the principles from United Scientific v Burnley applied here. The Sellers say that the rent review context is different from the present one for various reasons.[52]
81 In the only case in which the United Scientific v Burnley principles have been applied to a gas supply contract, Alliance Petroleum Australia NL v Australian Gas Light Co,[53] the relevant time stipulation was for the time within which an arbitrator must be appointed after the process had been effectively initiated. There were no negotiation obligations following the appointment of an arbitrator and so no negotiation period would be eroded if the appointment was done late. On this basis, the Sellers submit, Alliance Petroleum, like United Scientific v Burnley itself, is distinguishable from this case.[54]
82 Thirdly, the Sellers say that, even if United Scientific v Burnley is sufficiently analogous so that its principles apply, the court should find that the presumption that time is not of the essence is rebutted by the text of the GSA.[55]
83 Fourthly, the Sellers submit that the judge erred in finding that, if time were not of the essence, the time stipulation would still have work to do because it would fix the date after which a party could issue a deadline notice. They say this was an error because deadline notices apply only in relation to the non-performance of contractual obligations. Quoting Gibbs CJ in Perri v Coolangatta, they say that it is 'inappropriate that one party to a contract should be able to give a notice requiring the other to complete a sale, when that other party has not promised to do so ... and when it is not necessarily within his power to do so'.[56]
84 The Sellers recognise that in GR Mailman, the New South Wales Court of Appeal accepted in obiter that deadline notices could be applied to non‑promissory conditions precedent. However, the Sellers say that the court had misgivings about this, including that which the judge quoted in her Honour's reasons.[57] The Sellers say Gleeson CJ[58] felt bound to apply United Scientific v Burnley because it had been cited with approval in Gollin & Co Ltd v Karenlee Nominees Pty Ltd,[59] decided one year after Perri v Coolangatta. They submit, however, that Gollin v Karenlee did not say anything express about deadline notices, nor whether they could or should apply to non‑promissory conditions precedent.[60]
85 The Sellers say that Mango Boulevard Pty Ltd v Mio Art Pty Ltd[61] is the only appellate authority in Australia which expressly held that a deadline notice could be issued in respect of a failure to exercise a power. They submit, however, that this court need not pay Farah deference to Mango Boulevard v Mio Art because that case does not itself develop the common law - the Queensland Court of Appeal was merely applying what it perceived to be the state of the common law after Gollin v Karenlee. Further, and in any event, Mango Boulevard v Mio Art is distinguishable as it did not concern a time stipulation.[62]
86 Accordingly, the Sellers conclude, deadline notices are of no application here because cl 14.3 does not contain an obligation. In turn, the time stipulation in that clause would have no work to do if it were found not to be essential.[63]
87 Fifthly, the judge erred when she found that a non‑essential time stipulation still has work to do because, if breached, the defaulting party may be liable in damages. In the case of cl 14.3, the judge said that a late notice would still be effective to initiate a Price Review, but would be a breach of cl 14.3. The Sellers submit that there is no possibility of damages if a Price Review Notice is issued late because there was no promise or obligation to issue a notice.[64]
88 Sixthly, the Sellers contend that the judge erred in failing to recognise that a consequence of her Honour's construction is that a notice can be issued at any time. They submit that the start and end of the window provided in cl 14.3 must be treated alike - that is, if the words 'nor less than 90 days prior' are not of the essence (such that a Price Review Notice could be issued late), then, as a matter of logic, the words 'not more than 120 days' must also be not essential (such that a Price Review Notice could be issued early).
89 The Sellers say that the judge appears not to have appreciated that the start and end of the window provided in cl 14.3 must be treated alike. Her Honour said that 'a notice could be issued until the Price Review Date but not after that'[65] and that 'a Price Review Notice cannot be issued until the start of the 30‑day Notice Window'.[66] The Sellers say it is not apparent why a construction which reads into cl 14 another time stipulation (namely, a notice may be issued at any time after the start of the window in cl 14.3 but before the relevant Price Review Date) should be preferred over that which was expressly agreed and included in cl 14.3.[67]
90 The Sellers add that there is a sensible reason why a Price Review Notice cannot be issued too early, namely, so that the parties could undertake a genuine assessment of Market Price at a future date.[68]
91 Seventhly, the Sellers submit that the judge erred in failing to find that the negotiation period provided for in cl 14 supported a construction requiring compliance with the time stipulation in cl 14.3.
92 Eighthly, the judge erred in finding that the limited rights of termination in the GSA supported, or significantly supported, the conclusion the time was not of the essence in cl 14.3.
93 Ninthly, the judge erred in finding that not giving effect to a late notice would be so harsh that the parties could not have intended this.
94 In written submissions, the Buyer supported and adopted the judge's construction - that a Price Review Notice could be given not before 120 days prior to the Price Review Date and until the Price Review Date, but not after the Price Review Date. However, in oral submissions they advanced a different construction, founded on and said to give full effect to the principles in United Scientific v Burnley - that a Price Review Notice could be issued at any time before, during or after the time stipulated in cl 14.3. That is, a Price Review Notice could validly be given both more than 120 days prior to the Price Review Date, as well as at any time after 90 days prior to the Price Review Date, including at any time after the Price Review Date.[69] On this construction, a Price Review Notice could be given at any time during the whole period of the contract or at least at any time within each [number redacted]‑yearly interval between Price Review Dates, including at any time after one Price Review Date and into the period designated for the next Price Review Date.
95 The Buyer begins by pointing to the context of the GSA. It is a long‑term agreement with limited termination rights. The parties contracted to buy and sell gas for [number redacted] years, regardless of financial hardship or changes to market demand (these matters are expressly excluded from the force majeure provisions). The parties entered the contract [number redacted] years ahead of the Start Date. They must be taken to have known that there could be rises or falls in Market Price in the [number redacted] years leading up to the Start Date, and during the [number redacted]‑year term of the contract.
96 Next, it submits that the features that underpinned the presumption in United Scientific v Burnley apply here. Like in the rent review context, the Price Review process is an agreed contract pricing mechanism that forms a vital part of the contractually agreed consideration in a long‑term gas supply contract. Also like in the rent review context, the Price Review clauses are to the benefit of both parties as the Market Price could rise or fall.
97 The Buyer submits that the line of cases starting with United Scientific v Burnley and encompassing Alliance Petroleum, GR Mailman and Mango Boulevard v Mio Art establish a general principle that time stipulations, whether promissory or non‑promissory, in machinery‑type provisions for determining price adjustments under a contract are not construed as essential unless there is express provision or necessary implication to that effect.[70]
98 The Buyer points to the following seven matters in submitting that the text of cl 14 does not state or imply that time is of the essence.
99 First, it submits that the purpose of cl 14 is contained in cl 14.1 ‑ to enable the parties to request a Price Review. The trigger for the request is the mere belief that Market Price has changed. Clause 14.3, and those that follow, then provide the machinery by which a Price Review is to be initiated.[71] In support of this, it points to the express statement in cl 14.6(a)(ii), in clear and unqualified terms, that the parties intend the BRGP will remain a price equal to the Market Price through Price Reviews conducted under cl 14.[72]
100 The Buyer says that the fact cl 14 does not mandate automatic Price Reviews is simply to avoid the cost and burden of a Price Review if neither party believes the Market Price has changed. Relying on cl 14.1, cl 14.6(1)(a)(ii) and the structure of cl 14, the Buyer submits that the purpose of cl 14 is as the judge found: to enable the parties, through the ability to request a Price Review, to ensure that if the Market Price changes, the price will be adjusted to remain equal to the Market Price.[73]
101 Secondly, it submits, there are no words in cl 14.3 that make the valid initiation of a Price Review conditional upon compliance with the time stipulation. The clause does not use language such as 'on condition that', 'subject to', 'provided that', or 'if' (or any equivalent phrase) the notice is issued in the stipulated period.[74]
102 Thirdly, the Buyer emphasises that the definition of 'Price Review Notice' does not encompass the time stipulation.[75]
103 Fourthly, the obligation in cl 14.5 is not contingent upon a Price Review Notice being issued within the time period ‑ that obligation is enlivened upon (or, 'on') receipt of a notice that complies with clause 14.4.[76]
104 Fifthly, reading cl 14.3 with cl 32.1(d) indicates that if a party did not initiate a Price Review within the time stipulated, they may still initiate it later. This point is the subject of the Buyer's notice of contention.
105 Sixthly, there is no deeming provision providing that the ability to initiate a Price Review is lost if the Price Review Notice is not served within the period mentioned. In that respect, the Buyer points to other clauses having the character of a deeming provision such as cl 11.3(b), cl 19.4(b) and cl 25.6.[77]
106 Seventhly and finally, given the context of the GSA (outlined above) and the importance of Price Reviews in that context, if such a consequence was intended, this should have been specified. That a trifling delay would result in a party losing the right to initiate a Price Review would be an uncommercial construction.[78]
107 The Buyer provides detailed submissions in response to each of the textual matters on which the Sellers rely.
108 The Buyer says that the clarity of the language used is not to the point. The meaning of the time stipulation is clear, but that is not the issue; the issue is the consequences of failing to comply with it. In construing the GSA to resolve that issue, regard must be had to all its clauses, and harmony must be achieved between them.[79]
109 The Buyer makes a number of points in response to the Sellers' contention that the time stipulation is essential 'because it is a non‑promissory condition precedent to the duty to perform an obligation or a "contingent" condition'. In addition to the textual considerations summarised in [99] - [106] above, those points include the following.
110 The Buyer submits that the real issue is whether the obligations imposed by cl 14.5 are contingent upon an event, and the content of any such contingency. It contends that the performance of the obligation to negotiate in cl 14.5 is contingent upon, and only upon, the receipt of the Price Review Notice. In that manner and to that extent, the event (the receipt of the Price Review Notice) can be described as a 'condition precedent' to the performance of the contractual obligation (here, the obligation to negotiate in cl 14.5). It reiterates that the obligation in cl 14.5 is not expressed to be subject to compliance with the time stipulation in cl 14.3. Clause 14.3 cannot be characterised as a condition precedent merely because it is the clause that defines the term 'Price Review Notice' and that term is used in the description of the event upon which the obligation in cl 14.5 is contingent.
111 The Buyer submits that cl 14.3 contains both non‑promissory and promissory aspects. It is non‑promissory in that the parties 'may' initiate a Price Review but are not required to do so. However, it is promissory in the sense that, if a party chooses to initiate a Price Review, they 'promise to issue any Price Review Notice ... within the time period'.[80]
112 As to the Sellers' argument that cl 14.3 confers a Hohfeldian power on the parties to issue a notice within the time stipulated which, once exercised, triggers cl 14.5, the Buyer submits that, whatever the characterisation of cl 14.3 under a Hohfeldian analysis, ordinary businesspeople would regard the ability to initiate a Price Review as a right. This is how, it submits, the ability was referred to in GR Mailman.[81]
113 The Buyer responds to the Sellers' third reason for why strict compliance with the time stipulation is required. It says that, contrary to the Sellers' contentions, as to frequency, only one Price Review can occur in relation to any Price Review Date. A delay in initiating a Price Review will not affect the time and cost involved or alter the fact that price will change on and from the Price Review Date. As to certainty, the Buyer says that uncertainty is inevitable, even if the Price Review is initiated within the window in cl 14.3.[82]
114 As to the Sellers' submission outlined in [72] above, the Buyer submits that this is a new argument that should not be allowed on appeal. In any event, it says, this argument assumes that the parties objectively contemplated that a purpose of the Price Review process would be to 'game' the system and influence Market Price, by delaying negotiations of other third party contracts. It notes that there is no evidence about the parties' influence over Market Price. For example, it queries whether a party would have such control over contracts with third parties that they could delay execution of the third party contract until after the Price Review Date. If so, consideration of that contract would be excluded from the standardisation and weighting process by cl 14.6(b)[83]f the GSA.83
115 The Buyer submits that limited weight should be put on the fact that a late notice could curtail the period contemplated in cl 14.5 for good faith negotiations. The Buyer points to the following features of cl 14. Clause 14.5 does not oblige the parties to engage in good faith discussion for the full period allowed nor does it oblige them to together have regard to the factors in cl 14.6. Further, the parties may continue negotiating after the Price Review Date, as there is no fixed date for a referral to arbitration. The parties are not 'locked in' to the Final Price submitted, under cl 14.7, three days after the Price Review Date. By cl 14.11(b) they may later provide a revised Final Price with their Price Review Response.[84]
116 In summary, the Buyer submits that the judge did not make the asserted errors or any error was not material.
117 The Buyer says the judge did not err in placing weight on the placement of the definition of Price Review Notice in determining whether time was of the essence. The Buyer identifies two related questions of construction that inform whether time was of the essence. The first is whether the time stipulation is a precondition to the obligation in cl 14.5. The second is whether the time stipulation is a precondition to the ability to initiate a Price Review. The placement of the definition, the Buyer says, is a powerful textual indicator on the first and an important textual indicator on the second.
118 The Buyer submits that the judge did not err in applying the essentiality test from Tramways v Luna Park, and that United Scientific v Burnley and GR Mailman show that it is applicable by analogy.
119 The Buyer says the judge was correct to find the rent review context sufficiently analogous for the principles from United Scientific v Burnley to apply. It says the complexity of a Price Review process, and the requirement to negotiate, do not affect the rationale underpinning United Scientific v Burnley.
120 Further, the Buyer submits that the judge did not err in applying the concept of notices to perform, or, as the primary judge called them, deadline notices, in the present context. It submits that United Scientific v Burnley found that deadline notices could be provided in the context of contracts such as this and that the courts in GR Mailman and Mango Boulevard v Mio Art accepted this.
121 The Buyer submits that the time stipulation would still have work to do if it were not essential. Clause 14.3 is partly promissory, so a breach of it would sound in damages. It also provides the temporal framework for giving a deadline notice. Further, apart from these effects, the time stipulation sets out a timetable in a directory sense that records the expectations of the parties and, in appropriate circumstances, could give rise to an estoppel.[85]
122 The Buyer says that an early notice raises different considerations (particularly given it could be later reissued within the time period, such that an early notice would not result in the loss of the ability to initiate a Price Review). In any event, the Buyer submits, there is no reason why a Price Review Notice issued early would be invalid. It notes that, an early Price Review Notice would enliven earlier the obligation to engage in good faith discussions in cl 14.5. However, the obligation is merely for the parties to seek to agree a new price prior to the Price Review Date. All the other steps follow after the Price Review Date. So, the concern that an early notice would cause a review to occur too early, and therefore at a time too far removed from the Price Review Date, would not apply.[86]
123 The Buyer further submits that the judge did not make the other errors asserted by the Sellers.
124 We turn now to determine the critical question of construction of cl 14.
Legal principles and summary of our conclusions
125 As all parties recognise, the question - whether the time stipulation in cl 14.3 is essential - is one of construction.
126 As already noted, the Sellers' particulars and submissions assert a number of errors in the primary judge's reasoning to the conclusion on the critical question of construction. However, demonstration of error in the reasoning process is neither necessary nor sufficient for success on the part of the Sellers. Because a question of construction is one of law, there is only one true construction, and the task of this court in an appeal on a question of construction is to determine for itself the proper construction of the instrument.[87] Thus, it is not necessary to determine the merits of each criticism of the judge's reasoning, although some differences between our analysis and that of her Honour will emerge in the course of explaining our preferred construction.
(1) The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose. The starting point for the proper construction of a clause is the language used in the clause. In particular, one starts by identifying the possible meanings that the words chosen by the parties can bear.
(2) Ascertaining the meaning of terms in an instrument requires a determination of what a reasonable person would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract.
(3) The instrument must be read as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed to have some operation.
(4) The general principle applicable to the construction of commercial contracts is that they should be given a businesslike interpretation. Absent a contrary intention, the court approaches such contracts on the basis that the parties intended to produce a result which makes commercial sense. This requires that the construction placed on the term or terms in question is consistent with the commercial object of the agreement. However, it must also be borne in mind that business commonsense may be a topic on which minds may differ.
128 It may be seen that these principles make no reference to presumptions as to the parties' intentions. Later in these reasons we will explain why we do not accept the Buyer's submission that, in determining the question of construction in this case, the court should start with the presumption that the parties did not intend time to be of the essence in cl 14.3.
129 The conclusions we have reached may be summarised as follows:
(1) Applying the principles of construction summarised in [127] above, on a proper construction of cl 14 of the GSA, it is only by issuing a Price Review Notice within the notice period stipulated in cl 14.3 that a party may effectively initiate a Price Review. Consideration of the text of cl 14.3, in the context of cl 14 as a whole, seems to us to demand that conclusion. The competing constructions create intractable disharmony with other provisions of cl 14 such as cl 14.5 and cl 14.7.
(2) The Buyer's reliance on the general principle asserted in [97] above - that time stipulations in machinery provisions for determining price adjustments under a contract are presumed not to be essential - does not assist them for two reasons:
(a) We do not accept that there is any such general principle applicable to all contracts containing provisions for the adjustment of price, irrespective of the nature, terms and subject matter of the contract and the market within which the contract operates.
(b) Even if such a general principle existed, in its terms it applies only to machinery provisions. In our opinion, cl 14.3 is not properly characterised as merely a machinery provision within the context of the GSA read as a whole.
(3) Even if, somehow, it is appropriate to begin the construction exercise with a presumption that the time stipulation in cl 14.3 is not essential, the matters set out under the heading, 'The proper construction of cl 14', would, in our view, comfortably sustain the conclusion that the presumption was rebutted.
The proper construction of cl 14 Outline of cl 14
130 We begin with an outline of the various provisions contained in cl 14.
131 Clause 14.1 states that the purpose of cl 14 is to enable either party to request a Price Review if the party believes the Market Price has moved, compared with the Market Price at the date of execution of the GSA or prevailing since the most recent Price Review.
132 Clause 14.3 provides for the initiation of a Price Review. 'Price Review' means 'a price review in respect of the BRGP', which is thus a reference to the review process contained in cl 14.[90] Either party may initiate a Price Review by issuing 'a notice which complies with cl 14.4 ('Price Review Notice') not more than 120 days nor less than 90 days prior to a Price Review Date'. 'Price Review Date' is defined in cl 14.2.
133 It can be seen from the terms of cl 14.3 that the definition of Price Review Notice is 'a notice which complies with cl 14.4'. As the Buyer emphasises, the brackets so defining Price Review Notice are located before the time stipulation in cl 14.3.
134 Clause 14.5 imposes obligations on the parties to meet and in good faith discuss the proposed new BRGP and to seek to agree on a new BRGP prior to the Price Review Date. Those obligations arise '[u]pon receipt of the Price Review Notice'.
135 Clause 14.6(a)(ii) records that the parties agree that they intend the BRGP will remain at a price equal to the Market Price through Price Reviews conducted under cl 14.
136 Clause 14.6(b) stipulates, in considerable detail, the matters to which regard is to be had in determining the Market Price.
137 By cl 14.7, if agreement is not reached by the Price Review Date, then within three days of the Price Review Date each party must submit to the other a proposed new price, referred to as the Final Price.
138 By cl 14.8, if the parties are unable to agree on a revised BRGP within seven days of the parties having submitted their respective Final Prices, then either reviewing party may refer the matter to arbitration by giving notice to the other party. No time period is stipulated for the giving of that notice.
139 Clause 14.9 provides for the appointment of three arbitrators. Each party shall appoint an arbitrator of its choice within 20 days of receipt by either party of the notice requiring arbitration. The party‑appointed arbitrators then appoint a presiding arbitrator within 10 days of the appointment of the last of them. If an arbitrating party fails to appoint its own arbitrator within the prescribed period, or if the party‑appointed arbitrators fail to agree on a presiding arbitrator, then either party may request the President of the Bar Council of the Western Australian Bar Association to appoint an independent arbitrator as the presiding arbitrator or as arbitrator for that party as applicable.
140 Clause 14.11 provides a timetable for the parties to make submissions as to their proposed Final Price and for Price Review Responses in response to the other party's submissions.
141 Clause 14.13 provides for the arbitrators to issue their decision as soon as possible and to take all available steps to issue their decision within nine months of the Price Review Date.
142 Clause 14.17 provides for the application of the revised BRGP, following agreement or issuance of an arbitral decision, for each month on and from the Price Review Date for that Price Review.
143 There are, in substance, three competing constructions. The Sellers' construction is that time is of the essence of the time stipulation in cl 14.3. In other words, the power under cl 14.3 to initiate a Price Review can be invoked only by giving notice within the period stipulated in it.
144 The Buyer's construction is that time is not of the essence of the power to initiate a Price Review, and that the power may effectually be exercised at any time, including before the stipulated period and including after the Price Review Date.
145 The judge's construction is that the power to initiate a Price Review may be exercised during the stipulated period, and after the stipulated period up to the Price Review Date, but not thereafter and not before the beginning of the stipulated period.
146 For the reasons that follow, in our opinion, the preferable and correct construction is the construction advanced by the Sellers.
The proper construction of cl 14 - why the Sellers' construction is to be preferred
147 The following matters, in combination, seem to us to compel acceptance of the Sellers' construction. In summary:
(1) the language and structure of cl 14.3 supports the Sellers' construction;
(2) by contrast, nothing in the language and structure of cl 14.3 supports the Buyer's construction or the judge's construction;
(3) the Buyer's construction and the judge's construction are inconsistent with the text of cl 14.3, as they give the temporal element in cl 14.3 no work to do;
(4) the Sellers' construction is harmonious with other provisions of cl 14;
(5) by contrast, the Buyer's construction and the judge's construction produce incoherence with both cl 14.5 and cl 14.7; and
(6) contrary to the Buyer's submission and to the judge's conclusion, cl 14.3, which confers the power to initiate a Price Review, cannot properly be characterized as a mere machinery provision.
148 First, in our view, the language and structure of cl 14.3 firmly supports the Sellers' construction. Clause 14.3 is the sole source of the parties' power to initiate a Price Review. No other provision in cl 14 (or elsewhere in the GSA) so empowers the parties. Clause 14.3 confers on the parties the power to do something which they otherwise could not do, namely, initiate a Price Review, and thereby create obligations upon all parties, by issuing a notice. The clause empowers the parties - they 'may initiate a Price Review' - and specifies the means of exercising that power - 'by issuing ...'. The word 'by' in the clause connotes that what follows it is the means of initiating the Price Review. Thus, the conferral of the power to initiate a Price Review is coupled with the specification of the means by which the power is to be invoked. Issuing the notice within the stipulated period is the sole means provided by the GSA for a party to initiate a Price Review. It follows that if a party does not issue a notice within the stipulated period, the party will not have done what cl 14.3 provides for them to do to initiate a Price Review, with the result that one will not have been initiated.
149 The Buyer emphasises that cl 14.3 does not use the classical language of conditionality, such as 'if' or 'on condition that'. While that may be accepted, the conferral of a power to do X by doing Y naturally conveys, as a matter of the ordinary meaning of the language, that a party wishing to exercise the power thereby conferred, namely to do X, can do so by, and only by, doing Y. Nothing in the ordinary meaning of such language conveys that X may be done in any other manner.
150 Clause 14.3 confers a power on the parties but does not impose any obligations upon them. The language of cl 14.3 is permissive - 'may', it contains or involves no promises. The primary judge's conclusion and the Buyer's submissions to the contrary cannot be accepted.
151 The judge did not explain the basis for her conclusion that a party giving notice outside the period stipulated in cl 14.3 would thereby be in breach of cl 14.3. With respect, we can find no basis for so construing cl 14.3.
152 The Buyer was invited to identify the basis for finding, as it submits, a promissory element in cl 14.3. The response was that this conclusion:[91]
arises as a matter of construction of that clause because it contains within it a reference to the definition of Price Review Notice, but does not include the time element, but it does direct that if you are to initiate, you do so within that window.
...the only other matter that might illuminate that particular argument is the duty of good faith because there's no express promise to initiate. The time period is an aspect that is directory within the clause. And if one is to initiate, then one must do so within the period identified in clause 14.3.
153 Those matters are said to sustain the conclusion that, on a proper construction, not as an implied term,[92] the parties promise that, if they choose to give a notice, they will not give a notice outside the stipulated period. Nothing more was said to explain how a promissory element is contained in cl 14.3. It is, with respect, difficult to make sense of this submission. It falls a long way short of persuading us of the alleged express term. We can see no foothold for the alleged term in the text of cl 14.3. Read in its natural and ordinary meaning, the effect of cl 14.3 is that the parties have agreed that a Price Review for the purposes of cl 14 may be initiated by the issue of a notice in compliance with cl 14.4 within the time stipulated in cl 14.3. To read cl 14.3 as providing that the parties have agreed that issuing a notice that complies with cl 14.4 - which is something neither party is obliged to do - will initiate a Price Review, coupled with an independent promise that the initiating notice will not be given outside of the stipulated period, is at best highly artificial and at worst is to rewrite the clause.
(1) clause 14.3 imposes no obligations. It confers a power on each of the parties to initiate a process which thereby creates mutual obligations and which is liable to lead to a substantive alteration of the parties' rights and obligations;
(2) the time stipulation in cl 14.3 is an element of that conferral of power; it is an aspect of the sole means for exercising the power and it thereby defines and delimits the extent of the power; and
(3) No reasonable businessperson reading cl 14.3 would contemplate that a Price Review could be initiated other than by issuing a notice within the period stipulated in cl 14.3.
155 For these reasons, in our view the language and structure of cl 14.3 strongly suggests that the time stipulation delimits the extent of the power. As will be seen, that reading of cl 14.3 is reinforced by consideration of other parts of cl 14, in particular cl 14.5 and cl 14.7.
156 Secondly, by contrast, the Buyer's construction and the judge's construction find no support in the text of cl 14.3. For the reasons given in [148], [149] and [154], nothing in the language of cl 14.3 suggests that a party may issue a Price Review Notice outside the period stipulated in cl 14.3. The Buyer did not point to any textual foothold in cl 14.3 in support of its construction (or the judge's construction).
157 Thirdly, the Buyer's construction and the judge's construction are inconsistent with the text of cl 14.3, as they give the temporal element in cl 14.3 - its words 'not more than 120 days nor less than 90 days prior to a Price Review Date' - effectively no work to do. A construction that gives each part of an instrument some operation, as the Sellers' construction does, is, on that account, to be preferred to a construction that gives part of the instrument no operative effect.[93]
158 We have already explained why we do not accept the Buyer's submission, and the judge's finding, that the time stipulation in cl 14.3 does work in that giving a notice outside the stipulated period would be a breach of the GSA.
159 The judge also found, and the Buyer also submits, that the time period in cl 14.3 has work to do in, by its expiry, marking the beginning of the period when a party may issue what the judge referred to as a deadline notice. As we have mentioned, the judge referred to a 'deadline notice' as a notice, issued after the time period in cl 14.3 has elapsed, requiring the other party to give a Price Review Notice under cl 14.3 within a stipulated time (which needs to be what a court considers a reasonable time), thereby making time of the essence, failing which the other party would thereafter be precluded from invoking cl 14.3. We reject this proposition as to the work done by cl 14.3 for two reasons.
160 The first reason is that, in our view, the so‑called deadline notice procedure can have no application to cl 14. In submitting that it did so apply, the Buyer advanced two different bases for its application. At first, it submitted that it applied as a matter of construction of the GSA.[94] Later, it submitted that the giving of a deadline notice did not arise as a matter of construction of the GSA, but rather as a consequence of the application to it of the United Scientific v Burnley line of authority.[95] Neither basis can be accepted.
161 As to the first basis, cl 14.3 provides, in its terms, that a Price Review Notice may be issued by taking the stipulated steps within the stipulated time period. In other words, in its terms, cl 14.3 stipulates the period for the giving of a Price Review Notice. There is thus no occasion for, and no reasonable reader of cl 14.3 would have reason to contemplate any occasion for, the giving of a notice stipulating some other time, after the period stated in cl 14.3, by which the other party must give any Price Review Notice. Stipulating a time within which to issue a Price Review Notice is the purpose and effect of the time stipulation in cl 14.3 itself. It would not occur to a reasonable reader of cl 14.3 that, after the stipulated period had elapsed, a deadline notice of this kind could be given, nor that such notice would serve any purpose. To import the notion of a notice making time of the essence to the context of cl 14.3 and the giving of a Price Review Notice is far removed from the parties' objectively ascertained intentions, as revealed by the GSA. It is, in our respectful view, incapable of justification as reflecting the proper construction of the GSA. It was, no doubt, for that reason that the Buyer did not persist in so contending.
162 As to the second basis asserted by the Buyer, the availability of a notice procedure does not arise through the application of the principles in United Scientific v Burnley because, as explained later in these reasons, those principles have no application to, and do not assist in, the question of construction in the present case.
163 The second reason is that, even if the deadline process were applicable, while that would give work to do to the stipulation in cl 14.3 that the notice be given 'nor less than 90 days prior to a Price Review Date', it does not give any work to the words 'not more than 120 days ... prior to a Price Review Date'.
164 Finally, the Buyer also submitted that, even if these arguments were rejected, the temporal element of cl 14.3 would still have work to do as those words would be taken as 'directory'[96] or as 'record[ing] the expectations of the parties as to how the process was to operate'.[97] Little was said by way of explanation of these asserted conclusions or as to how they gave any legal effect to the temporal element in cl 14.3 if the Buyer's preceding arguments (including that the temporal element in cl 14.3 is promissory) were rejected. Moreover, insofar as the Buyer contends that the time element in cl 14.3 is 'directory', it appears to be no more than a label for the consequence of its construction, rather than adding anything to or illuminating the process of construction.[98] Further, even if cl 14.3 were to be construed as 'recording' the non‑promissory 'expectations' of the parties, its effect is so far removed from the text of cl 14.3 as to count strongly against acceptance of that construction.
165 For these reasons, in our view the Buyer's construction gives no work to the temporal element of cl 14.3, which counts firmly against acceptance of its construction.
166 Fourthly, the Sellers' construction is harmonious with other provisions of cl 14.
167 Clause 14.5 provides for obligations to arise 'upon receipt of the Price Review Notice', not upon receipt of a Price Review Notice. The word 'the' indicates that 'the Price Review Notice' is a reference to a Price Review Notice of which mention has already been made. In our view, that must refer to a Price Review Notice issued under cl 14.3, as no other part of cl 14 provides for the issuing of such a notice. Clause 14.3 and cl 14.5 thus operate harmoniously. Obligations arise under cl 14.5 if and only if a party has initiated a Price Review under cl 14.3. It would make no sense, and it would be contrary to the structure of cl 14, for any obligations to arise under cl 14.5 in the absence of a party having initiated a Price Review, which can occur only via cl 14.3. Therefore, the obligation to negotiate in cl 14.5 arises upon receipt of a Price Review Notice issued under cl 14.3 which for the reasons already given is one issued within the time stipulation and which thereby initiates a Price Review. The Sellers' construction is thus harmonious with cl 14.5.
168 Further, the competing constructions should be evaluated against the elaborate and prescriptive provisions of cl 14, which set out the steps that apply upon receipt of a Price Review Notice. Those provisions require the following sequential steps:
(1) The parties must thereupon negotiate a new BRGP and seek to agree on the revised BRGP prior to the Price Review Date. Those negotiations are to be conducted by reference to, and only to, the matters set out in cl 14.6(b).
(2) If no agreement is reached by the Price Review Date, then within three days of the Price Review Date each party must submit its proposed Final Price.
(3) If within seven days of the submission of the parties' Final Prices no agreement is reached, either party may refer the matter to arbitration. (There is no obligation to take that step, and no time limit is fixed for the taking of that step.)
(4) There is a timetable for the steps to be taken for the appointment of the three arbitrators.
(5) There is a timetable for the provision of submissions and responses to the other party's submissions. Those submissions are to substantiate reasoning for the Final Price - that is, the price submitted to the other party in accordance with step 2.
(6) The arbitrators are to give their decision as soon as possible and to take all available steps to do so in no more than nine months after the Price Review Date.
169 Viewed in that context, the parties' stipulation in cl 14.3 that any Price Review Notice be issued at least 90 days before the Price Review Date, has an evident justification - the parties selected the period they evidently considered appropriate for the negotiations contemplated by cl 14.5, which are required to occur before the taking of steps 2 and 3 above to institute an arbitration.
170 The whole tenor of cl 14 is that if there is to be a Price Review because a party contends or 'believes' (cl 14.1) the current price is not Market Price, the parties need to 'get on with it' within the appointed timeframe. While the parties have no control over the time within which an arbitral award would be issued, the parties have agreed limited, precise and interrelated times for each of the steps in cl 14.3, cl 14.5 and cl 14.7. Each of the steps is expressed with unambiguous finality. Consistently with cl 13.1(b), there is no obligation to ascertain Market Price by referring the matter to arbitration. Thus, there is no time limit fixed for the taking of the step to refer the matter to arbitration, and a reasonable time would be implied[99] which, in the context of cl 14, would, no doubt, be relatively short. Overall, the scheme of cl 14 is that if there is to be a Price Review - it is not mandated - it is to occur at [number redacted]‑yearly intervals in which the time contemplated to commence and complete the process is about 12 to 13 months, by starting the process within three to four months of the Price Review Date (cl 14.3), and obtaining an arbitral award within about nine months of the Price Review Date (cl 14.13).
171 Fifthly, by contrast, both competing constructions are not harmonious with these features of cl 14 and both involve, with respect, a significant reworking of the contractual scheme of cl 14. Of course, it is not to the point that in this particular case, the Buyer was only three weeks late. Even though in one sense it might be thought that a delay of a few weeks, or even a few days, is a small departure capable of being excused, the contractual significance of the delay lies not in its length, but in its location outside of the boundaries that the parties agreed to when they entered into the contract. To overlook the delay would be to find there were no boundaries (on the Buyer's construction) or to rewrite them (on the judge's construction).
173 Clause 14.5 was, together with the purpose of cl 14 (to which we will come), the centrepiece of the Buyer's submissions, and the textual feature of cl 14 on which the Buyer primarily relied. As we have said, the Buyer repeatedly emphasised that the definition of Price Review Notice found in cl 14.3 does not include the temporal stipulation. It submits that when the definition is inserted in cl 14.5, it can be seen that the proper construction is that the receipt of a notice complying with cl 14.4 (and therefore within the definition of Price Review Notice) enlivens the parties' obligations in cl 14.5, regardless of whether it is issued within the time stipulated in cl 14.3.
174 In our opinion, even before one looks beyond cl 14.5, rejection of this submission is compelled by two textual features of cl 14.5 itself.
175 The submission overlooks the use of the definite article in cl 14.5. We repeat [167] above. Obligations arise under cl 14.5 if and only if a party has initiated a Price Review under cl 14.3. Absent initiation under cl 14.3, there is no Price Review and there is nothing that could be said to be 'the Price Review Notice'. Thus cl 14.5 cannot assist the Buyer as it directs attention back to cl 14.3. As already observed, nothing in cl 14.3 provides any textual foothold for reading it as empowering the initiation of a Price Review outside the stipulated period.
176 Further, the Buyer's construction ignores, or fails to grapple with, the temporal requirements of cl 14.5 itself. Among other things, cl 14.5 requires the parties to seek to agree on a new BRGP prior to the Price Review Date. Yet, under the Buyer's construction, a party may issue a Price Review Notice after the Price Review Date. By definition, in such circumstances it is impossible for the parties to seek to agree on a new price prior to the Price Review Date. In this scenario, contemplated by the Buyer's construction, the obligation in cl 14.5 to seek to agree on a new BRGP prior to the Price Review Date could not arise. Adoption of the Buyer's construction would denude cl 14.5 of any operation or effect in this scenario. Thus, the very clause on which the Buyer principally relies - cl 14.5 - reveals incoherence in the Buyer's construction and counts strongly against its acceptance. The only potential textual foothold of the Buyer's construction in any operative provision of cl 14 is thereby removed.
177 The fact, emphasised by the Buyer,[100] that the parties would be free to negotiate at whatever time a Price Review Notice were issued, is not to the point. Clause 14.5 imposes obligations to negotiate, it does not simply create an opportunity to do so. Moreover, cl 14.6 prescribes, in considerable detail, the factors and criteria by reference to which the negotiations required by cl 14.5 are to be conducted. The constraints imposed by cl 14.6 would not exist in negotiations voluntarily conducted by the parties.
179 The Buyer's construction gives rise to similar incoherence in relation to cl 14.7. That clause provides that if the parties have not agreed a revised BRGP by the Price Review Date, then, within 3 days of that date, each party must submit its Final Price to the other. The opening words of the clause demonstrate the interlocking and sequential nature of the steps prescribed in cl 14. Those opening words assume compliance with the parties' obligations of negotiation under cl 14.5 and apply cl 14.7 to the scenario where those negotiations have not produced agreement. Moreover, when it applies, cl 14.7 requires the submission of a Final Price within three days of the Price Review Date. Again, under the Buyer's construction, a party may issue a Price Review Notice any time after the Price Review Date - and thus more than three days thereafter ‑ thereby rendering it impossible for the parties to submit to each other a Final Price within the time stipulated by cl 14.7. Despite invitation, the Buyer did not identify any modified operation that might be given to the clause in this scenario, much less explain how that operation might arise as a matter of construction of the clause.[101]
180 The Buyer submits that any departures from the timetable in cl 14 arising from its construction should not be seen as significant, because such departures are merely the consequence of the application of the presumption in United Scientific v Burnley.[102] We do not accept this submission, which finds no support in the cases on which the Buyer primarily relied. Those cases are analysed in detail later in these reasons. In United Scientific v Burnley, it was held that the primary obligation was to pay market price from the rent review date if higher than the fixed rent for the preceding period in a context in which it was understood by the parties that market price would inevitably be higher. Also, the leases contained no express provisions timetabling subsequent steps after the step in respect of which time was said not to be of the essence. GR Mailman does not assist the Buyer, as the lease in that case specifically provided for the consequence of non‑compliance with the time stipulation. In Alliance Petroleum, the question of whether time was of the essence arose only in relation to the appointment of an arbitrator, the matter having already been referred to arbitration, in a context in which the price adjustment clauses were expressed in imperative terms - either party could, in effect, 'require' a price adjustment and, absent agreement, the matter 'shall be referred to arbitration'.[103] A conclusion that, in this particular respect, time was not of the essence was consistent with the imperative nature of the scheme to produce a price adjustment. Such a conclusion did not run up against express provisions timetabling subsequent steps. The same is true, in this last respect, of Mango Boulevard v Mio Art.
181 Contrary to the Buyer's submissions, the incoherence with cl 14.5 and cl 14.7 produced by the Buyer's construction is not simply a consequence of the application of the presumption in United Scientific v Burnley. Rather, that incoherence counts strongly against adopting the Buyer's construction as the construction that best reflects the parties' objective intentions revealed by their agreement. The intractable disharmony of the Buyer's construction with cl 14.5 and cl 14.7 demonstrates that, reading cl 14 as a whole, its construction cannot be accepted. Even in a case where the presumption in United Scientific v Burnley was applicable, difficulty or impossibility of reconciling a conclusion that time was not of the essence in the relevant respect with other express provisions of the contract would count strongly, perhaps fatally, against adopting that construction. In our view, assuming the presumption applied, the present is such a case.
183 As the Buyer recognised,[104] it was no doubt in recognition of the incoherence with cl 14.5 and cl 14.7 produced by the Buyer's construction that the primary judge adopted her Honour's construction in preference to the Buyer's construction. However, in our respectful opinion, the judge's construction does not avoid incoherence with these provisions.
184 For the reasons already given, the judge's construction does not accommodate the definite article in the opening phrase of cl 14.5.
185 Further, on the judge's construction, a party may give a Price Review Notice up to and including the day before the Price Review Date. In practical terms, that permits a notice to be given hours, even minutes, before the Price Review Date. In such circumstances, the obligation imposed by cl 14.5 would be set at naught. The contemplation, by the judge's construction, of the giving of notice immediately before the Price Review Date cannot be reconciled with cl 14.5.
186 Issues also arise in relation to a notice issued a week or a month before the Price Review Date. The consequential truncation of the period for negotiation contemplated by the parties - as revealed by cl 14.3 read with cl 14.5 - counts against adoption of the judge's construction.
187 Nor, as we now turn to explain, can the judge's construction be reconciled with cl 14.7.
188 Presumably, although this was not explained, on the judge's construction, if a notice were given shortly before the Price Review Date, the obligation under cl 14.7 would take effect according to its terms, requiring the parties to issue Final Price notices to each other within three days after the Price Review Date. But, as already observed, cl 14.7 assumes that the parties have conducted negotiations under cl 14.5. Moreover, given the complexity of the parties' tasks in determining a revised BRGP in accordance with cl 14.6(b), three or four days is evidently inadequate for the task of preparing a Final Price notice. In this context, it should not be overlooked that the Final Price that each party submits to the other party as required by cl 14.7 is the subject matter of that party's Price Review submission to the arbitrators under cl 14.11. That reinforces that the parties contemplated that the Final Price submitted under cl 14.7 would be the product of the not insubstantial process mandated by cl 14.5, read with cl 14.6.
189 The primary judge appears to have gone some way to recognising this issue. Her Honour found that the parties objectively intended to give themselves sufficient time to undertake the task required by cl 14.6 and to seek to reach an agreement prior to the Price Review Date, or at least prior to the date by which, under cl 14.8, either party was entitled to refer the matter to arbitration.[105] However, her Honour then observed that when evaluating the objective intention of the parties, she considered that they intended that they would have a 'reasonable period of time' within which to negotiate, which her Honour considered raised the question of what would objectively have been thought to be a 'reasonable period of time'.[106] With respect, there seems to us to be no occasion to undertake an abstract exercise of divining what the parties objectively thought to be a reasonable period in circumstances where the parties have made express provision to the effect already explained (see [169] above). In our view, the question of what the parties objectively intended to be the period of time within which to negotiate, for the purposes of their agreement, is wholly answered by the express terms of cl 14.3 and cl 14.5. Read together, those terms reveal the parties' intention that the negotiations required by cl 14.5 will commence when a Price Review Notice is received, which will be not more than 120 days nor less than 90 days before the Price Review Date. It is not open, as a matter of construing the parties' agreement, to put aside the parties' agreed position in favour of a hypothetical reasonable time.
190 For these reasons, in our respectful opinion, the judge's construction produces incoherence with both cl 14.5 and cl 14.7.
191 There is a further difficulty with the judge's construction. Her Honour said that 'a Price Review Notice cannot be issued until the start of the 30‑day notice window'.[107] However, her Honour did not articulate a process of construction that explains how compliance with the temporal element of cl 14.3 is essential as regards serving a Price Review Notice too early, but is not essential in relation to serving one too late. Given the language of the clause, the natural starting point is that the clause is to be construed to operate symmetrically in this respect. There is nothing to displace that starting point. Thus, it seems to us that it must be an element, or at least a consequence, of the judge's construction that a Price Review Notice may be given at any time before the start of the stipulated period. That gives rise to further disharmony with cl 14.5 and to outcomes which would appear objectively unlikely to have been intended.
192 For these reasons, in our opinion, the need to give a harmonious construction to cl 14 overwhelmingly favours adoption of the Sellers' construction of cl 14.3 in preference to the competing constructions.
193 Sixthly, the purpose of cl 14, as expressed in cl 14.1, does not sustain the Buyer's construction or the judge's construction. That purpose is entirely consistent with the Sellers' construction. We do not accept the judge's conclusion, and the Buyer's submission, that:
(1) the purpose of the Price Review in cl 14 is to enable the parties to ensure that, if the Market Price changes, the price will be adjusted so that the BRGP remains equal to the Market Price; and
(2) cl 14.3 is merely machinery to achieve that purpose.
194 Clause 14.1 states the purpose of cl 14, but confers no power to initiate a Price Review. The only clause that confers this power is cl 14.3. Just as there are important limits on the assistance to be derived from the general purpose of a statute in construing a specific provision,[108] there are limits on the extent to which the purpose of a contractual clause may alter the meaning of the operative provision(s).
195 The purpose stated in cl 14.1 is to enable the parties to request a Price Review. The power to so request is conferred by cl 14.3, which provides that a party may do so within the stipulated period. Thus, cl 14 achieves its purpose through cl 14.3, which confers on the parties a power to so request by issuing a Price Review Notice in accordance with the requirements of cl 14.3, including its time stipulation. In other words, the purpose stated in cl 14.1 is effectuated by cl 14.3 and so it is effectuated to the extent and in the manner detailed in cl 14.3. The stated purpose of the clause - enabling the parties to request a review - cannot justify the removal or ignoring of the limits upon the power to initiate a Price Review contained in the clause conferring the power to do so.
196 Moreover, cl 14 is to be read in the context of the pricing provisions in cl 13. The framework for a price review created by those provisions is substantially different from that created by the rental obligations considered in United Scientific v Burnley. In the rent review cases of the kind considered in United Scientific v Burnley, the obligation to pay rent was construed as an obligation to pay the fixed rent for the first period of the lease, and market rent current at each review date if that were higher.[109] That being the substantive nature of the obligation to pay rent, the provisions setting out the procedures for the agreement of market rent or, failing agreement, determination by arbitration, were mere machinery provisions for the establishment of the market rent which was payable in the subsequent periods of the lease. On the other hand, under cl 13 of the GSA, there is no substantive obligation to pay Market Price for gas at and from each of the intervals specified in cl 14.2. Rather, provision is made for the continuation of the Base Reference Gas Price '[u]nless and until' revised amounts 'have first been agreed, established or determined under Clause 14'.
197 The Buyer's reliance on the statement in cl 14.6(a)(ii) that the parties intend that the price will remain at Market Price does not assist them. Clause 14.6(a)(ii) says that this is to be achieved 'through Price Reviews conducted under this clause 14'. Price Reviews under cl 14 are conducted only if a party initiates a review. As already explained, that can be done only under and in accordance with cl 14.3. Thus the statement in cl 14.6(a)(ii) provides no basis to ignore or remove the limits imposed by the time stipulation in cl 14.3. Clause 14.6(a)(ii) does not itself impose an obligation to pay Market Price, standing outside of and operating independently from the Price Review initiated via cl 14.3. Rather, cl 14.6(a)(ii) is one of the guiding 'factors' outlined in cl 14.6 in the context of a Price Review initiated under cl 14.3, and is one of the 'pricing principles' to which the arbitrators must have regard under cl 14.12(a).
198 Taking into account the textual and contextual matters referred to in [148] ‑ [191] above, and what is said in [196] above, cl 14.3 cannot properly be characterised as mere machinery for ensuring that the price under the GSA is and remains the Market Price. The parties are given the option, not the duty, of initiating a Price Review. Clause 14.3 is the sole source of the power to do so and it stipulates the means of invoking that power. The Base Reference Gas Price continues '[u]nless and until' revised amounts 'have first been agreed, established or determined under Clause 14'. For the reasons already given, in our view cl 14.3 is properly seen as a contingent condition, in other words a non‑promissory condition precedent, to the initiation of a Price Review and to the arising of any obligation under cl 14.5.
200 By definition, the Sellers' construction produces the consequence that, in a long‑term gas supply agreement with limited termination rights, the opportunity to initiate a Price Review for a [number redacted]‑year phase is lost by a failure to issue a notice within the period stipulated in cl 14.3. Whether that consequence is uncommercial and unlikely to have been intended by the parties must take account of a number of matters, including the following.
201 First, the parties chose to stipulate for a notice period encompassing 31 days, not a single day. The length of that period reduces the prospect of an oversight by a party which intends to initiate a review.
202 Secondly, the parties are sophisticated and well resourced.
203 Thirdly, the judge found that, in entering the GSA, the parties would not have contemplated, as a realistic possibility, that one of them would overlook the time stipulation and the need to issue the notice within the stipulated period, and thereby inadvertently lose the opportunity to invoke cl 14.3.[112] On appeal, no party criticised that finding. In the circumstances, it does not strike us as unthinkable (or 'incredible' as Lord Salmon said in United Scientific v Burnley)[113] that the parties could have intended that if they overlooked the need to initiate a Price Review within the stipulated period, they would lose the opportunity to invoke it in respect of the impending [number redacted]‑year period.
204 Fourthly, the countervailing consequences of the competing constructions must also be considered. On the Buyer's construction, a party which decides not to invoke cl 14 during the stipulated period is free to come to a different decision at any time subsequently if market conditions change. In circumstances where the parties have chosen to expressly identify the period during which the price review clause may be invoked, this might be thought an unlikely intention to ascribe to the parties.
205 Fifthly, there was no evidence and no findings as to the operation of the market for the long‑term supply of gas. In particular, there was no finding to the effect that either or both parties could readily and with confidence ascertain Market Price and make appropriate provision for disgorgement under cl 14.17 of the difference between the Market Price and the current price (plus interest) against the contingency that the Price Review might occur well after, possibly years after, the contractually specified time.[114]
206 Further, as already observed, under the GSA, which is a take or pay contract, there is no inhibition on the Buyer selling gas, as is explicitly contemplated by cl 8(g) and cl 8(h). Consequently, the Buyer has an interest in securely knowing the BRGP applicable to the impending [number redacted]‑year period, to enable it to strike a price with those to whom it may wish to resell the gas. The Sellers' construction provides, whereas the Buyer's construction and the judge's construction would undermine, that security.
207 To our minds, the consequences of the Sellers' construction are not aptly characterised as uncommercial and objectively unlikely to have been intended by the parties. In any event, to the extent that the consequences may be aptly so characterised, the textual and contextual matters to which we have referred in [148] ‑ [191] above nevertheless sustain, indeed in our view compel, the Sellers' construction.
208 While we recognise the absence of a deeming provision that expressly stipulates the consequences of non‑compliance with the temporal element of cl 14.3, the combination of features to which we have already referred means that that absence is of little weight. In particular, if there were an addendum to cl 14.3 which provided that if a Price Review Notice were issued outside of the prescribed time, current prices would subsist or a Price Review would not have been initiated, the addendum would add nothing of substance to the operation of cl 14 read with cl 13.1(b).
209 For the above reasons, we prefer the Sellers' construction. Even if the presumption referred to in United Scientific v Burnley were applied, the matters to which we have referred would comfortably persuade us that the presumption is rebutted. Read as a whole, cl 14 reveals an intention that only a notice given within the period stipulated in cl 14.3 is effective to initiate a Price Review.
210 We turn now to address the Buyer's contention that there is a presumption, applicable to this case, that time is not of the essence and to explain why we approach the critical question of construction without any such presumption.
Should it be presumed that cl 14.3 is not essential?
211 We do not accept the Buyer's submission that the line of cases starting with United Scientific v Burnley establishes a general principle that time stipulations, whether promissory or non‑promissory, in machinery‑type provisions for determining price adjustments under a contract are not construed as essential unless there was an express provision or necessary implication to that effect. In our view, neither authority nor principle sustains any such general principle or presumption. In evaluating the Buyer's submission, we will consider each of the principal authorities on which the Buyer relied, as well as authority relied on by the Sellers, focusing on the issues that fell for determination in each case, and the reasoning by which those issues were determined. As will be seen, we think the authorities fall well short of sustaining the broad principle asserted by the Buyer.
212 Before turning to United Scientific v Burnley, we will outline equitable principles as to time stipulations in the performance of a contract, and as to notices to complete, because those principles informed the approach in United Scientific v Burnley.
Equity's approach to time stipulations and to notices to complete
213 In Stickney v Keeble,[115] Lord Parker of Waddington said as follows:
... in a contract for the sale and purchase of real estate, the time fixed by the parties for completion has at law always been regarded as essential. In other words, Courts of law have always held the parties to their bargain in this respect, with the result that if the vendor is unable to make a title by the day fixed for completion, the purchaser can treat the contract as at an end and recover his deposit with interest and the costs of investigating the title.
In such cases, however, equity having a concurrent jurisdiction did not look upon the stipulation as to time in precisely the same light. Where it could do so without injustice to the contracting parties it decreed specific performance notwithstanding failure to observe the time fixed by the contract for completion, and as an incident of specific performance relieved the party in default by restraining proceedings at law based on such failure.
This is really all that is meant by and involved in the maxim that in equity the time fixed for completion is not of the essence of the contract, but this maxim never had any application to cases in which the stipulation as to time could not be disregarded without injustice to the parties, when, for example, the parties, for reasons best known to themselves, had stipulated that the time fixed should be essential, or where there was something in the nature of the property or the surrounding circumstances which would render it inequitable to treat it as a non-essential term of the contract.
It should be observed, too, that it was only for the purposes of granting specific performance that equity in this class of case interfered with the remedy at law. A vendor who had put it out of his own power to complete the contract, or had by his conduct lost the right to specific performance, had no equity to restrain proceedings at law based on the non-observance of the stipulation as to time.
214 In Louinder v Leis,[116] Mason J referred in similar vein to the difference in attitude to time stipulations in contracts of the common law and equity. His Honour observed that the date for completion is a term of the contract a breach of which would at common law entitle the innocent party to determine the contract and recover damages. If, however, the parties did not make time of the essence of the contract, equity would (i) order specific performance unless to do so would be unjust, and (ii) prevent the innocent party from enforcing their common law rights.[117]
215 Thus, unlike the law, equity generally treated time stipulations in a contract as not of the essence unless there was an express or implied contractual provision to that effect.[118] In this respect, equity did not construe the operative provision differently from the law; rather, it took a different view as to the consequences of a breach of that provision.[119] The position was summarised by Street J in Solomons v Halloran:[120]
A distinction is made between that which is matter of substance and that which is matter of form, and if there is nothing in the express stipulations between the parties, the nature of the property, or the surrounding circumstances which would make it inequitable to interfere with and modify the legal rights, a Court of Equity, though construing the contract as it must in the same way as a Court of law would, will interfere with and modify the legal rights arising on the legal construction of the contract ... To render time essential it is not enough that a time is specified at or before which something is to be done, but the Court must be satisfied that the time was specified not merely as a formal part of the contract, but that either from the nature or structure of the contract the parties really contemplated and intended that time should be essential and should be strictly observed.
216 Section 21 of the Property Law Act 1969 (WA) provides that stipulations in a contract, as to time or otherwise, that according to rules of equity are not deemed to be or to have become of the essence of the contract, shall be construed and have effect at law in accordance with the rules of equity.
which are appropriate for the granting of equitable remedies by way of relief against the loss by a party of his contractual rights by reason of a failure on his part to perform the contract in precise accordance with its provisions as to time. This is so because only in such cases do the rules of equity treat as not of the essence of the contract time stipulations which are of the essence according to the traditional view of the common law[.]
218 By reason of equity's more lenient approach to time stipulations, a practice developed in Chancery whereby an innocent party, after default by the other party, would give notice requiring completion of the contract by the defendant within a reasonable specified time. Thus, it is open to the party not in breach to give the breaching party a notice to complete within a reasonable time fixed by the notice, in which case equity would not intervene to preclude the effective exercise of the common law right to terminate.[124] A notice to complete is accordingly a step in securing the lifting of the equitable restraint on the legal right to rescind.[125] The notice to complete has also been characterised as providing a firm foundation for an inference of repudiation.[126]
United Scientific Holdings Ltd v Burnley Borough Council
219 In United Scientific v Burnley, the House of Lords upheld appeals against two decisions of the Court of Appeal in relation to whether a landlord had effectually invoked a rent review clause. In each case, the Court of Appeal held that the commercial nature of the contract or the nature of the rights granted under a rent review clause gave rise to a presumption that time specified in the clause for anything to be done is of the essence. The two appeals were heard together in order to consider the merits of that approach.
220 In the first appeal, the lease provided, in relation to the rent for each successive period of 10 years of the term, that '[d]uring the year immediately preceding' that 10‑year period 'the [lessor] and the lessee shall agree or failing agreement determine by arbitration' the market rent.[127] In the second appeal, rent for the second period was to be the fixed sum for the first period 'or a sum equal to the market rent (if duly determined in the manner hereinafter set out) whichever shall be the higher'. Market rent was then to be determined and notified in the following manner: (1) a notice of the rent proposed by the landlord for the second (seven‑year) period was to be served by the landlord on the tenant not more than 12 months, nor less than six months, prior to the review date, (2) the tenant could then within one month of service of the landlord's notice serve a counter‑notice, either agreeing the proposed rent or proposing its own rent, and (3) in default of the lessee serving its counter‑notice or in default of agreement as to market rent, the rent 'shall be valued' by an expert determination initiated by the landlord.[128]
221 The House of Lords held that, in common with the approach to all contracts, there is a presumption that strict adherence to the timetable specified in a rent review clause is not of the essence of the contract.[129]
222 A majority of the House adopted the view that the law concerning contracts of all types was correctly summarised in Halsbury's Laws of England - that time was not of the essence unless the parties expressly so stipulate or the nature of the subject matter of the contract or the surrounding circumstances show that time should be considered of the essence.[130]
223 Their Lordships also held that, in each appeal, there was nothing in the terms of the leases to displace the presumption that the timetables in the rent review clauses were not of the essence.
the rules of equity, to the extent that the Court of Chancery had developed them up to 1873 as a system distinct from rules of common law, did not regard stipulations in contracts as to the time by which various steps should be taken by the parties as being of the essence of the contract unless the express words of the contract, the nature of its subject matter or the surrounding circumstances made it inequitable not to treat the failure of one party to comply exactly with the stipulation as relieving the other party from the duty to perform his obligations under the contract. The Court of Chancery had reached this position in relation to contracts for the sale of land by the extension by Lord Eldon LC of the earlier doctrine that a stipulation as to the time of repayment by the mortgagor under a legal mortgage was not of the essence of the contract so as to entitle the mortgagee to refuse to reconvey the property if payment with interest was tendered after the stipulated date was passed: Seton v Slade [1802] EngR 267; (1802) 7 Ves Jun 265.
225 His Lordship concluded his consideration of the question of principle in the following terms:[132]
I see no relevant difference between the obligation undertaken by a tenant under a rent review clause in a lease and any other obligation in a synallagmatic contract that is expressed to arise upon the occurrence of a described event, where a postponement of that event beyond the time stipulated in the contract is not so prolonged as to deprive the obligor of substantially the whole benefit that it was intended he should obtain by accepting the obligation.
So upon the question of principle which these two appeals were brought to settle, I would hold that in the absence of any contra-indications in the express words of the lease or in the interrelation of the rent review clause itself and other clauses or in the surrounding circumstances the presumption is that the time-table specified in a rent review clause for completion of the various steps for determining the rent payable in respect of the period following the review date is not of the essence of the contract.
226 As the passages set out below demonstrate, the guide to construction laid down by the House of Lords in United Scientific v Burnley was developed with reference to the subject matter of the contracts, the market in which the parties operated and in which the contracts were to be applied, and, in that context, their Lordships' inference as to the commercial purpose to be served by the parties' provisions dealing with time.
My Lords, during the last two decades since inflation, particularly in the property market, has been rife, it has been usual to include in leases for a term of years, except when the term is very short, a clause providing for the annual rent to be reviewed at fixed intervals during the term and for the market rent current at each review date if it be higher, to be substituted for the rent previously payable. The wording of such clauses varies; there are several different ones now included in the books of precedents; but a feature common to nearly all of them is that not only do they specify a procedure for the determination of the revised rent by agreement between the parties or, failing that, by an independent valuer or arbitrator, but they also set out a time-table for taking some or all of the steps in that procedure which, if followed, would enable the revised rent to be settled not later than the review date.
...
The rent review clauses that have given rise to the two instant appeals, as well as nearly all those which have been considered in the reported cases, if they result in any alteration of the rent previously payable can only have the effect of providing for the payment of a higher rent than would be payable by the tenant if the review clause had not been brought into operation. So the only party who can benefit from a review of rent under these clauses is the landlord. It is accordingly unlikely that the tenant would take the initiative in obtaining a review of the rent, even where the clause contains provision for his doing so - as it does in the second of the instant appeals.
... The determination of the new rent under the procedure stipulated in the rent review clause neither brings into existence a fresh contract between the landlord and the tenant nor does it put an end to one that had existed previously. It is an event upon the occurrence of which the tenant has in his existing contract already accepted an obligation to pay to the landlord the rent so determined for the period to which the rent review relates. The tenant's acceptance of that obligation was an inseverable part of the whole consideration of the landlord's grant of a term of years of the length agreed. Without it, in a period during which inflation was anticipated, the landlord would either have been unwilling to grant a lease for a longer period than up to the first review date or would have demanded a higher rent to be paid throughout the term than that payable before the first review date. By the time of each review of rent the tenant will have already received a substantial part of the whole benefit which it was intended that he should obtain in return for his acceptance of the obligation to pay the higher rent for the succeeding period.
...
[In relation to the second appeal] [i]n two respects under the terms of the review clause the progress of the procedure for determining the new rent is, or may become, within the exclusive control of the landlord. He alone can initiate the procedure; and he alone can apply to the President of the RICS if negotiations with the tenant do not result in an agreement as to the rent or upon the person who is to value it.
The tenant's position under this clause thus differs from that of the tenant under the rent review clause that is the subject of the first appeal inasmuch as he has no right under his contract to initiate the procedure or to apply for the appointment of a valuer if the landlord himself fails to do so within the stipulated times. But this difference has not in my view any significant practical consequences so far as concerns any detriment to the tenant from the landlord's failure to do either of these things within the stipulated times. If the tenant reckons that the advantage of knowing before the review date exactly how much higher his new rent will be outweighs the economic benefit of having the use of the money representing the difference until the new rent has been determined, he has the remedy in his own hands. Quite apart from the fact that he can get a pretty good idea of what the market rent is from his own surveyor or can himself offer to enter into negotiations with the landlord before the stipulated time for serving a lessor's notice has expired, so soon as that time has elapsed he can give to the landlord notice specifying a period within which he requires the landlord to serve a lessor's notice if he intends the market rent to be determined and payable instead of the former rent for the ensuing seven years. The period so specified, provided that it is reasonable, will become of the essence of the contract. (emphasis added)
It was envisaged from the outset that the rent would be reviewed during the currency of the leases: the clauses merely provided machinery for determination of the new rent, which in more stable conditions might have been stipulated in advance. Moreover, the clauses went to the very basis of the consideration moving from the landlords: in a period of inflation the latter would not have granted leases for such long terms without inclusion of rent review clauses - and certainly the initial rent would in each case have been much higher without those clauses. To put it the other way round, the rent review clauses were integral parts of the consideration moving from the tenants, whereby they acquired a long term of years at an initial rent lower than it would otherwise have been. (emphasis added)
In a period of acute inflation, such as we have experienced for the last 20 years or so, and may well continue to experience for many years to come, what is a fair market rent at the date when a lease is granted will probably become wholly uneconomic within a few years. Tenants who are anxious for security of tenure require a term of reasonable duration, often 21 years or more. Landlords, on the other hand, are unwilling to grant such leases unless they contain rent revision clauses which will enable the rent to be raised at regular intervals to what is then the fair market rent of the property demised. Accordingly, it has become the practice for all long leases to contain a rent revision clause providing for a revision of the rent every so many years. Leases used to provide for such a revision to be made every 10 years. Now the period is normally every seven and not infrequently every five years. To my mind, it is totally unrealistic to regard such clauses as conferring a privilege upon the landlord or as imposing a burden upon the tenant. Both the landlord and the tenant recognise the obvious, viz, that such clauses are fair and reasonable for each of them. I do not agree with what has been said in some of the authorities, namely, that a rent revision clause is for the benefit of the landlord alone and not at all for the benefit of the tenant. It is plainly for the benefit of both of them. It is for the benefit of the tenant because without such a clause he would never get the long lease which he requires; and under modern conditions, it would be grossly unfair that he should. It is for the benefit of the landlord because it ensures that for the duration of the lease he will receive a fair rent instead of a rent far below the market value of the property which he demises. Accordingly the landlord and the tenant by agreement in their lease provide that at stated intervals during the term, the rent should be brought up to what is then the fair market rent. The revision clause itself lays down the administrative procedure or machinery by which the fair market rent shall be ascertained.
...
In my opinion each lease constitutes, amongst other things, an agreement between the parties that, at stated intervals, the rents shall be revised so as to bring them into line with the then open market rent. ...
As far as the first appeal is concerned, I do not understand how, on the facts I have related the delay could properly be said to have been caused by the landlords rather than by the tenants. The lease not only enabled but put an obligation on the tenants as well as on the landlords to have the rent ascertained by arbitration in default of agreement. In these circumstances it hardly lies in the tenants' mouth to complain of the delay. Nor is there any evidence that they have been prejudiced by the delay for which they appear, if anything, to have been more responsible than the landlords.
...
[With respect the second appeal] [m]y Lords, the parties are bound by the lease to pay during the period commencing on April 8, 1975, and ending on April 8, 1982, the yearly rent of £117,340 or the market rent 'if duly determined in the manner hereinafter set out' (ie in the second schedule) 'whichever shall be the higher.' I do not consider that an agreement between the parties or a determination by a Fellow of the Royal Institution of Chartered Surveyors as to the amount of the market rent adds any new contractual term. It merely quantifies the rent which the lessees are bound by the lease to pay during the period in question. The words 'if duly determined in the manner hereinafter set out' in my view do no more than indicate the procedure to be followed in determining the market rent. (emphasis added)
230 Lord Fraser of Tullybelton said:[136]
In time of inflation it is to be expected that the landlord will call for a review on every occasion where he is entitled to do so, especially if (as in both the instant appeals) a review cannot lead to the rent being reduced below the level that would prevail if there were no review. So far as the tenant is concerned, he will of course want to know the amount of his liability but he will normally be able with the aid of skilled advice to arrive at a reasonably close estimate of the current market rent. So far as the landlord is concerned, he may be very seriously prejudiced by delay in ascertaining the reviewed rent if, as is usual, it is higher than the former rent, because he will be unable to collect the reviewed rent until it has been ascertained, and any delay will keep him out of his money representing the difference between it and the former rent. Conversely the tenant will have the use of the money until the reviewed rent has been ascertained. This is strikingly illustrated in the Cheapside appeal where the landlord has claimed an increase of over £480,000 per annum in the rent, and loss of interest on a sum of that order even for a short time is obviously a serious matter.
As the substance of a review clause is, in my opinion, to provide machinery for ascertaining the market rent from time to time, at the intervals agreed in the interests of both parties, rather than to confer a benefit on the landlord, it seems to me that stipulations as to time ought not to be strictly enforced unless there is something in a particular clause to indicate that time is of the essence in that case.
...
But when a rent review clause is operated it merely varies one term in a continuing contract. The term is one which the parties have agreed from the beginning is to be variable and the review clause merely provides the machinery for effecting the variation. Review clauses are also different in this respect from a tenant's option to break a lease[.] (emphasis added)
231 In the second appeal, Viscount Dilhorne expressed a contrary view on the question of whether time was of the essence in relation to the giving of the lessors' notice. His Lordship concluded that if the parties, when they entered into the lease, had been asked whether they thought it essential that the notice should be given within the stipulated period, they would have answered it in the affirmative. Recognising that this meant that if the notice was served a day late, the consequences to the lessors would be serious, Viscount Dilhorne observed that it lay entirely within the lessor's power to serve the notice within that period. However, because the notice was given in accordance with the stipulated period, that question did not arise.[137]
(1) Where a rent review clause confers on a landlord or tenant a right for his benefit or protection, as part of the procedure for ascertaining the new rent, and that right is expressed to be exercisable within a specified time, there is a rebuttable presumption of construction that time is not intended to be of the essence in relation to any exercise of that right.
(2) In a case where the presumption applies, the other party concerned may, if he wishes to bring matters to a head after the stipulated time for the exercise of the right has expired, give to the owner of the right a notice specifying a period within which he requires the right to be exercised, if at all; the period thus specified will if it is reasonable then become of the essence of the contract. ...
(3) The presumption is rebuttable by sufficient 'contraindications in the express words of the lease or in the interrelation of the rent review clause itself and other clauses or in the surrounding circumstances'. ...
(4) Though the best way of rebutting the presumption is to state expressly that stipulations as to the time by which steps provided for by the rent review clause are to be taken is to be treated as being of the essence (see United Scientific Holdings Ltd v Burnley Borough Council ...), this is not the only way. Any form of expression which clearly evinces the concept of finality attached to the end of the period or periods prescribed will suffice to rebut the presumption. The parties are quite free to contract on the basis that time is to be of the essence if they so wish.
233 As will be seen, the decision in United Scientific v Burnley has been applied in Australia to rent review clauses in leases, and has been applied by analogy to some other contracts.
234 In Perri v Coolangatta, a contract for the sale of land did not fix a settlement date and included a special condition that the contract was subject to the purchasers completing the sale of another property they owned. Three months after the contract was made, the vendor gave a notice requiring the purchasers to complete the purchase by a stipulated date. The purchasers did not do so and, thereafter, on 10 August, the vendor gave a notice rescinding the contract. On 29 September, the vendor sued the purchasers for a declaration that the contract had been terminated.
235 The court held that the special condition made the completion of the sale of the purchasers' property a condition precedent to the purchasers' obligation to purchase the vendor's property. The court also held that the special condition included an implied term that it be fulfilled within a reasonable time.[140]
236 A majority of the court held that a reasonable time for the fulfilment of the special condition had expired by September 1978, so that it was open then to the vendor to avoid the contract without first giving any notice limiting a reasonable time for completion.
237 Gibbs CJ considered whether any notice needed to be given to the other party in a situation where a conditional contract did not fix the time for fulfilment of the condition, so that it must be performed within a reasonable time, a party could terminate the contract if the condition were not fulfilled within a reasonable time, or whether it was necessary to give prior notice to the other party. His Honour considered it inappropriate that one party to a contract should be able to give a notice requiring the other to complete a sale, when that other party has not promised to do so and when it is not necessarily within the other party's power to do so. His Honour also observed that the rights of the party not in default to limit a particular time within which the other contracting party is to perform their obligations, as discussed in Louinder v Leis, apply 'only where the party to whom a notice may be given is under a contractual obligation to act'.[141] Gibbs CJ concluded that when the time has elapsed for performance of a condition which is not a promissory condition, but a condition precedent to the obligation to complete a contract of sale, either party, if not in default, can elect to treat the contract as at an end if the condition has not been fulfilled or waived, and that it is not necessary first to give a notice calling on the party in default to complete the contract or fulfil the condition.[142]
238 Mason J observed that the distinction between essential and non‑essential terms had traditionally been made for the purpose of determining whether breach of a term justified termination, and that the distinction had particular importance for the exercise of the equitable jurisdiction to relieve against the consequence of strict adherence to time stipulations in contract.[143]
239 His Honour further observed that the expression of a provision in the form of a condition precedent endows it with the character of essentiality. However, provisions requiring something to be done within a reasonable time are not considered to be essential unless expressly or impliedly made so, given the notorious difficulty in predicting and identifying what is a reasonable time.[144]
240 Wilson J also emphasised the distinction between a contract which is subject to a condition requiring an act or a decision from a person other than the party to the contract, and an unconditional contract. The equitable principles affording relief against the strict operation of time stipulations which are not of the essence are ordinarily applied in the latter context. In a case such as the present, where a contract was conditional on a matter that was not within the power of either party to ensure, if on the expiration of a reasonable time, the condition was not fulfilled, either party could terminate a contract.[145]
241 Brennan J observed that the special condition of the contract specified the event upon the occurrence of which the obligations to complete became unconditional, but contained no promise that the event would occur. Where the occurrence of an event upon which the obligations to complete are contingent is not promised, the mere non‑occurrence of the event is no breach of contract, and the court will not decree completion of the contract absolutely. Any decree must be limited to the performance of any promise affecting the occurrence of the contingency and further performance decreed subject to the contingency.[146]
242 Brennan J rejected the submission that the vendor could not avoid the contract unless it had given a notice to complete and the notice had not been complied with. His Honour considered that those submissions suggested a confusion between the consequences of non‑fulfilment of a contingent condition and the consequence of breach of a promissory term. A notice to complete insists upon performance by a party in default to whom the notice is given or an obligation binding upon them. Such a notice 'can have no application to a situation where the party to whom it is given is under no obligation to perform'.[147]
243 Thus, a majority of the court, namely Gibbs CJ, Stephen and Brennan JJ, held that the ability of a party to give a notice requiring the other party to take a step within a reasonable time, failing which the contract could be terminated, had no application to the non‑fulfilment of a contingent non‑promissory condition.[148] The breadth of the italicised statements of principle in [237] and [242] should be noticed.
244 Gollin v Karenlee involved a lease of premises for a term of eight years in which the rent was fixed for the first three years. The lease contained a clause providing for a review of the rent under which the rent would be as agreed or, failing agreement, 10% per annum of the mean of valuations of the premises, one of which to be by a valuer appointed by the lessor and the other by a valuer appointed by the lessee, but on the proviso that it be not less than the annual rent for the first three years.
245 The court observed that this was the only clause relating to the amount of rent to be paid for the last five years of the term, and that the reference to the minimum did not fix the amount of rent pending or in default of the determination under the agreed process.[149]
246 The tenant argued that the landlord had lost the right to rely on the rent review clause because it had failed to appoint a valuer within a reasonable time. The court found that even if the lessors were under an implied obligation to appoint a valuer within a reasonable time after the commencement of the fourth year of the term, it was neither a condition of the availability of the procedure in the rent review clause nor of the essence of the contract that that implied obligation be performed within that reasonable time.
247 The court then said as follows:[150]
The provisions of [the rent review clause] cannot be treated as having been solely for the benefit of the lessors. They constituted the only agreed procedure for ascertaining a rent for the last five years of the lease. If the application of that procedure were to result in the minimum rent of $144,000, that amount would represent the determination of rent by that procedure as distinct from an amount nominated in default of it. In these circumstances, even if the lease had contained a provision expressly requiring Gollin and the lessors respectively to appoint a valuer or to activate the rent review procedure within a specific time, the performance of that obligation within that particular time could not, without more, have properly been seen either as a condition of the applicability of [the rent review clause] or as being of the essence of the contract (see, generally, United Scientific Holdings v Burnley Borough Council). The position is even clearer in the present case where there was no express obligation and no express provision as to time. It is, as has been seen, difficult enough to imply in the lease an unqualified requirement that each party appoint a valuer or obtain a valuation or otherwise activate the rent review procedure within a reasonable time of the commencement of the fourth year of the term without agreement having been reached on the rent for the last five years. It is plainly impossible to imply a further provision that that implied time for the performance of that implied obligation was of the essence of the contract or that the performance of that implied obligation within that implied time was a condition of the operation of the only clause of the contract which made provision as to the amount of rent to be paid for the last five years of the term. It follows that any delay of the lessors in invoking the provisions of [the rent review clause] and in appointing a valuer did not, in the circumstances, involve any breach of an essential term of the contract or a failure to comply with the requirements of a condition of the operation of [the rent review clause]. If it had involved such a breach, a serious question would have arisen whether, in circumstances where Gollin had not purported to rescind the contract, the consequence of the breach was that the lessors lost the right to invoke the procedure which the parties had agreed should be applied to determine the annual rent for the last five years of the term. (emphasis added)
248 In the first part of this paragraph, the court explained the position on the hypothetical assumption that the lease had contained a provision expressly requiring the parties to appoint a valuer or to activate the rent review procedure under the relevant rent review clause within a specified time. Thus, the court proceeded, at this point in its analysis, on the assumption that there was an express time obligation, in circumstances where the rent review provision constituted the only agreed provision for the ascertainment of the rent for the last five years of the lease. The court found that, in those circumstances, performance of that obligation could not have properly been seen as a condition of the applicability of the rent review clause or as being of the essence of the contract. In so holding, the court said 'see, generally,' United Scientific v Burnley.
Alliance Petroleum Australia NL v Australian Gas Light Co
249 In Alliance Petroleum, the presumption in United Scientific v Burnley was applied by analogy to a gas supply agreement.
250 In Alliance Petroleum, the parties executed an agreement for the supply of natural gas over a period of 30 years. The agreement provided by cl 24(b) that either party may, at times or in periods specified in the agreement, 'require' a review to be made for the purpose of adjusting prices either upwards or downwards. By cl 24(c), in the event that either party 'require[d] an adjustment of price', the parties were obliged to consult together in good faith and use their best endeavours to agree on a price, or on a formula for fixing the price. The agreement further provided by cl 24(d) that if the parties failed to agree on a price or on a formula within three calendar months from the date of the requiring of a review by the initiating party, the matter 'shall be referred to arbitration' before two arbitrators, one to be appointed by the purchaser and the other by the sellers. The appointments were to be made within one month after the expiry of the three‑month period mentioned.
251 Cox J observed that the language of par (d) of cl 24 was, on its face, clear. That supported the conclusion that failure to appoint an arbitrator within the stipulated time was a breach of contract, but begged the question of whether it was the intention of the parties that that should be the end of the matter.[151] In explaining that conclusion, his Honour observed that it was important to bear in mind that the case did not involve the failure of the party to refer the matter to arbitration. Rather, the lateness related merely to the subsequent step of the appointment of an arbitrator. His Honour continued:[152]
It is unlikely that a delay of four days would ever make any significant difference to the outcome of such an arbitration; if it would in any given case, and to the detriment of the party who was not in default, that could be remedied by an award of damages. In the circumstances it is difficult to suppose that the parties intended that a failure by one of them to make an appointment under par (d) within time was to be utterly irretrievable. Common sense would hardly support such an interpretation of the Agreement, once it is accepted that, in the case of some contracts and in some circumstances, time is not of the essence. The delay could be of the most trifling kind, and arise from circumstances for all practical purposes outside the defaulting party's control.
252 His Honour observed that United Scientific v Burnley had been accepted in Australia by the High Court.[153]
253 By reference to United Scientific v Burnley, Cox J expressed the opinion that, if the 'obligation' type of review clause is not, so far as the time for appointing arbitrators is concerned, of the essence of the contract, nor is a clause that gives either party the option of seeking a rent review.[154]
254 Cox J considered that the critical question was whether, as a matter of construction, the policy embodied in United Scientific v Burnley should be applied to the time provision of a price review clause in the contract for the sale of gas in that case. His Honour concluded that the features distinguishing the price review clause in his case from the rent review clauses considered in United Scientific v Burnley and in Gollin v Karenlee were not sufficient to justify a different approach. His Honour then said:[155]
Time will be of the essence wherever the circumstances of the case indicate that this would fulfil the intention of the parties. Such an intention will be found, 'broadly speaking', in 'mercantile' contracts. That last expression is perhaps of somewhat imprecise meaning. Sometimes the word 'mercantile' is used to refer to trade and commerce. Sometimes it is used interchangeably with 'commercial'. If precise classifications matter, then it would seem to me that, contrary to Mr Von Doussa's submission, the present Agreement embodies a mercantile contract. But that only means that we are in the area in which, generally speaking, time will be of the essence. There is nothing inevitable about it. United Scientific deprecates the attempt to solve these questions by merely classifying the contract as being of a commercial character. See per Lord Diplock at p. 924 and Lord Salmon at p. 950. Cases such as Raineri v Miles and Bunge Corporation New York v Tradax Export SA Panama and the charterparty decisions show that there are contracts and circumstances in which the inclination to find that time is of the essence will be very strong indeed. However, in all cases it will be necessary, in my view, to look not merely at the broad subject‑matter of the contract -whether it is for the lease of an office block or the sale of goods or something else - but also the nature of the particular power or obligation that is in question.
255 His Honour then reasoned in relation to the relevant clause as follows:[156]
Clause (24)(d) is a machinery clause. As I have already said, a failure by one party to nominate an arbitrator within the stipulated time will not affect the amount or quality of the gas supplied by the Producers or the obligation of AGL to receive it and pay for it, and it will have no bearing upon the time at which those mutual obligations will be performed. In short, the fulfilment of the main purpose of the contract will continue without interruption or delay despite the late compliance by the Producers of their obligation under par (d). We are a long way, then, from those cases that deal with perishable goods, or string contracts, or time charters with their personal service overtones, or shipping and other contracts in which there is a strong tradition of strict compliance unless the parties have chosen to include a 'non-technicality' clause. A payment of damages for the breach of contract constituted by a late appointment by one party would take care of any loss that the other party might suffer in such a case. Much was made of the virtues of simplicity and certainty and of the advantage of everyone knowing from the outset where they stand, but common sense and a due sense of proportion are also worthwhile attributes in a commercial contract. I have already said something about these last considerations with respect to clause (24). No doubt it borders upon the fictitious to impute to the parties to the Agreement an intention on a subject to which they probably did not address their minds at all, but that is where the matter of policy enters, no less in this case than in United Scientific and Gollin v Karenlee and the other cases that I have discussed. I see no reason why the courts, when asked to apply a liberal and, as it seems to me, a sensible interpretation to the time table of a price review clause in a contract for the sale of goods, of the kind dealt with [in] this Agreement, should hesitate to do so on the ground that this may conceivably have an unsettling effect upon the construction of contracts generally. It need not do so. I am not called upon to decide whether time is or is not of the essence in other clauses of this Agreement, or in arbitration clauses in other contracts. I am only concerned with the parties' intention, actual or implied, with respect to one feature of this particular price review clause. At any rate, certainty can be bought at too high a price, even in the commercial world.
If it is a matter of applying to this Agreement the principles and policies to which I have referred, I think, for the reasons I have given, that I should hold that the Producers' obligation to appoint an arbitrator within the time specified in par (d) of clause (24) was not an essential term of the Agreement, and that the appointment that was purportedly made on 6th May was valid and effectual.
GR Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd
256 GR Mailman was concerned with a question of whether time was of the essence in a rent review clause. In particular, the issue was whether the lessee's failure to give a notice within a specified time resulted in liability on the part of the lessee to pay an increased rent at a rate that had been stipulated by a notice given earlier by the lessor. The rent review clause provided for the lessor to give notice within a stipulated period prior to the expiration of the relevant period. It then said that, prior to the expiration of 14 days from service of any such notice from the lessor, the lessee may give notice in writing disputing that amount. Upon receipt of such notice of dispute from the lessee, the lessor would be obliged to appoint a valuer to provide an opinion of the current market rent. The clause provided that, in the event that the lessee does not serve notice of dispute on the lessor within the time prescribed, the lessee should be deemed to have agreed that the amount set out in the lessor's notice was the current market rent for the following review period.
257 All members of the court held that the decision in United Scientific v Burnley applied in New South Wales.[157] Gleeson CJ observed that the decision had been cited with approval by the High Court in Gollin v Karenlee.
258 Samuels JA said that had he not been guided by authority, he would, by the application of general principles of contract law, have had little difficulty in concluding that the time period for the lessee to give a notice of dispute was essential. His Honour characterised the giving of a notice of dispute within 14 days of the lessor's notice as a non‑promissory condition precedent and observed that such terms require strict compliance before they can be said to have been fulfilled.[158] However, like Gleeson CJ, Samuels JA went on to say that the High Court had cited United Scientific v Burnley with approval, with the consequence that analysis must begin with the assumption that the law as stated in United Scientific v Burnley applies to time stipulations in rent review clauses. His Honour observed that this was so even accepting that it seems somewhat inapposite to speak of a 'breach' of a right to seek a rent review, or that one can issue a notice to complete to make the exercise of an adversary right within a specified time essential to a contract. His Honour observed that those matters were implicit in the speeches of their Lordships in United Scientific v Burnley.[159]
Certain features of these propositions may be noted. First, although the question whether time is of the essence of a contract usually arises in relation to contractual obligations which are to be performed by or within a stated time, so that many of the leading authorities on the subject discuss the matter in terms of one party being in breach, and the consequent rights of the 'innocent' party, in this context the principles concerning time being of the essence are operating in the context of the exercise of a right rather than the performance of an obligation. Secondly, and in consequence, there is an element of incongruity in the importation into this area of discourse of the notice procedure, for the party giving the notice is not requiring the performance of a promise made for that party's benefit but is, instead, 'requiring' the exercise of a right which may be adverse to that party's own interests. A notice of the kind contemplated may, in effect, be requiring the recipient to declare an attitude or take a stand rather than to do anything the recipient is contractually bound to do. This is a somewhat unusual use of such a notice. However, the decision of the House of Lords clearly provides for such a notice where otherwise appropriate. Thirdly, it is established that, in a case where a time is stipulated in a contract but is not of the essence, the consequence is not that the agreement between the parties is altered so that the stipulation is varied by, for example, adding to it an expression such as 'or within a reasonable time thereafter'. The agreement as to time remains, and if there is a breach, and consequent damage, the party in breach may be liable. The rules as to time being or not being of the essence, and as to the giving of a notice such as a notice to complete, relate to some of the consequences of non-compliance with the contractual stipulation, but they do not alter its meaning: Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509. Finally, the issue always comes back to the construction of the contract between the parties. The idea of a 'rebuttable presumption' as to the meaning of words involves some conceptual difficulties, but it is not novel, and the result is that, if there is doubt about what the language of the contract means, the court will lean against a conclusion that time is of the essence, but, nevertheless, if, either expressly or by necessary implication the parties clearly evince an intention that time is to be of the essence the court will give effect to that intention. (emphasis added)
260 Meagher JA referred to three features of Lord Diplock's view in United Scientific v Burnley. First, in considering rent review clauses, a court should apply the same principles which the courts had formerly applied when resolving the question of a failure to comply with an obligation to do something within a specified time amounted to breach of a condition or of a warranty. Secondly, and as a consequence, if such rent review clauses expressly or by necessary implication suggest that time is of the essence, that is an end to the matter. Thirdly, the problem is not one of ascertaining the meaning of the words used, but, rather, the consequences of not meeting the stipulated condition or criterion.[161]
261 All members of the court considered that the express spelling out of the consequences of the lessee failing to give a notice disputing the landlord's assessment of the new rent was sufficient to displace the presumption arising from United Scientific v Burnley. The court had to give meaning to, and could not rewrite, the provision which spelt out the agreed consequence of failing to do something within the stipulated time.[162]
262 In Mango Boulevard v Mio Art, the court applied the principles and presumption in United Scientific v Burnley to a time stipulation for obtaining an alternative valuation in a process of determining a variable price under a share sale agreement. The share sale agreement provided, in the absence of agreement as to market value, a process for obtaining a market valuation, the result of which would be an integer in the calculation of the purchase price of the shares. Clause 4.6 further provided that if a party were dissatisfied with the outcome of the valuation, that party may arrange an alternative valuation. The clause also provided processes of resolution depending on the extent of the difference between the valuation and the alternative valuation. Clause 4.6 did not include any stipulation as to time. It was accepted that, by implication, an alternative valuation was to be obtained within a reasonable time.
263 Although lengthy, we set out the following observations of Peter Lyons J as to the provisions of the agreement because they seem to us significant in informing the court's approach in that case:[163]
(a) The obligation to pay the price arose under cl 5.1. Its effect was to fix the price as the price calculated under cl 4.1(a), though with a minimum of $5,000,000, subject to some specified adjustments. It is convenient to refer to these as the variable price and the minimum price, respectively.
(b) The minimum price was to be paid, as the parties must have expected, within seven days of the Effective Date, which, as things turned out, was 30 January 2007. Although cl 5.1(a), together with the definition of 'Completion Date', envisaged an alternative time for payment, the parties must have seen that the Effective Date would inevitably occur later than the date of settlement of the SSA, which was to be no later than 7 July 2003. That was only three days after the date of the SSA.
(c) Any balance payable by virtue of the calculation under cl 4.1(a) was payable within two days after the determination of the purchase price pursuant to cl 4. Although cl 5.1(b) envisaged an alternative time, namely the date of settlement of the contract, the parties must have inevitably expected that in fact the variable price would be determined on a date well after the date of settlement of the SSA. That is because cl 4 required the determination of the purchase price by reference to the market value of the Property 'immediately after the Effective Date'; see cl 4.3.
(d) Critically, the calculation of the purchase price under cl 4.1(a) was to be determined by reference to the market value of the Property immediately after the Effective Date. Although the clause referred to the 'improved market value' of the Property, the sense in which it was 'improved' is to be understood as a reference to the obtaining of development permits, rather than the construction of improvements; see cl 4.4(a). Moreover, since the Effective Date was determined by reference to a preliminary approval, which does not authorise development to occur, improvement by the carrying out of development was plainly not contemplated by the parties to have occurred by a date very shortly after the Effective Date; see the definition of 'Effective Date' in cl 12.1.
(e) The Property was of substantial size - approaching 240 hectares in area. The parties intended to maximise its yield and profit; cl 4.2(a). They also envisaged a development application, and the obtaining of a preliminary approval (as well as development permits). The parties also anticipated negotiations with referral agencies and other interested parties, intended to reach reasonable compromises and commercial solutions to conditions or objections. As it happened, the Effective Date was more than three years and six months after the parties entered into the SSA. Had there been an appeal to the Planning and Environment Court, that date was likely to have been significantly later than 30 January 2007. Although these things were not known to the parties at the time when they entered into the SSA, it seems to me to be illustrative of the uncertainties, so far as the parties were concerned at the time they entered into the SSA, about when the Effective Date might occur; and the real prospect that the Effective Date would be some years after the date of the SSA.
(f) Clause 4.3 provided a means of fixing the date (30 days from the Effective Date) after which, if the parties were unable to agree on the value of the Property, the Valuation was to be carried out; and a date (40 days after the Effective Date) after which, if they were unable to agree on any valuer to carry out the valuation, one of them might request the appointment of a valuer. In each case a consequence was identified if the event did not occur within the relevant period.
(g) However, no time was specified for the carrying out of the Valuation; or for the making of the request for the appointment of a valuer; or for obtaining the valuation.
(h) No doubt after the Valuation had been carried out, and provided to the parties, either of them was given the right to arrange for an Alternative Valuation; cl 4.6. The clause, however, makes no express mention of the communication of dissatisfaction by one party to the other; or of obtaining the Alternative Valuation; or of the provision of it to the other party. Not surprisingly, it does not specify any means for determining the time by which any of these events was to occur; nor indeed a time for arranging an Alternative Valuation.
(i) No time was specified within which the party obtaining the Alternative Valuation might require the question of the value of the Property to be submitted to mediation.
(j) No time was specified within which the party obtaining the Alternative Valuation might require the dispute about the true value of the Property be submitted to arbitration.
(k) It might be said that where the SSA made no provision for determining the times for any of the matters to which I have referred, it might be implied that each must be done within a reasonable time of some earlier event, identifiable by reference to the SSA. If that be so, again no provision was made for the consequence of the failure to take any of those steps within a reasonable time. Indeed, no consequence is identified for the failure to take any step at all; for example, the failure to require the question of the value of the Property to be submitted to mediation; or if mediation is unsuccessful, the failure to require the dispute to be submitted to arbitration.
It can be seen that such provision as was made for an Alternative Valuation is but one step in a relatively lengthy process for the ultimate determination of the purchase price, to be carried out a relatively long time after the parties entered into the SSA.
264 On appeal, the court rejected the appellant's contention that the alternative valuation was delivered after the expiry of a reasonable time.[164] The court went on to express a view on the respondent's contention that, if the alternative valuation was delivered after the expiry of a reasonable time, it was nevertheless effectual as an alternative valuation under the contract. Peter Lyons J delivered separate reasons relating to whether the right to deliver an alternative valuation was lost upon the effluxion of a reasonable time after delivery of the valuation. Both Fraser JA[165] and Gotterson JA[166] agreed with Peter Lyons J in this regard.
265 Fraser JA said that the provision for an alternative valuation might properly be characterised as 'merely a machinery provision designed to give effect to the contractual intention to fix the purchase price in accordance with the main agreement expressed in cl 4.1'.[167]
266 Fraser JA observed that in GR Mailman, Gleeson CJ and Samuels JA took the High Court's approval in Gollin v Karenlee of United Scientific v Burnley as requiring the conclusion that the notice procedure endorsed in United Scientific v Burnley was potentially applicable in the context of a contractual rent review mechanism which did not specify the consequences of a party's failure to take a step within a specified time. His Honour considered that the differences between such a rent review mechanism and cl 4 of the agreement in that case were 'not so significant as to constitute a ground for adopting a different construction' of the relevant clause.[168]
267 Peter Lyons J described the principal significance of Gollin v Karenlee for the case before him as the approval by the High Court of the decision in United Scientific v Burnley.[169] His Honour referred to the decision in GR Mailman, observing that all members of the New South Wales Court of Appeal accepted that the law was as stated in United Scientific v Burnley. His Honour said as follows:[170]
Samuels JA noted an apparent anomaly in the adoption of the decision in United Scientific, on the ground that in Perri v Coolangatta Investments Pty Ltd it was accepted that the equitable rules concerning time stipulations (including notices to complete) had no application where the time stipulation in the contract was a non-promissory condition precedent to the existence of the contractual obligation, even where the condition precedent required an act or event to occur within a reasonable time. It might be observed that Mason and Brennan JJ who were parties to the decision in Gollin had also been members of the Court which decided Perri in the previous year. The explanation may lie in the difference in the type of clause under consideration in Perri. Fulfilment of a condition of the type considered in Perri was not something within the control of the party to the contract, to whom it was suggested a notice might be given, so that time might become essential. Moreover, it may also be relevant that non-fulfilment of such a condition, either by the time stated in the contract, or within a reasonable time where that is implied, would give rise to a right to terminate the contract. The taking of a step in a rent review procedure is of a different character. (citations omitted)
268 His Honour concluded that there was no material difference in character between the provisions of cl 4 of the share sale agreement relating to the determination of a variable price, the provisions for the variation of the price for gas in Alliance Petroleum, and the provisions for the variation of rent considered in the United Scientific v Burnley case. Consequently, his Honour applied the law as stated in United Scientific v Burnley. Applying those principles, time was not of the essence, there being no express stipulation and the nature of the subject matter and surrounding circumstances not suggesting a contrary conclusion.[171]
269 His Honour further observed that if that question were looked at simply as a matter of construction of a share sale agreement, there were a number of reasons for concluding that time was not intended to be essential. There was no time fixed for the alternative valuation. His Honour also emphasised that it was difficult to see that time could be of the essence in relation to the obtaining of the primary valuation, since without it no price could be determined under the share sale agreement. That being so, it would be incongruous to say that the time for obtaining the alternative valuation was nevertheless of the essence.[172]
270 Peter Lyons J observed that a troubling consequence of his conclusion might be that the processes provided for in the relevant clauses might be left open for an indefinite period. However, his Honour considered that that consideration applied equally to the rent review cases and to the determination of price in Alliance Petroleum. Further, if the clause were to be read as meaning that the dissatisfied party had an obligation or a right to obtain an alternative valuation within a reasonable time, the decision in Perri v Coolangatta would not preclude the giving of a notice making time of the essence.[173]
271 There are also some first instance decisions in Australia applying the presumption in United Scientific v Burnley, in contexts outside rent review clauses, including to:
(1) a clause providing for the lessor to give notice of its opinion as to the market value of a property, which would be deemed to be the market value and used to determine the purchase price following the exercise by the lessee of an option to purchase the leased property;[174] and
(2) a clause providing for a party to a coal supply agreement to give a 'Change Event Notice' thereby triggering a procedure for adjustment, following negotiation between the parties, of the terms of the agreement, including as to price;[175] and
(3) a clause, characterised as a machinery provision, in a mining joint venture agreement providing for the manager to issue in a stipulated time frame cash call notices to participants to require them to fund the operating expenses of the mine.[176]
272 As foreshadowed, in our view, the authorities on which the Buyer relies fall well short of sustaining the general principle it asserts. As is apparent from the detailed outline above, none of the authorities expresses a broad principle along the lines of the general principle asserted by the Buyer.
273 The foundational decision in United Scientific v Burnley was a decision about time stipulations in a rent review clauses in leases. The long‑standing inflationary conditions then affecting the rental market were emphasised in their Lordships' speeches.[177] Lord Diplock observed that it has been usual to include rent review clauses in long‑term leases 'in the last two decades since inflation' and Lord Fraser of Tullybelton said the main purpose of such clauses is to protect the revenues of landlords from the effects of inflation. As Gleeson CJ observed in GR Mailman,[178] the decision in United Scientific v Burnley was, and was expressed to be, a judicial response to a practical commercial problem relating to the fixing of a rental for leases, and especially long leases, in times of inflation. Given this context, United Scientific v Burnley provides an insecure foundation for the imposition of the presumption other than in rent review cases, let alone to all cases falling within the broad principle asserted by the Buyer.
274 Both Gollin v Karenlee and GR Mailman were cases concerned with rent review clauses. Nothing in the reasoning in those decisions supports a principle of broader application than to rent review clauses in leases.
275 Further, as already explained, United Scientific v Burnley involved two cases, one of which involved a promissory provision and the other a non‑promissory provision. In Gollin v Karenlee, in making the observation in which the court referred with approval to United Scientific v Burnley the court assumed the existence of a provision creating an obligation. In those circumstances, it is not clear that the court should be taken to have approved that part of the reasoning in United Scientific v Burnley that related to the lease with the non‑promissory provision. In our view, that is all the more so in circumstances where a year earlier, in Perri v Coolangatta a majority of the High Court had held that the ability of a party to give a notice requiring the other party to take a step within a reasonable time, failing which the contract could be terminated, had no application to the non‑fulfilment of a contingent non‑promissory condition.[179] In so observing, we do not overlook the tentatively expressed suggestion by Peter Lyons J in Mango Boulevard v Mio Art as to how Perri v Coolangatta and Gollin v Karenlee might be reconciled. Such a reconciliation would not accommodate the breadth of the statements of principle in Perri v Coolangatta, as to which see [243] above.
276 The Sellers submit that, insofar as Mango Boulevard v Mio Art and Alliance Petroleum applied the presumption to contracts outside the context of rent review clauses, and in the case of Mango Boulevard v Mio Art in extending the presumption to a power as distinct from an obligation, the decisions are wrong.[180] However, for the following reasons, it is not necessary to decide whether that is so.
277 As to Alliance Petroleum, three features of the case make it significantly different from the present case. First, either party could 'require' an adjustment to price and absent agreement there was a mandatory reference to arbitration. Secondly, as Cox J emphasised more than once,[181] the case concerned delay only in relation to the appointment by a party of an arbitrator in circumstances where the other steps envisaged by cl 24 had occurred, including the mandatory reference of the matter to arbitration. Given the contractual scheme outlined in [250] above, the characterisation of the provision as a machinery clause was, with respect, readily understandable. Thirdly, the case concerned the failure of a party to comply with its obligations in respect of the relevant time stipulation; it was not concerned with a non‑promissory time stipulation.
278 That leaves the decision in Mango Boulevard v Mio Art. Their Honours' acceptance of the application of the presumption in United Scientific v Burnley and the application in that case of a notice to make time of the essence were by no means necessary parts of the court's reasoning. First, the court found that the alternative valuation was obtained within a reasonable time. Secondly, the court considered that, without regard to any presumption, as a matter of construction the proper conclusion was that time was not intended to be essential in relation to the alternative valuation.[182] Further and in any event, the court's application of the presumption to the clause in that case does not support the broad contention advanced by the Buyer as to the scope of the presumption.
279 For these reasons, the authorities on which the Buyer relies do not sustain the application of a presumption that time is not of the essence in the broad category of cases it contends.
280 Further, in our opinion, the application of such a presumption to the general class of cases proposed by the Buyer is unjustifiable as a matter of principle. It does not fit with the modern approach to construction, which has as its focus the text, context - including subject matter and market - and purpose of the particular instrument to be construed.
281 There are many judicial statements in Australia observing that presumptions have fallen into disfavour in the context of construction and other related contexts. This court has recently so observed in Sino Iron v Mineralogy,[183] with reference to Ermogenous v Greek Orthodox Community of SA Inc.[184] In JKC Australian LNG Pty Ltd v CH2M Hill Companies Ltd,[185] this court expressed agreement with the conclusion of the primary judge in that case that application of a presumption arising from the nature of a performance bond in the process of construing an instrument of that character was inconsistent with the general approach of Australian courts to questions of construction. In like vein, in Kawasaki Heavy Industries Ltd v Laing O'Rourke Construction Pty Ltd,[186] the New South Wales Court of Appeal rejected the notion of a presumption in favour of an unfettered right to call on a bond. Rather, the matter is to be approached by an orthodox process of construction of the relevant language.[187]
282 Some authors suggest that presumptions as to intention are better reframed as a construction preference which may assist in choosing between competing constructions.[188] The Buyer did not frame its submissions in this manner, but we have considered its submissions in this alternative framework nonetheless. The italicised observations of Gleeson CJ in Mailman in [259] above support that view, as do the observations of Saville J in[189]e Peonia:189
Over the course of the years the English Courts have dealt in this way with many disputes over the meaning and effect of commercial bargains. As a result there exists a large body of case law which not only authoritatively reaffirms and from time to time refines the applicable principles, ... but also provides authoritative guidance on the meaning and effect of common types of commercial bargain, both generally and with regard to the words and phrases commonly used in such bargains. It follows that if in one case a Court concludes that a particular type of commercial bargain gives rise, or indeed does not give rise, to particular express or implied rights or obligations, another Court or tribunal is likely (or, if required by the laws of precedent, bound) to take the same view of another like bargain, unless there are significant differences in the words or phrases used, or in the context in which they are used. The approach, however, always remains the same. The starting point must be to examine in context the words and phrases used in the case under consideration. If this is not done, then there exists the risk that the law will start dictating to the parties what their bargain should be, the antithesis of the philosophy and principles of English common law on this subject.
283 On the Buyer's submission, a presumption that time is not of the essence is to be made in all cases involving a time stipulation in machinery‑type provisions for determining price adjustments. Thus, whether such a presumption is to be made or preference is to be given is evidently not sensitive to matters such as the subject matter of the contract, the market conditions in the market relevant to that contract, the length of the term of the contract and the relationship between the parties. To state the obvious, those matters are readily capable of bearing significantly on the discernment of the parties' objective intentions revealed by a contract. In our view, it is not a sufficient answer to say that these matters might be considered in determining whether the presumption was rebutted. To impose the presumption of intention, or construction preference, without regard to such matters seems to us to demonstrate that it is an unjustifiably blunt and over‑inclusive tool for the ascertainment of the parties' intentions and runs the risk identified by Saville J in the passage from The Peonia quoted above.
284 The point seems to us to be illustrated by consideration of the present case. The task of construction is to discern the intention revealed by the lengthy and elaborate terms of the GSA. In the circumstances, we are unable to see any principled basis on which the court should approach the task of objective ascertainment of these sophisticated commercial parties' intentions by reference to a presumption, or with any predilection one way or another as to the parties' intentions.
285 For these reasons, we reject the Buyer's submission that the authorities establish a presumption or a construction preference that time is of the essence of general application to all time stipulations, whether promissory or non‑promissory, in machinery‑type provisions for determining price adjustments under a contract.
286 We would also observe that we have some conceptual difficulty with applying the presumption to the class of cases propounded by the Buyer. As already noted, that class of cases is said to apply to all machinery‑type provisions for determining price adjustments. Whether a term is properly seen as machinery may itself be seen as a question of characterisation rather than one of construction. Nevertheless, whether that characterisation is apt necessarily requires consideration of the terms of the contract. That in turn will involve, at least to some extent and in some respects, construing those terms. Once the presumption is applied to the contract, the contract must then be construed to determine whether the presumption is rebutted. We have difficulty seeing (i) at what point before the process of construction is completed, that process is to be interrupted and the presumption interposed, before the process of construction then resumes for the purpose of deciding whether the presumption is rebutted, and (ii) why it should be so interposed.
287 In any event, even if the presumption, or constructional preference, that time is not of the essence were applicable to the general class of case propounded by the Buyer, in our view, it would not apply to the present case. That is because, for the reasons given in [198] above, cl 14.3 cannot properly be characterised as a machinery provision.
288 Nor, in our respectful opinion, can the presumption be applied to the present case on the basis, adopted by the primary judge, that this case is 'sufficiently analogous' or 'sufficiently similar' to United Scientific v Burnley.[190] For the reasons already given, United Scientific v Burnley is inapt to provide a launching-pad for such reasoning. In addition to the points we have already made, to so reason seems to us unacceptably vague. The basis for reasoning from a rent review clause in a lease to a price review clause in a gas supply agreement is not apparent. No satisfactory criteria for evaluating the sufficiency of any analogy (or discerning the sufficiency of similarity) were identified by the Buyer or by the judge. Apart from proposing the category of cases to which we have referred, and supporting the judge's approach, the Buyer did not identify criteria.[191] The judge's reasons for finding a sufficient analogy are outlined at [41] - [43] above. In substance, the first two amount to no more than that cl 14 provides for a price review in a long‑term contract. For the reasons already given, that is an inadequate foundation for commencing the construction task with a presumption or preference. The same is true of the third reason. The extent of the apparent prejudice arising from failure to give notice within the stipulated period is a matter to be considered in the construction exercise, together with all the other relevant considerations. It is not a basis for a presumption or preference.
289 The Buyer submitted at the hearing that, in the alternative to applying the presumption from United Scientific v Burnley in the form of a presumption, it is possible to treat the 'features in United Scientific' as 'markers' or factors relevant to construing this contract 'without elevating it to a presumption'. It submits that this is what the primary judge did in the part of her Honour's reasons outlined at [41] - [[[192]](2021_193.html#_Ref<a name=)] above.192 However, it appears that the judge did treat the United Scientific v Burnley as establishing a presumption that could be applied as such to this case. As explained above, the approach her Honour took was to consider whether the circumstances of this case were 'sufficiently analogous to apply the principle[193]n United Scientific'.193 The word 'principles' must mean, or at least include, the presumption that time stipulations in rent review clauses are not of the essence. In any event, if, by the submission that the features in United Scientific v Burnley can be applied as factors relevant to construing this contract, the Buyer meant the approach taken by the judge as outlined at [41] ‑ [43] above, then that approach should not be adopted for the reasons at [288] above.
290 Further, as we have said, even if the presumption or constructional preference were somehow applicable to the construction of cl 14 of the GSA, for the reasons given under the heading, 'The proper construction of cl 14', in our view, the presumption is comfortably rebutted in the present case.
291 By its notice of contention, the Buyer contends that the judge's conclusion can be sustained on two further bases, although, as we will explain, the second basis adds nothing of substance.
292 First, the Buyer contends that the judge's conclusion - that a Price Review Notice issued outside the period stipulated in cl 14.3 is effectual - is sustained by the operation of cl 32(1)(d).
293 Clause 32.1(d) provides that if a party does not exercise a right or remedy fully or at a given time, the party may still exercise it later.
294 The Buyer submits that cl 32(1)(d) is a 'powerful indicator supporting the conclusion that time is not of the essence' in cl 14.3.[194] It contends that: (1) the ability to initiate a rent review, as referred to in cl 14.3, would be understood by business people as a 'right', and (2) applied in the context of cl 14.3, the fact that a party did not exercise its right under cl 14.3 at the times given in that clause does not prevent it from exercising it later.[195]
295 The relationship between this contention and the Buyer's construction of cl 14 was made not entirely clear. The contention might be taken as supporting the Buyer's construction of cl 14 that time is not of the essence in cl 14.3. Or, it may be taken to proceed on the assumption that its construction of cl 14 was not accepted. Either way, the contention fails. As to the first, cl 32.1(d) does not inform the construction of cl 14.3 or of cl 14 more generally. Consequently, we proceed on the basis of our preferred construction of cl 14 in considering the notice of contention.
296 It is not necessary to determine the metes and bounds of the scope of operation of cl 32.1(d). In our opinion, on its proper construction it is incapable of affecting the operation of cl 14.3 and its time stipulation. In our view, cl 32.1(d) is directed to a right or remedy the existence of which is not itself conditioned by any temporal element. In such a case, the clause operates to make clear that the fact that the right or remedy was not exercised immediately does not preclude the subsequent exercise of it. In our view, the clause is not directed to, and has no operation in relation to, a right where the conferral of the right is conditioned by compliance with a requirement as to time. In such a case, when the stipulated time has elapsed, there is no right to which cl 32.1(d) could attach. In other words, in the case of a right such as one under cl 14.3 - where the right is a right to do something only within a stipulated period - there is no room for the operation of cl 32.1(d). Once the period stipulated in cl 14.3 had elapsed, there was no right in relation to which cl 32.1(d) could operate.
297 That reading of cl 32.1(d) is consistent with and supported by its reference to not exercising a right or remedy 'at a given time' and being able to exercise it 'later'. The phrase 'at a given time' more naturally refers to a time in the abstract, rather than to a stipulated time. The lack of temporal specificity in the operative effect of the clause - enabling the party to do it 'later' - sits comfortably with this sense of cl 32.1(d): enabling a party to do something 'later' is as much as can be done in relation to a failure to do something at a time in the abstract. By contrast, provision enabling a party to do something 'late' would have been apt to apply to a clause stipulating a specific time by which (or specific time period within which) something has to be done. Thus, the provision in cl 32.1(d) that the right may be exercised 'later' rather than 'late' also favours the construction set out in [296] above in preference to reading the clause as enabling a party, where a clause provides the right is to be exercised at a stipulated time (or within a stipulated period), to exercise the right after the stipulated time (or after the stipulated period) has elapsed.
298 The Buyer's construction strains the language of cl 32.1(d). At best it involves a very awkward attribution of meaning to that language. Accepting that words denoting the singular include the plural,[196] a party who does not exercise the power in cl 14.3 to initiate a Price Review within the time there stipulated cannot be said, as the Buyer would have it, to have not exercised that right at the times given in cl 14.3. That is so for two reasons. First, for the reasons in [297] the phrase 'at a given time' more naturally refers to a time in the abstract, rather than to a stipulated time. Secondly, and in any event, cl 14.3 does not give times, it stipulates a period. That stipulation of a period does not create a (infinite) set of 'given times'.
299 As the Buyer ultimately accepted, to construe cl 32.1(d) in the manner it contends for results in giving no effect to the time stipulation in cl 14.3.[197] Clause 32.1(d) should not be construed to have such an effect.
Section 21 of the Property Law Act 1969 (WA)
300 The Buyer's notice of contention asserts that the judge's conclusion can be sustained by virtue of s 21 of the Property Law Act, as addressed in United Scientific v Burnley. However, the Buyer's submissions in support of the contention explain the limited basis of the Buyer's reliance on s 21. Its written submissions say only that the Buyer relies on the equitable presumption under s 21 of the Property Law Act insofar as it informed the approach adopted in United Scientific v Burnley. Although it initially appeared that the Buyer went further in its oral submissions,[198] in the end, it relied on s 21 in aid of the application of the reasoning in United Scientific v Burnley.[199]
301 We have already had regard to s 21 of the Property Law Act in the course of considering United Scientific v Burnley and other authorities. Consequently, this contention adds nothing to the analysis.
302 For the above reasons, we would determine the critical question of construction favourably to the Sellers. In our view, time is of the essence of the time stipulation in cl 14.3. In other words, the power under cl 14.3 to initiate a Price Review can be invoked only by giving notice within the period stipulated in it. Consequently, we would uphold the appeal. Declarations should be made accordingly. We would hear from the parties as to the terms of the declarations and as to costs.
303 We would also hear from the parties as to the identification of those parts of these reasons that should be suppressed from publication in order to give effect to the parties' obligations of and correlative interests in confidentiality, reflected in the order of Mitchell JA made on 9 October 2020.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
[1] Parts of these reasons have been suppressed from publication in order to give effect to the parties' obligations of and correlative interests in confidentiality, reflected in the order of Mitchell JA made on 9 October 2020.
[2] Only the first respondent is a party to, and therefore the 'Buyer', under the contract. However, as all respondents adopted a single position in the appeal, in the interests of consistency of terminology, in these reasons the respondents are also referred to, collectively, as the Buyer in the outline of their contentions.
[3] Pilbara Iron Company (Services) Pty Ltd v Chevron (TAPL) Pty Ltd [2020] WASC 296 (primary reasons).
[6] Defined in cl 1.1 of the GSA to mean any 'hydrocarbons or mixture of hydrocarbons and other gases, consisting primarily of methane, which at a temperature of 15˚C and an absolute pressure of 101.325 kPa is predominantly in the gaseous state'.
[9] Defined as gigajoules in cl 1.1 of the GSA.
[10] Clause 28 requires notices to be in writing, signed and served. It also sets out address details, and provides for when notices are taken to have been received. It does not address the consequences of a failure to issue a notice within a time stipulation.
[11] Defined in cl 1.1 of the GSA to mean contracts for the wholesale supply of Gas for a term of [number redacted] years or greater and an average quantity of [number redacted] TJ or more per Day, but excluding the GSA.
[12] Defined in cl 1.1 of the GSA to mean the wholesale market for Gas under contracts for supply for resale to Gas customers in Western Australia and as direct sales by Gas producers to end users in Western Australia for whose business Gas retailers and/or other Gas producers would normally be expected to compete.
[14] Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219 [42].
[15] Primary reasons [107] ‑ [112], [318].
[16] Primary reasons [113] ‑ [115].
[17] Primary reasons [116] ‑ [117].
[18] Primary reasons [118] ‑ [120].
[19] United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904, outlined at [219] ‑ [232] below.
[27] Primary reasons [226] - [229].
[28] Primary reasons [229] - [230].
[29] Primary reasons [213] - [214].
[33] Primary reasons [250] ‑ [252].
[34] Primary reasons [266] ‑ [278].
[35] Primary reasons [279] - [295].
[39] Appellants' submissions [14] ‑ [15].
[40] Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537.
[41] Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689.
[42] GR Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80.
[43] Appellants' submissions [16] referring particularly to Perri v Coolangatta (554) and (555).
[45] Appellants' submissions [19] - [20].
[49] Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632.
[51] Appellants' submissions [25] ‑ [31].
[53] Alliance Petroleum Australia NL v Australian Gas Light Co (1985) 39 SASR 84.
[56] Perri v Coolangatta (545). The Sellers also refer to Perri v Coolangatta per Gibbs CJ (546), Brennan J (569) (Stephen J agreeing at (547)).
[57] Primary reasons [143], and see also primary reasons [151]. The Sellers say that Samuels JA (95) and Meagher JA (99 ‑ 100) in GR Mailman also had misgivings.
[58] GR Mailman (94 ‑ 95). In fact, the passage to which they refer is from the judgment of Samuels JA.
[59] Gollin & Co Ltd v Karenlee Nominees Pty Ltd [1983] HCA 38; (1983) 153 CLR 455.
[61] Mango Boulevard Pty Ltd v Mio Art Pty Ltd [2013] QCA 271.
[68] Appellants' submissions [52] referring to Callaghan v Merivale CBD Pty Ltd [2005] NSWSC 985; [2006] NSW ConvR 56-155 [17].
[71] Respondents' submissions [20]; appeal ts 42, 66.
[73] Respondents' submissions [51] ‑ [52].
[74] Respondents' submissions [21]; appeal ts 45, 61.
[75] Respondents' submissions [23]; appeal ts 46.
[76] Respondents' submissions [24] ‑ [25]; appeal ts 46.
[77] Respondents' submissions [27]; appeal ts 61 - 62.
[79] Respondents' submissions [29] ‑ [30].
[80] Respondents' submissions [40] referring to Mango Boulevard v Mio Art [84]; appeal ts 51 - 53.
[81] Respondents' submissions [43] referring to GR Mailman (88) and (95). See also appeal ts 111.
[82] Respondents' submissions [44] - [45]; appeal ts 111 - 112.
[84] Respondents' submissions [47] ‑ [50]; appeal ts 100 - 105.
[85] Respondents' submissions [65]; appeal ts 51, 53.
[86] Respondents' submissions [66] ‑ [67].
[87] Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80; (2019) 55 WAR 89 [172] and cases there referred to.
[88] Black Box Control v TerraVision [42].
[89] Sino Iron v Mineralogy [295] - [298].
[90] See the definition of BRGP in cl 1.1 of the GSA.
[93] George 218 Pty Ltd v Bank of Queensland Limited [No 2] [2016] WASCA 182; (2016) 313 FLR 287 [88] and the cases therein cited; Tokio Marine & Nichido Fire Insurance Co Ltd v Hans Bo Kristian Holgersson t/as Holgerssons Complete Home Service [2019] WASCA 114 [53] - [58].
[98] cf Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [38], [93].
[99] Larking v Great Western (Nepean) Gravel Ltd (in liq) [1940] HCA 37; (1940) 64 CLR 221, 228, 231, 237 ‑ 238; Reid v Moreland Timber Co Pty Ltd (1946) 73 CLR 1, 13.
[100] Respondents' submissions [49]; appeal ts 101.
[106] Primary reasons [195] - [196].
[108] As to which see, for example, Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 [50] ‑ [53]; R v A2 [2019] HCA 35; (2019) 93 ALJR 1106 [34] ‑ [36].
[109] United Scientific v Burnley (922), (946), (948), (955), (959).
[110] Primary reasons [307], [310].
[111] Primary reasons [314], [318](5).
[113] United Scientific v Burnley (955).
[114] Compare United Scientific v Burnley where Lord Diplock observed that the tenant could always get a 'pretty good idea' of market price by consulting 'his own surveyor': United Scientific v Burnley (933). See, to similar effect, Lord Fraser of Tullybelton (959).
[115] Stickney v Keeble [1915] AC 386, 415 - 416; Lord Parker of Waddington's observations were accepted by the High Court in Petrie v Dwyer [1954] HCA 75; (1954) 91 CLR 99, 105.
[116] Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509.
[117] Louinder v Leis (519 - 520), referring to Canning v Temby [1905] HCA 45; (1905) 3 CLR 419, 426.
[118] Stickney v Keeble (415 - 416); Neeta (Epping) Pty Ltd v Phillips [1974] HCA 18; (1974) 131 CLR 286, 297 ‑ 298; Louinder v Leis (519 - 520, 524 - 525, 532); Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1988) 166 CLR 623, 651 ‑ 652, 664; Douglas v Cicirello [2006] WASCA 226 [14], [45]; see also Lindgren KE, Time in the Performance of Contracts (2nd ed, 1982) [210] - [222], approved in Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315 [49].
[119] Louinder v Leis (524 - 525); GR Mailman (89, 94, 97, 98 - 99); Hewitt v Debus [2004] NSWCA 54; (2004) 59 NSWLR 617 [77].
[120] Solomons v Halloran [1906] NSWStRp 110; (1906) 7 SR (NSW) 32, 42.
[121] Holland v Wiltshire [1954] HCA 42; (1954) 90 CLR 409, 418, adopted by Brennan J in Louinder v Leis (532, 533). See also, to like effect, Dixon CJ in Holland v Wiltshire (415); Stickney v Keeble (417) and Louinder v Leis (524).
[122] Holland v Wiltshire (418 - 419), referring to Stickney v Keeble.
[123] Neeta (Epping) v Phillips (298 ‑ 299); Louinder v Leis (524 ‑ 525, 532); Laurinda v Capalaba (652); Douglas v Cicirello [14], [45].
[124] Canning v Temby (426); Carr v JA Berriman Pty Ltd [1953] HCA 31; (1953) 89 CLR 327, 348 ‑ 349; Neeta (Epping) v Phillips (298 ‑ 299); Louinder v Leis (512 ‑ 514, 520, 524, 526, 532); Laurinda v Capalaba (644 ‑ 645, 652); Earnshaw v Gorman & Sons Pty Ltd [2001] WASCA 50 [27].
[125] Canning v Temby (426); Louinder v Leis (532 ‑ 533); Laurinda v Capalaba (644 ‑ 645, 652).
[126] Louinder v Leis (526, 536); Laurinda v Capalaba (644 - 645, 664).
[127] United Scientific v Burnley (931).
[128] United Scientific v Burnley (932 - 933).
[129] United Scientific v Burnley (930, 940, 950, 962).
[130] United Scientific v Burnley (937, 944, 958).
[131] United Scientific v Burnley (927).
[132] United Scientific v Burnley (930).
[133] United Scientific v Burnley (922 - 923), (929 - 930), (933 - 934).
[134] United Scientific v Burnley (946).
[135] United Scientific v Burnley (948), (950), (951), (955).
[136] United Scientific v Burnley (959), (961 - 962).
[137] United Scientific v Burnley (939).
[139] Trustees of Henry Smith Charity v AWADA Trading and Promotion Services Ltd (1983) 47 P & CR 607.
[140] Perri v Coolangatta (543, 554, 559‑ 560, 567).
[141] Perri v Coolangatta (545 - 546).
[144] Perri v Coolangatta (554 - 555).
[145] Perri v Coolangatta (559 - 560).
[146] Perri v Coolangatta (565 - 566).
[148] Perri v Coolangatta (546, 547, 569).
[163] Mango Boulevard v Mio Art [69] - [70].
[164] Mango Boulevard v Mio Art [29].
[165] Mango Boulevard v Mio Art [37].
[166] Mango Boulevard v Mio Art [67].
[167] Mango Boulevard v Mio Art [34].
[168] Mango Boulevard v Mio Art [36].
[169] Mango Boulevard v Mio Art [74].
[170] Mango Boulevard v Mio Art [79].
[171] Mango Boulevard v Mio Art [82].
[172] Mango Boulevard v Mio Art [83].
[173] Mango Boulevard v Mio Art [84].
[174] Bondi Diggers Club Ltd v Vitarni Pty Ltd (1996) 7 BPR 15,061.
[175] Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd (No 5) [2016] QSC 199 [138] ‑ [151].
[176] Rolleston Coal Holdings Pty Ltd v ICRA Rolleston Pty Ltd [2020] QSC 352; (2020) 14 ARLR 213.
[177] United Scientific v Burnley (922, 948, 958).
[179] Perri v Coolangatta (546, 547, 569).
[182] Mango Boulevard v Mio Art [34], [83].
[184] Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 [26].
[185] JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2] [2020] WASCA 112 [91].
[186] Kawasaki Heavy Industries Ltd v Laing O'Rourke Australia Construction Pty Ltd [2017] NSWCA 291; (2017) 96 NSWLR 329.
[187] Kawasaki v Laing O'Rourke [60] - [67].
[188] See, for example, Carter JW, The Construction of Commercial Contracts (2013) [16-05].
[189] The Peonia [1991] 1 Lloyd's Rep 100, 103.
[191] Respondents' submissions [19], [57].
[194] Respondents' Notice of Contention [79].
[195] Respondents' Notice of Contention [79]; appeal ts 119 - 121, 123 - 124.
(1982) 149 CLR 509
(1982) 149 CLR 537
(1990) 21 NSWLR 689
(1991) 24 NSWLR 80
(1985) 39 SASR 84
(1983) 153 CLR 455
(2019) 55 WAR 89
(2016) 313 FLR 287
(1998) 194 CLR 355
(1940) 64 CLR 221
(1946) 73 CLR 1
(2009) 239 CLR 27
(2019) 93 ALJR 1106
(1954) 91 CLR 99
(1905) 3 CLR 419
(1974) 131 CLR 286
(1988) 166 CLR 623
(2003) 217 CLR 315
(2004) 59 NSWLR 617
(1954) 90 CLR 409
(1953) 89 CLR 327
(2002) 209 CLR 95
(2017) 96 NSWLR 329