DICOM AWT OPERATIONS PTY LTD -v- CITY OF STIRLING [2019] WASCA 117 (16 August 2019)

1. AnaeCo Ltd (AnaeCo) holds the patent for the DiCOM System. This is a system for separating the organic and inorganic components of household waste, recovering recyclable material and converting organic material to compost and bio-gas. Prior to December 2006, AnaeCo was called Organic Resource Technologies Ltd. It will be convenient to refer to it as AnaeCo throughout these reasons.
2. The appellant (DiCOM) was established by AnaeCo and Perpetual Investment Management Ltd as a special purpose vehicle to provide services under waste supply agreements. They also established Brockway DiCOM Facility Pty Ltd (Brockway) as trustee of the DiCOM AWT Investment Trust, and licensed the DiCOM System to that Trust.
3. DiCOM entered into waste supply agreements with the Council and the City. We shall refer to them collectively as the Waste Supply Agreements. The agreement with the Council is dated 5 April 2007 (Council Agreement). The agreement with the City is dated 13 August 2008 (City Agreement).
4. The Council operates the Brockway Waste Transfer Station (Waste Transfer Station) under a Crown lease. It has subleased part of the Waste Transfer Station (Site) to Brockway, which has further subleased the Facility Site to DiCOM.

1. On 5 April 2007, DiCOM and the Council entered into the Council Agreement.
2. On 15 August 2007, Brockway and AnaeCo entered into an 'Engineering, Procurement, Construction & Management Agreement' (EPCM Contract).
3. On 21 September 2007, Brockway subleased the Site to DiCOM.
4. On 13 August 2008, DiCOM and the City entered into the City Agreement. The City Agreement was varied in a minor respect on 7 November 2008.
5. On 3 December 2010, Brockway, AnaeCo and Monadelphous Group Ltd entered into a 'Contract for Design and Construction DICOM System Shenton Park Stage 2' (DC Contract). The DC Contract replaced and released the parties from the EPCM Contract.
6. On 6 December 2010, DiCOM and AnaeCo entered into an 'Operation and Maintenance Agreement' under which AnaeCo was to operate and maintain the Facility.
7. Between 2010 and 2016, AnaeCo and Monadelphous constructed Stage 2 of the Facility. It was an agreed fact that the 'Commission Date' for the purposes of the Council Agreement occurred no later than 21 October 2013.
8. On 9 February 2016, a Deed of Settlement and Release was executed in relation to the DC Contract (Deed). Under the Deed, AnaeCo and Monadelphous were required to pay Brockway $5,800,000, excluding GST, for failure to meet all of the requirements of the Project Specification. Once that payment was made, the Deed provided that the date of Practical Completion would be 15 April 2016. A certificate of Practical Completion was not issued under the DC Contract.
9. In the period from 1 September 2017 to 31 October 2017, the Facility accepted 609.08 tonnes of waste for processing and exported 431.10 tonnes of waste to landfill. It exported no recyclable material or compost, and produced no electricity. It retained recovered organic material for later bioconversion.
10. DiCOM initially asserted that the Facility achieved 'Final Completion' for the purposes of the City Agreement on 1 November 2017. This was significant as it was claimed to give rise to obligations of the Council and the City to make regular deliveries of Waste to the Facility and to make payments to DiCOM in respect of those deliveries.
11. DiCOM issued invoices to the Council and the City in respect of the months of November and December 2017, purportedly pursuant to the Waste Supply Agreements. The Council and the City disputed that 'Final Completion' had been achieved, and denied that they were liable to pay the invoices. The Council and the City issued separate proceedings on construction summonses seeking declaratory and injunctive relief.
12. It may be noted that DiCOM now accepts that the Facility has not achieved Practical Completion under the Council Agreement, and that Final Completion has not yet occurred under the City Agreement.[1] However, it maintains a challenge to the trial judge's declaration as to when these events will occur, on the basis that the declarations will affect the rights of the parties under the Waste Supply Agreements.[2]

1. Schedule 2 of both Waste Supply Agreements defines certain categories of waste. It is convenient to refer to these definitions, which are largely in common terms, before identifying the operative parts of the Waste Supply Agreements.
2. Waste is relevantly defined as any material delivered to and deposited at the 'Receival Point' at the Waste Transfer Station.
3. Municipal Solid Waste or MSW is defined in the Council Agreement to mean municipal solid waste from household collections from kerbside and commercial waste the composition of which is consistent with the composition determined pursuant to a 'Waste Composition Study' (discussed in further detail later). There is a similar definition in the City Agreement, which refers to 'household collections from kerb side wheelie bins or front load bulk bins and commercial waste'.
4. Recoverable Material is material from which it is feasible to sort or derive 'Recyclables' and 'Renewable Resources' for which there is an established market and from which DiCOM makes an acceptable profit.
5. Recyclables are aluminium and steel cans, and certain plastic bottles, containers and packaging.
6. Renewable Resources is defined to mean:

Organic Products (including DiCom® Bioconversion Products) and Environmental Credits, and any other material or right created, derived or sorted from Municipal Solid Waste delivered to the Facility, including biogas, other than Non-Specification Material and Residual Material.

For this purpose, 'Organic Products' is defined to mean 'material which is suitable for use as compost or organic fertilizer, including DICOM Compost'.

1. Non-Specification Material is any delivery of waste containing specified material (for example, batteries and clinical or hospital waste).
2. Residual Material is defined in the Council Agreement to mean material derived from Waste or otherwise produced by processing Waste, other than Recyclables and Renewable Resources.
3. Residual Material is defined in the City Agreement to mean material derived from Waste or otherwise produced by processing Waste, other than Recoverable Material or Non-Specification Material.

1. Clause 2.3 of the Council Agreement requires DiCOM to provide 'the Services' in accordance with the Council Agreement.
2. Clause 2.4 provides that the Council must:

(1) supply Municipal Solid Waste in accordance with the agreement;

(2) make payments in accordance with the agreement; and

(3) 'remove, transport and dispose of all Residual Material and Non‑Specification Material'.

1. Clause 3.5 provides that, on the 'Commission Date', DiCOM must commence provision of the 'Services'.
2. Schedule 1 provides for the following definitions relevant to cl 3.5.
3. The 'Commission Date' is defined to mean:

[I]n respect of Stage 2, the date on which [DiCOM] notifies [the Council] that the Facility is ready to receive, sort, process and treat Municipal Solid Waste for the purpose of commencing the Commission Period.

1. 'Services' means 'the sorting and processing of Municipal Solid Waste at the Facility'. 'Facility' is defined to mean:

[T]he DiCOM® System and supporting infrastructure at [the Waste Transfer Station] to be located on the Site incorporating Stage 1 and, as the case may be, Stage 2.

1. 'Stage 1' is defined to mean the development of one vessel to process Solid Municipal Waste at the Site, and associated infrastructure. 'Stage 2' is defined to mean the development of an additional two vessels to process Solid Municipal Waste at the Site, and associated additional infrastructure.
2. The 'DiCOM System' is defined in the following terms:

DiCOM® System the integration [sic] of [AnaeCo] developed:

(a) Waste receival, sorting & recovery system.

(b) solid organic waste processing system using DICOM® Bioconversion.

(c) auxiliary systems for DICOM® Bioconversion Products,

for the purposes of processing Waste by:

(a) recovering Recyclables.

(b) converting the organic fraction of Waste into DICOM® Bioconversion Products.

(c) value adding DICOM® Bioconversion Products by producing renewable energy, organic fertiliser/soil conditioner or solid recovered fuel briquettes.

1. Schedule 2 defines 'DiCOM Bioconversion Products' as being DiCOM Compost and DiCOM Biogas. 'DiCOM Compost' means the compost product of DiCOM Bioconversion. 'DiCOM Biogas' means the biogas product of DiCOM Bioconversion. 'DiCOM Bioconversion' is defined in sch 1 to mean the bioconversion process developed and patented by AnaeCo.

1. Clauses 4.1 and 4.2 provide for the Council's obligations to deliver Waste in certain periods.

1. Clause 4.1(a) deals with the 'Pre-Performance Test Commission Period', while cl 4.1(b) deals with the 'Performance Tests Period'. Under sch 1, these are the periods of time during which Municipal Solid Waste is introduced to the Facility in accordance with the Pre-Performance Test Commission Schedule and the Performance Tests Schedule respectively. Those schedules (in s 1 of sch 5) relate to Stage 1 of the Facility.
2. Clause 4.1(a) and cl 4.1(b) require the Council to deliver Municipal Solid Waste in accordance with those schedules. The Pre-Performance Test Commission Schedule provides for delivery of 634 tonnes of MSW in each of months 1 and 2, and 2,750 tonnes of MSW in each of months 3 and 4. The Performance Tests Schedule provides for delivery of 634 tonnes of MSW in each of months 5 - 10.
3. Clause 4.1(a) and (b), and the associated schedules, provide for DiCOM to notify the Council of the commencement of the Pre‑Performance Test Commission Period and the Performance Tests Period.

1. Clause 4.1(c) deals with the 'Commission Period'. Clause 3.2 provides:

The Commission Period begins on the Commission Date and ends at the end of the Ramp Up Period as notified to [the Council] by [DiCOM].

1. The 'Ramp Up Period' is defined in sch 1 to be the period detailed in s 2 of sch 5.
2. Clause 4.1(c) requires that:

During the Commission Period, [the Council] must deliver Municipal Solid Waste to the Receival Point in accordance with the Commission Schedule and the Ramp Up Schedule.

1. The phrases 'Commission Schedule' and 'Ramp Up Schedule' are also defined in sch 1 by reference to s 2 of sch 5. The Commission Schedule provides for the Council to deliver 634 tonnes of MSW in month 1, 1,375 tonnes in month 2 and 2,750 tonnes in each of months 3 and 4. The Ramp Up Schedule provides for 2,750 tonnes of MSW to be delivered in each of months 5 and 6. Section 2 of sch 5 provides that month 1 and month 5 commence on the date in respect of which DiCOM gives notice to the Council.

1. Clause 4.1(d) deals with the 'Bank Test Period'. Clause 3.3 provides that the Bank Test Period begins and ends on the dates notified to the Council by DiCOM. Clause 4.1(d) provides that, during the Bank Test Period, the Council must procure the delivery of Municipal Solid Waste in accordance with the Bank Test Schedule. Sch 1 defines the Bank Test Schedule by reference to s 2 of sch 5, which provides for the delivery of 2,750 tonnes of MSW in each of months 7 - 12. Section 2 of sch 5 provides that month 7 commences on the date in respect of which DiCOM gives notice to the Council.

1. Clause 4.2 provides for the Council's delivery obligations on 'achievement of Practical Completion'. Subject to a presently immaterial exception relating to increases in the amount of Waste, cl 4.2 provides:

On achievement of Practical Completion in respect of Stage 2 (as notified by [DiCOM] to [the Council]), [the Council] must procure the delivery of the following tonnes of Municipal Solid Waste:

(a) 126.45 tonnes of Municipal Solid Waste an Operating Day (Daily Base Capacity);

(b) 634 tonnes of Municipal Solid Waste a week (Weekly Base Capacity);

(c) 2,750 tonnes of Municipal Solid Waste a Month (Monthly Base Capacity); and

(d) 8,250 tonnes of Municipal Solid Waste a Quarter (Quarterly Base Capacity); and

(e) 33,000 tonnes of Municipal Solid Waste in a Financial Year (Annual Base Capacity)

1. The term 'Practical Completion' is not defined in the Council Agreement.
2. Clause 4.8(a) requires the Council to deliver a quantity of Municipal Solid Waste equal to 'DBC' each Operating Day and 'QBC' each Quarter. 'DBC' and 'QBC' are respectively defined in sch 1 by reference to the Daily Base Capacity and Quarterly Base Capacity specified in cl 4.2(a) and (d) respectively. In general terms, cl 4.8 subjects the City to a financial penalty if it does not deliver at least 95% of QBC or 99% of ABC (discussed in greater detail at [56] below). 'ABC' is defined in sch 1 to mean the Annual Base Capacity specified in cl 4.2(e).

1. Clause 9.1 provides that, subject to certain exceptions, DiCOM must, 'during the Operational Period', accept up to 110% of the quantities referred to in cl 4.2. Under cl 3.4, the Operational Period begins on the day immediately following the end of the Bank Test Period and ends on the Expiry Date. Sch 1 defines the Expiry Date to mean 'the 20th anniversary of the date on which the Operational Period begins', subject to any extension pursuant to other provisions of the Agreement.

1. Clause 4.3(a) provides for the Council's obligation to remove Residual Material and Non-Specification Material arising from Waste delivered by the Council or any Third Party:

[The Council] must remove, transport and dispose of all Residual Material and Non-Specification Material in accordance with the Collection Procedures, being Residual Material derived and Non‑Specification Material separated or sorted from Waste delivered by [the Council] or any Third Party.

1. Clause 10.1, sch 12 and Annexure A set out a complex formula for the calculation of the 'Service Charge' payable by the Council to DiCOM in respect of delivered Waste. For present purposes, it is sufficient to note the following broad general features of the Council's payment obligations.

1. There are two components to the Service Charge. The first component is:

[A]n amount determined by [DiCOM] (on a basis consistent with the Assumptions Book) on or before the Commission Date that is sufficient to provide a rate of return on the capital employed and to cover the expected future operating and finance related cash flows necessary to be incurred to deliver the service requirements for the Term.

It will be convenient to refer to this as the 'return on capital component of the Service Charge'.

[A]n amount equal to the actual costs to [the Council] of the removal, transportation and disposal of the quantity and composition of the Residual Material determined by the Waste Characterisation Study (Residual Material Cost).

1. Clause 4.8 provides for payments required if the Council does not deliver at least 95% of QBC in any quarter or 99% of ABC in any year. In general terms, the Council must pay the Service Charge which would have been payable if QBC or ABC had been delivered plus the amount of DiCOM's lost revenue from the sale of Recyclables and Renewable Resources. In the case of a failure to deliver at least 95% of QBC, the Council must also pay an amount equal to any new or increased cost incurred by DiCOM as a result of QBC not being delivered.

1. The Service Charge is capped at an amount equal to 110% of the gate fee charged by the Council at the Commission date. If the sum of the components referred to above exceeds that cap, then there will either be an agreed increase to the Service Charge or the term of the agreement will be extended by a period necessary to enable DiCOM to recover the amount of the Overrun.

1. Section 1 of sch 12 provides that, in each month, the Council must pay the Service Charge on the tonnes of Waste it delivers during that Month less:

(1) the cost to the Council in respect of all Residual Material removed, transported and disposed of by the Council during that month; and

(2) the Overhead Amount (in effect the cost per tonne of the Council operating the Waste Transfer Station) in respect of each tonne of Waste delivered to the Facility by a Third Party during that month.

1. The general effect of the above provisions is that, subject to the Service Charge cap, the Council is liable to pay the return on capital component of the Service Charge for each tonne of Waste it delivers to the Facility. In general terms, the cost of removing Residual Material derived from Waste delivered by the Council to the Facility has no net effect on the amount payable by the Council to DiCOM. This is because the Residual Material Cost of that material is a component of the Service Charge, but can be deducted from the amount payable by the Council pursuant to the provisions referred to at [58] above.

1. Clause 10.2 provides for DiCOM to make monthly claims following the Commission Date. That is, the obligation for the Council to make payments in respect of delivered Waste arises from the beginning of the Commission Period.
2. Under cl 10.2(a) at the end of each month DiCOM must submit to the Council a tax invoice in respect of 'the monthly Aggregate Service Charge for that Month calculated in accordance with Schedule 12' and amounts payable and adjustments made under certain other provisions of the agreement. The sum of these amounts and adjustments is the Monthly Claim. Clause 10.2(b) requires the Council to pay each Monthly Claim within 30 days after the Council's receipt of that Monthly Claim.
3. Sch 1 defines 'Monthly Aggregate Service Charge' to be:

[I]n respect of each Month, the number of tonnes of Municipal Solid Waste required under this agreement delivered to [DiCOM] at the Facility multiplied by the Service Charge. [sic]

1. The agreement makes a number of provisions for the adjustment of the payment amounts referred to above. It is unnecessary to detail the effect of those provisions in these reasons.

1. Sch 3 requires DiCOM to conduct a Waste Characterisation Study during Stage 1. That study is to address both the proportion by weight of Non-Specification Material, Recoverable Material, Recyclables, Residual Material and the percentage of Recoverable Material in Residual Material.
2. Sch 3 provides that the Waste Characterisation Study will be used to define the percentage and composition of Recoverable Material that the Council will be required to deliver, and by reference to which Municipal Solid Waste will be defined.

1. By cl 4.13, the Council acknowledges that to assure continuous operation of the Facility 55,000 tonnes of Waste (including 33,000 tonnes of Municipal Solid Waste) must be delivered rateably in a Financial Year in respect of Stage 2. By cl 5.1, the Council acknowledged that Waste is to be delivered from the Council and Third Parties to the Facility.
2. Clause 5.2 requires a waste characterisation study to be undertaken before any Waste is delivered by a Third Party to the Facility, and for subsequent studies to be undertaken. These studies are for the purpose of determining the proportions of Residual Material produced by the Facility for which the Council and Third Parties are responsible.

1. Clause 5.12 applies where DiCOM enters into a waste supply agreement with a Third Party on terms more favourable than the Council Agreement. DiCOM must notify the Council of the terms that are more favourable (MFTs), such notice to be accompanied by a mark-up of the Council Agreement showing the MFTs. The Council Agreement is then to be treated as being amended accordingly. For these purposes, 'more favourable' means:

[T]hat the service charge is less than the Service Charge or the same or similar terms contained in the applicable Third Party WSA to those contained in this agreement (having regard to the interaction of all terms) are more favourable such that those terms provide a more favourable apportionment of economic and liability risks than under this agreement.

1. The Council contends that it is entitled to have the Council Agreement amended under this clause by reference to the more favourable terms of the City Agreement. These include the requirement for 'Final Completion' before delivery is required under cl 4.2 of the City Agreement (discussed at [132] below). Although the trial judge did not determine disputed issues as to the application of cl 5.2 of the Council Agreement, it was agreed that there was utility in determining when 'Final Completion' occurred in the Primary Council [3]roceedings.3

1. The Primary Council Proceedings raised a number of issues, not all of which are in contention in the appeal.
2. The three issues which remain contentious concern:

(1) when 'Practical Completion in respect of Stage 2 (as notified by [DiCOM] to the [Council])' occurs for the purposes of cl 4.2 of the Council Agreement;

(2) the meaning of the term 'process' in certain provisions of the Council Agreement; and

(3) when 'Final Completion' occurs for the purposes of cl 4.2 of the City Agreement.

1. We will deal with the trial judge's approach to the third issue relating to the City Agreement when considering the City Appeal. The trial judge's approach to the first two issues, which relate to the Council Agreement, is addressed below.

1. The trial judge concluded that 'Practical Completion in respect of Stage 2 (as notified by [DiCOM] to the [Council])' meant 'on achievement of Practical Completion under the contract under which Stage 2 was completed'. As events transpired, this was the DC Contract.[4]
2. Therefore, '[o]n achievement of Practical Completion in respect of Stage 2' in cl 4.2 meant on achievement of Practical Completion under the DC Contract.[5] Practical Completion under the DC Contract would be 'achieved' on the date on which a certificate of Practical Completion was issued.[6]
3. In summary, her Honour's reasons for reaching those conclusions were as follows:

(1) The plain meaning of cl 4.2 is that it sets up a pre‑condition to the Council's obligation to deliver Waste during the Operational Period. Further, on its face and in the context of the Council Agreement as a whole, cl 4.2 suggests that, to trigger the Council's delivery obligations in the Operational Period, something more is required than simply the completion of the construction of the additional vessels and infrastructure.[7]

(2) There are numerous indicators that the phrase is a reference to an external event. The words 'Practical Completion' are capitalised but not defined. The reference to DiCOM notifying the Council suggests that Practical Completion was something that DiCOM, not the Council, would be told about under the construction contract. The agreement was premised on the fact that another entity would construct the Facility, and did not itself cover that construction. It would be extraordinary if an agreement to construct a facility of this size did not include the usual provisions for certification of practical completion.[8]

(3) A reasonable person would have understood the phrase '[o]n achievement of Practical Completion in respect of Stage 2 (as notified by [DiCOM] to [the Council])' to mean 'on achievement of Practical Completion under the contract under which Stage 2 was completed'. As events transpired, this was the DC Contract. This conclusion is supported by the commercial purposes and objects of the Council Agreement, and was a businesslike construction,[9] in contrast to the construction advanced by DiCOM.[10]

(4) The achievement of Practical Completion under the DC Contract depends upon the terms of the DC Contract. Under that contract, Practical Completion is achieved when, and only when, a certificate of Practical Completion in accordance with the contract is issued.[11]

1. In reaching the construction described at [73], the trial judge rejected two competing alternative constructions advanced by DiCOM. Up until the third day of trial, DiCOM argued that 'Practical Completion' in cl 4.2 was merely a reference to the beginning of the Operational Period: ie the end of the Bank [12]st Period.12 However, on the third day of the hearing, DiCOM conceded that cl 4.2 set out what was required to trigger the Council's delivery obligations. DiCOM contended that the Council's obligations were triggered by the development of the additional two vessels to process Waste and associated inf[13]structure.13
2. The trial judge made a declaration that, on the proper construction of the Council Agreement, 'Practical Completion in respect of Stage 2' for the purposes of cl 4.2 would not occur until the Facility has been certified as having reached Practical Completion in accordance with the DC Contract.

1. The trial judge concluded that 'process' in the Council Agreement required the Facility to:

(2) convert the organic fraction of Waste into DiCOM Bioconversion Products; and

(3) value-add DiCOM Bioconversion Products by producing renewable energy, organic fertiliser/soil conditioner, or solid recovered fuel briquettes.

The trial judge rejected DiCOM's contention that 'process' means only an ability to accept and convey Waste through the Facility for the purposes of recovering Recyclables and Renewables (so that the actual production of the products was merely aspirational).[14]

1. The trial judge made a declaration in the following terms:

On the proper construction of the Council Agreement, for the purposes of the definitions of the terms 'Commission Date', 'Services', and 'Residual Material' in the Council Agreement, 'processing' of MSW requires the Facility to:

(a) recover Recyclables;

(b) convert the organic fraction of Municipal Solid Waste into DiCOM® Bioconversion Products, being:

(i) DiCOM® Compost; and

(ii) DiCOM® Biogas; and

(c) value-add DiCOM® Bioconversion Products by producing renewable energy, organic fertiliser/soil conditioner or solid recovered fuel briquettes.

1. DiCOM appeals against the Primary Council Decision on three grounds. Ground 1 contends that the trial judge erred in law in making the declaration referred to at [77] above. Ground 2 contends that the trial judge erred in making a declaration as to when 'Final Completion occurred under the City Agreement. Ground 3 contends that the trial judge erred in law in making the declaration set out at [79] above.
2. We will deal with ground 2 when addressing the City Appeal.

1. In the Council Appeal, DiCOM has essentially reverted to its initial submission in the Primary Council Proceedings. DiCOM submits that the reference to 'Practical Completion in respect of Stage 2' is to the completion of the Bank Test Period or, if there is no Bank Test Period, the conclusion of the Commission Period.[15] DiCOM submits that the periods must be 'successfully completed', in the sense that the Facility has been processing the number of tonnes of Municipal Solid Waste set out in sch 5 to the Council Agreement.[16]

1. DiCOM makes only a limited challenge to the trial judge's declaration as to the meaning of 'processing' in the Council Appeal. It does not challenge the trial judge's conclusion that the reference to the processing of Waste was more than merely aspirational.
2. In essence, DiCOM contends that the trial judge erred in construing processing as requiring that the entire organic fraction of Municipal Solid Waste be converted into DiCOM Bioconversion Products. DiCOM contends that the definitions of 'Organic Products' and 'Renewable Resources' in sch 2 to the Council Agreement (set out at [26] above) make it clear that the output of 'processing' is not confined to DiCOM Bioconversi[17] Products.17 DiCOM submits that the declaration should be modified by the addition of the following underlined words:

On the proper construction of the Council Agreement, for the purposes of the definitions of the terms 'Commission Date', 'Services', and 'Residual Material' in the Council Agreement, 'processing' of MSW requires the Facility to:

(a) recover Recyclables;

(b) convert the organic fraction of Municipal Solid Waste into Renewable Resources, including but not limited to DiCOM® Bioconversion Products, being:

(i) DiCOM® Compost; and

(ii) DiCOM® Biogas; and

(c) value-add DiCOM® Bioconversion Products by producing renewable energy, organic fertiliser/soil conditioner or solid recovered fuel briquettes.

Disposition: Achievement of Practical Completion Proper construction of the Council Agreement

1. In our view, the preferable construction of the Council Agreement is that reached by the trial judge. That is, the 'achievement of Practical Completion in respect of Stage 2' refers to the achievement of practical completion under the contract under which Stage 2 is constructed. As events subsequently transpired, this involved certification of Practical Completion under the DC Contract. We agree with the trial judge's reasons, summarised at [75] above, for concluding that the Council Agreement should be construed in that manner. Below we further explain our reasons for preferring that construction, and rejecting DiCOM's submission that the reference is to the completion of the Bank Test Period or, if there is no Bank Test Period, the conclusion of the Commission Period.

1. There is no dispute as to the applicable principles of contractual construction,[18] summarised in the decision of this court in Black Box Control Pty Ltd v Terravision Pty Ltd,[19] in a passage the trial judge adopted.[20] The applicable approach was also summarised by the plurality in Electricity Corporation v Woodside Energy Ltd:[21]

The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". ... [U]nless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties ... intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". (citations omitted)

Requirement for Practical Completion to be 'achieved'

1. The language 'achievement of practical completion' indicates the prescription of a milestone which is a precondition to the Council's obligation to make, and therefore to pay for, regular deliveries of Municipal Solid Waste to the Facility over the Term. The reference to 'achievement' indicates that something must be achieved. As noted above, the Commission Period begins when notice of the Commission Date is given, and runs for the six months referred to in sch 5. That six month period commences on a date on which DiCOM gives notice to the Council. The 'Bank Test Period' begins and ends on dates notified to the Council by DiCOM. The idea that Practical Completion automatically follows from the conclusion of periods defined by reference to notices issued by DiCOM is inconsistent with the language of cl 4.2 with its reference to 'achievement', as it would be understood by a reasonable business person. By contrast, this feature of the contractual text supports our preferred construction - the issue of a certificate of Practical Completion is, in the ordinary sense of the word, the 'achievement' of practical completion.

1. Further, DiCOM's construction is inconsistent with the reference to 'Practical Completion' in clause 4.2. That language is not apt to merely denote the conclusion of a period. A reasonable business person would anticipate that the construction of Stage 2 would occur under a contract which would provide for certification of practical completion by an independent person. DiCOM accepted that this was so.[22] A reasonable business person would not contemplate that a development of the scale of Stage 2 would be constructed other than under a contract containing such a common customary provision. A reasonable business person in the position of the parties at the time the Council Agreement was entered into would naturally read the reference to 'Practical Completion' as being to the future certification of practical completion under a future construction contract.

No basis for assessing 'successful' completion'

1. DiCOM's reference to the 'successful' completion of the Commission Period and the Bank Test Period - in the sense that the Facility has been processing the number of tonnes of Municipal Solid Waste set out in sch 5 - is problematic. Clause 4.1(c) and (d), read with sch 5, require the Council to deliver certain quantities of Municipal Solid Waste to the Facility during the Commission Period and the Bank Test Period. However, those clauses do not provide for any qualitative or quantitative criteria for the performance of the Facility during those periods. Sch 5 states that quantities identified are indicative estimates only, and that DiCOM will confirm the delivery requirements on a daily basis.
2. The Council Agreement does not specify the proportion of the Waste delivered during the Commission Period and the Bank Test Period which must be processed in the Facility. The Council Agreement does not provide for any basis on which the 'successful' completion of the periods could be judged. DiCOM accepted that nothing in the contract sets out what constitutes success in terms of processing.[23]
3. DiCOM submitted that its construction of cl 4.2 would accommodate an objective determination of whether Practical Completion had been achieved. This was on the basis that, in the event of a dispute, the question could be referred to an independent expert under the dispute resolution provisions in sch 13 to the Council Agreement. However, on DiCOM's construction of the Agreement, there would be nothing substantive for the independent expert to determine, other than whether notices which commenced the Commission Period and the Bank Test Period, and concluded the Bank Test Period, had been given. At best for DiCOM's argument, it would involve the expert determining whether the facility was processing the specified amounts of Waste,[24] without any frame of reference as to what 'processing' requires.

Bank Test Period is required for the Operational Period to commence

1. DiCOM's submission also proceeds on the erroneous assumption that the Bank Test Period occurs at its option. It is common ground that there was no Bank Test Period in this case. The commencement of the Operational Period is defined by reference to the end of the Bank Test Period, and the Expiry Date of the Term is defined by reference to the commencement of the Operational Period. If there is no Bank Test Period then the Operational Period never begins. Further, if the Operational Period never begins then there is no reference date by which the Expiry Date of the Term could be determined.
2. It was suggested during the course of oral submissions that it might be possible for DiCOM to notify the Council of the beginning and end of the Bank Test Period notwithstanding that there is to be no bank test.[25] However, if that were the case it would only highlight the absence of any substantive hurdle involved in completing the Bank Test Period. This would tend to confirm the inconsistency of DiCOM's construction with the contractual text indicating that Practical Completion is something which must be 'achieved'.

1. In addition, DiCOM's construction does not advance the commercial purposes of the Council Agreement. In our view, the trial judge correctly found the Council Agreement to have the following commercial purposes, identified from the Agreement as a whole:[26]

(1) An ultimate object of the Council Agreement was that, subject to certain events occurring, the Council would deliver Waste to the Facility and DiCOM would process that Waste under the DiCOM System for a fee. An ultimate object was to recover recyclables and convert some Waste into compost and other renewable resources so as to significantly reduce the amount of Waste going to landfill. That was what the DiCOM System promised to do, and what the Council agreed to pay for.

(2) It was a commercial purpose of the Council Agreement that the Council would not be required to pay unless the DiCOM System worked: ie that its Waste was processed under, and as required by, the DiCOM System.

The trial judge's conclusion as to these commercial purposes of the Council Agreement was not challenged on appeal.

1. On DiCOM's construction, there would be no objective assessment of whether Stage 2 had been constructed so that the Facility worked before the Council was required to make regular deliveries of specified quantities of Municipal Solid Waste to the Facility and pay for the benefit of doing so. That would occur in a context where the Council is responsible for the removal of Residual Material at its own expense. The effect of the Council's payment obligations noted at [53] - [63] above is that the Council would incur its own cost of disposing of Residual Material in addition to the return on capital component of the Service Charge. While that result may be subject to the Service Charge cap, the consequence of exceeding that cap is that the Council must either agree to an increase in the Service Charge or see the term of the agreement extended to enable DiCOM to recover the 'Overrun'.
2. DiCOM contends that it was the function of Stage 1 to determine whether the DiCOM System worked, and that Stage 2 would not proceed if Stage 1 did not work.[27] It submits that:[28]

[V]iewed objectively the parties had contracted on the basis that all of the testing would be done during stage 1 and then all that needed to happen was the addition of the extra vessels and once that occurred stage 2 would commence or could commence.

1. There are two difficulties with this submission. First, the Council Agreement does not provide any qualitative or quantitative criteria for DiCOM to be entitled to proceed from Stage 1 to Stage 2. The only trigger for the Council's obligation to make and pay for regular deliveries of Waste is the 'achievement of Practical Completion in respect of Stage 2'. On DiCOM's construction of that phrase, whether that trigger is pulled is a matter for DiCOM to decide. Secondly, insofar as completion of Stage 1 testing was an indicator of ultimate success, it could only be an indication that, if Stage 2 were properly constructed, the Facility as a whole would work. On DiCOM's construction, there would be no requirement for a proper assessment as to whether Stage 2 had been constructed according to specification before the Council's obligation to make and pay for regular deliveries of Waste would arise.
2. DiCOM also submits that it has a commercial incentive to ensure the Facility works and converts delivered Waste into Recyclables and Renewable Resources, from which it can earn an income.[29] However, the commercial interests of the Council and DiCOM are far from aligned. The 'Assumptions Book' which is Annexure J to the Council Agreement indicates that the large bulk of anticipated revenue will be from the Service Charge. It might well be in DiCOM's interest to proceed with Stage 2 even if the income from the sale of Recyclables and Renewable Resources is reduced because the Facility does not work.
3. For the above reasons, DiCOM's construction does not advance, and would tend to impede, the commercial purpose of the Council Agreement that the Council would not be required to pay unless the DiCOM System worked. Our preferred construction advances that purpose, in that the issue of a certificate of Practical Completion is an objective determination that the Facility will, once Stage 2 is constructed, do what it is expected to do.

DiCOM's submissions as to errors in the trial judge's reasons

1. DiCOM's submissions assert a number of errors in the trial judge's reasoning to her preferred construction. It is not necessary to separately determine the merits of each of those criticisms. Beyond showing that a different construction is to be preferred, an appellant need not show specific error on an appeal concerned with a question of construction. Because an instrument has only one true construction, the task of this court in an appeal concerning the construction of an instrument is to determine for itself the correct construction of the instrument.[30] Nevertheless, we will explain why we do not accept that the judge made the asserted errors.

Construction by reference to subsequent contract

1. DiCOM submits that the trial judge erred in construing the relevant phrase by reference to the meaning of the term 'Practical Completion' in the DC Contract which was subsequently entered into between different parties.[31] We do not accept that submission.
2. The trial judge adopted the orthodox approach of determining the meaning of the Council Agreement at the time when it was made, having regard to 'the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting'.[32] Her Honour did not use post-contractual conduct for any inadmissible purpose of construing the Council Agreement.[33] Construed by reference to the circumstances known to the parties at the time the Council Agreement was entered into, cl 4.2 defines the parties' rights by reference to a future event which was to occur under the contract which the parties contemplated would provide for the construction of the Facility.[34]
3. On appeal, DiCOM notes that there was no construction contract in existence at the date of execution of the Council Agreement. However, DiCOM accepts that, at the date of execution, it would have been reasonably contemplated there would be a construction contract which would provide for the requirements of practical completion. DiCOM also accepts that, at the date of execution, it would have been reasonably contemplated that these requirements would involve the Facility being able to do certain things which would be detailed in that contract.[35]
4. In this context, the trial judge correctly concluded that cl 4.2 defined the parties' rights by reference to the achievement of Practical Completion under the contract under which Stage 2 was constructed. Once cl 4.2 is construed in that manner, it is then permissible to look to the terms of the DC Contract to see when Practical Completion is achieved under that contract. That is not to use subsequent events to construe the Council Agreement. Rather, it is merely to consider how cl 4.2, properly construed, applies to the subsequent events by reference to which the Council Agreement creates future obligations.

Failure to construe Council Agreement by reference to its provisions

1. Nor do we accept DiCOM's submissions to the effect that the trial judge failed to construe the language of the Council Agreement as a whole to ascertain the contractual intention. [36] Her Honour clearly did have regard to the contract as a whole, and arrived at the correct construction of cl 4.2 of the Council Agreement.
2. DiCOM refers to the use of the words 'Practical Completion' in respect of Stage 2' in par 2 of s 1 of sch 4 to the Council Agreement.[37] That part of the agreement provides for a Project Committee to meet and determine the most appropriate procedures to be followed to achieve 'Desired Outcomes', relevantly in respect of:

Operation after Practical Completion in respect of Stage 2 - [the Council's] Site Procedures for Steady State.

The reference to 'Desired Outcomes' is to ensuring 'that each party complies with [the] Law, and risk of injury to person, risk of damage to property and risk of contamination of the environment is negated or mitigated'.[38]

1. We see nothing in this part of the Council Agreement which is inconsistent with, or significantly counts against, the trial judge's construction of cl 4.2 of the Council Agreement.

1. DiCOM's submissions emphasise that the trial judge's construction of cl 4.2 of the Council Agreement produces the consequence that the Operational Period can never commence, and the Council's obligation to make regular deliveries of Waste will never arise. This is because a certificate of practical completion will never be issued under the DC Contract.[39] DiCOM also contends that the issue of a certificate of practical completion under the DC Contract may require a performance trial that will consume more Waste than the Council is obliged to deliver before Practical Completion is achieved under cl 4.2 of the Council Agreement.[40]
2. The principal difficulty with this submission is that it suffers from the vice which DiCOM seeks to attribute to the trial judge's reference to the terms of the DC Contract. That is, the submission seeks to construe the Council Agreement by reference to subsequent events, rather than by reference to how a reasonable business person in the position of the parties at the time of entering the contract would have understood the agreement. The absence of any certificate of practical completion under the DC Contract arises because of the manner in which the Deed, to which DiCOM was a party, resolved the dispute as to the construction of Stage 2. The Deed discharged the DC Contract without requiring the Project Specification to be met or a certificate of practical completion to be issued.
3. It may well be that the consequence of subsequent events, not contemplated by the Council Agreement, is that significant parts of the agreement now cannot operate. However, the fact those subsequent events might have frustrated the Council Agreement, or given rise to a right to terminate the agreement, does not make the trial judge's construction uncommercial. Further, it would be a more uncommercial result for both parties if DiCOM were required to accept and process, and the Council were required to deliver and pay for, Waste over an extended period when the Facility as constructed does not work.

1. For the above reasons, ground 1 of the Council Appeal is not established.

1. The remaining matters in dispute as to the requirement for DiCOM to 'process' Waste is limited. DiCOM now accepts (subject to [113] below) that the Facility must actually do the things referred to in the declaration set out at [79] above, not merely operate for the purpose of doing those things. DiCOM does not press written submissions a[41]anced to the contrary.41
2. DiCOM's complaint on appeal is that the declaration identifies the products into which the organic fraction of Municipal Solid Waste must be converted too narrowly. The Council accepts that the effect of the declaration is that the organic material which is converted by the Facility must be converted into DiCOM Bioconversion Products and nothing else.[42] The Council contends that the declaration correctly identified the products into which the organic fraction of Municipal Solid Waste must be converted.
3. The declaration was directed to resolving a dispute between the parties as to the content of DiCOM's obligation under cl 2.3 and 3.5 to provide the 'Services', defined to mean the sorting and processing of Municipal Solid Waste at the Facility. The 'Facility' is defined to mean the 'DiCOM System and supporting infrastructure'. The 'DiCOM System' is defined in the terms set out at [37] above. 'DiCOM System' relevantly refers to the integration of a set of systems identified in the definition 'for the purposes of processing Waste by ... converting the organic fraction of Waste into DiCOM Bioconversion Products'. DiCOM Bioconversion products are DiCOM Compost and DiCOM Biogas. The terms of the trial judge's declaration reflect the above provisions of the Council Agreement which define DiCOM's obligation to provide the 'Services'.
4. The fact that sch 2 defines 'Renewable Resources' and 'Organic Products' to include material other than DiCOM Bioconversion Products and DiCOM Compost does not detract from the above conclusion. DiCOM's defined service obligations are not to produce Renewable Resources, but to rather use the system for the purposes of converting the organic fraction of Waste into DiCOM Bioconversion Products.
5. DiCOM submits that the definitions of 'Recoverable Material', 'Renewable Resources' and 'Organic Products' contemplate that the Facility will be operated so as to convert the organic fraction of Waste into material other than DiCOM Bioconversion Products.[43] However, in our view these definitions are not directed to DiCOM's service obligations. The role of the definition of 'Recoverable Material' is to identify changes in Waste composition which may result in an adjustment of the Service Charge under cl 4.4 of the Council Agreement. Clause 4.7, which deals with changes to the definition of 'Recoverable Material', exists for that purpose.
6. Therefore, so far as the declaration relates to the use of the term 'processing' in the definition of 'Services', it properly reflects the terms of the Council Agreement and the content of DiCOM's obligation to deliver Services. DiCOM's proposed amendment to the declaration, set out at [84] above, would not do so.
7. It is not clear how the declaration, so far as it relates to the use of the term 'processing' in the definitions of 'Commission Date' and 'Residual Material', operates to resolve a dispute as to the parties' rights, duties and liabilities under the Council Agreement.
8. It was an agreed fact that the Commission Date occurred no later than 21 October 2013. There does not appear to be any justiciable controversy about the Commission Date, the resolution of which is facilitated by making the declaration as to the meaning of 'processing' in that definition.
9. The definition of 'Residual Material' identifies 'material derived from Waste or otherwise produced by processing of Waste, other than Recyclables and Renewable Resources'. If the system converts the organic fraction of Municipal Solid Waste into something other than DiCOM Bioconversion Products, the resulting material will be 'derived from Waste' even if it is not otherwise produced from processing Waste. That material will not lack the character of 'Residual Material' because it is not the result of processing Waste (although it will lack that character if it falls within the definition of 'Renewable Resources').
10. It might be argued that the declaration, so far as it relates to the use of the term 'processing' in the definitions of 'Commission Date' and 'Residual Material', was not sufficiently directed to the determination of any legal controversy as to the rights, duties and liabilities of the parties.[44] However, that was not the substance of the argument advanced by DiCOM in the appeal, which concerns whether the declaration properly reflects the scope of its obligations rather than whether it ought to have been made at all. That is reflected in the fact that DiCOM proposes the amendment, rather than the setting aside, of the declaration. As the declaration is not challenged on that basis, it is unnecessary to further consider the possible argument noted above.
11. For the above reasons, ground 3 of the Council Appeal is not established.

1. We turn to consider the City Agreement, the proper construction of which is the subject of the City Appeal and ground 2 of the Council Appeal.

1. Clause 2.3 of the City Agreement requires DiCOM to provide 'the Services' in accordance with the agreement. Clause 2.4 provides that the City must supply Municipal Solid Waste in accordance with the agreement, and make payments in accordance with the agreement.

1. Clause 3.5 provides that DiCOM must commence provision of the Services from the day immediately following the 'date of Final Completion' and continue to provide the Services 'during the Operational Period'. The 'Services' are defined in sch 1 to mean 'the sorting and processing of Municipal Solid Waste at the Facility'. The 'Facility' is defined in sch 1 to mean 'the DiCOM System and supporting infrastructure at [the Waste Transfer Station] to be located on the Site'. 'DiCOM System' is defined in sch 1 consistently with the definition of that term in the Council Agreement.
2. Clause 3.2 identifies when 'Final Completion' occurs in the following manner:

Final Completion will occur when the Facility is able to process Waste at a rate of 55,000 tonnes per annum as certified in accordance with the engineering, procurement, construction and management agreement under which the Facility is constructed (Final Completion).

1. Clause 3.5(c) indicates that, as at the date of the agreement, it was anticipated that the date of Final Completion will be the end of the first quarter of 2009.
2. Schedule 1 also contains a definition of 'Final Completion' in the following terms:

Final Completion means the date on which the Facility is able to accept and process waste at a rate of 55,000 tonnes per annum to the satisfaction of [DiCOM].

1. Clause 3.4 defines the 'Operational Period' in the following terms:

The Operational Period begins on the day immediately following the end of the Bank Test Period and ends on the Expiry Date.

1. Clause 3.1 and sch 1 relevantly provide for the 'Expiry Date' to be 'the 20th anniversary of the end of the Bank Test Period'.
2. Clause 3.3 defines the 'Bank Test Period' in the following terms:

(a) The Bank Test Period is the period during which all tests required to be undertaken by [DiCOM] in accordance with the Finance Agreements will be undertaken.

(b) The Bank Test Period will begin on a date notified by [DiCOM] to the [City]. The Bank Test Period will end when the Financiers conclude that the bank tests are satisfied. [DiCOM] will promptly notify the [City] of the date that the Bank Test Period ends.

The 'Financiers' are defined in sch 1 to be the provider(s) of finance to DiCOM for the operation of the Facility.

1. Clause 4.1 - cl 4.3 provide for the City's delivery obligations in three different periods:

(1) Clause 4.1 provides for delivery '[u]p to and including the date of Final Completion', in amounts reasonably required by DiCOM to enable ramp up of the Facility and undertake the Initial Waste Characterisation Study.

(2) Clause 4.2 provides for delivery 'during the period from Final Completion to the commencement of the Operational Period' (generally according to a 'Pre-Operational Period Schedule' to be agreed subject to a default position).

(3) Clause 4.3 requires the City to provide notice that it intends to deliver Waste according to one of three options not less than '60 days prior to the commencement of the provision of Services (as contemplated by clause 3.5)'.

1. Depending on the option chosen, the City may be required to deliver 14,000 or 22,000 tonnes of Solid Municipal Waste in each Financial Year. As the City elected the 'Fixed Profile' option on 29 April 2016,[45] it is convenient to make specific reference to the City's delivery obligations under that option, provided for by cl 4.3(ii) of the City Agreement.
2. Clause 4.5(a) requires the City to procure the delivery of Municipal Solid Waste in accordance with a 'Fixed Profile Delivery Schedule', which is to be submitted by the City and approved by DiCOM.
3. Clause 4.8(a) requires the City to deliver a quantity of Municipal Solid Waste equal to 'QBC' in each Quarter and 'ABC' in each Financial Year. 'QBC' and 'ABC' are respectively defined in sch 1 by reference to the Quarterly Base Capacity and Annual Base Capacity specified in the applicable part of cl 4 (depending on which option the City elects). In the case of the Fixed Profile Option cl 4.5(c) applies, and provides that QBC is the quantity specified in the Fixed Profile Delivery Schedule and ABC is 14,000 tonnes.

1. Clause 9.2 provides for DiCOM's obligation to receive Waste where the City elects the Fixed Profile Option. Subject to certain exceptions, DiCOM must, 'during the Operational Period' accept up to the quantities of Municipal Solid Waste specified in the Fixed Profile Delivery Schedule. Clause 9.3 and cl 9.4 provide for a qualified right of DiCOM to decline to accept by notice to the City.

1. Clause 10.1 provides that the 'Service Charge' will be determined in accordance with sch 10.
2. 'Service Charge' is defined in sch 1 to mean the service charge determined in accordance with sch 10, as escalated and as amended pursuant to the agreement, and calculated in accordance with sch 10.
3. Section 1 of sch 10 provides:

Subject to Section 2 and Section 3 of this Schedule 10, the [City] must pay the Service Charge in respect of the number of tonnes of Waste delivered by the [City] during each Month of the Term.

The Term is defined in cl 3.1 as beginning on the date the agreement is executed by both parties and continuing until the Expiry Date.

1. Section 4 of sch 10 provides for a 'Baseline Service Charge' to apply to Waste delivered in accordance with the agreement until the determination of the Service Charge that will apply during the 'Operational Period'. Under par 2(d) of s 4 of sch 10:

The Service Charge applicable at the commencement of the Operational Period will be no greater than 110% of the service charge per tonne of municipal solid waste payable by the [City] to Atlas Group Pty Limited (Atlas) under the single bin contract referred to in Recital D of this agreement as at the date of commencement of the Operational Period.

1. Clause 10.2 provides for DiCOM to make monthly claims following 'the Date of Financial Completion'. The 'Date of Financial Completion' is not defined. It is common ground in the appeal that the reference to the date of 'Financial Completion' is a typographical error, and should be read as the date of 'Final Completion'.[46] We shall refer to the date of Final Completion in these reasons.
2. Under cl 10.2(a), at the end of each month following the date of Final Completion, DiCOM must submit to the City a tax invoice in respect of 'the Monthly Aggregate Service Charge for that Month calculated in accordance with Schedule 10' and amounts payable and adjustments made under certain other provisions of the agreement. The sum of these amounts and adjustments is the 'Monthly Claim'. Clause 10.2(b) requires the City to pay each Monthly Claim within 30 days after the City's receipt of that Monthly Claim.
3. Sch 1 defines 'Monthly Aggregate Service Charge' to be:

[I]n respect of each Month, the number of tonnes of Waste required under this agreement delivered to [DiCOM] at the Facility multiplied by the Service Charge. [sic]

1. Clause 4.16 provides for the City to pay DiCOM the amount that the Council deducts from amounts payable to DiCOM under the Council Agreement in respect of Residual Material and Non-Specification Material delivered by the City.

1. Only one issue in the Primary City Proceedings remains contentious in these appeals. That concerns when the date of Final Completion occurs for the purposes of cl 3.5, cl 4.2 and cl 10.2 of the City Agreement. As noted above, these clauses respectively define when DiCOM must commence providing the Services, when the City must deliver Waste in accordance with the Pre-Operational Period Schedule and when DiCOM can submit invoices by reference to the date of Final Completion.
2. The competing constructions advanced in the Primary City Proceedings were identified by the trial judge in the following terms:[47]

It was common ground that Final Completion will occur under the City Agreement when the Facility is able to process waste at 55,000 tpa. The dispute is who or what determines when the Facility is able to do that.

As noted earlier, DiCOM asserts that Final Completion occurs when it itself is satisfied the Facility can process waste at 55,000 tpa. The City asserts that Final Completion occurs when the Facility is certified under the DC Contract as being able to process waste at 55,000 tpa.

1. In the Primary City Proceedings, the parties took different positions in relation to the application of the definitions of 'Final Completion' in cl 3.2 of, and sch 1 to, the City Agreement. The City submitted that cl 3.2 augments the Schedule definition so that the Facility must have been certified as being able to process 55,000 tonnes of Waste per annum in accordance with the agreement under which the Facility was constructed.[48] DiCOM argued that Final Completion was defined solely by the definition in sch 1, and all that was required was that DiCOM, acting in good faith, was satisfied the Facility could process 55,000 tpa.[49]
2. The trial judge rejected DiCOM's construction on the grounds that it:[50]

(1) was inconsistent with the plain meaning of cl 3.2;

(2) was inconsistent with what a reasonable person would have understood the terms to mean;

1. Given that DiCOM's argument on appeal (discussed at [154] - [155] below) is substantially different from its case below, it is unnecessary to enter into a detailed discussion of the trial judge's reasons for reaching these conclusions. However, the following passages capture the essence of the[51]rial judge's approach:51

The commercial purpose and objects sought to be secured by the City Agreement were not in dispute. The DiCOM® System was unproven. The City Agreement was objectively intended to ensure the City bore none of the risk that the system wouldn't work. DiCOM accepted that, if it did not work, the City would not have to pay anything.

Against that background, a reasonable person would have understood cl 3.2 to define when Final Completion would be contractually established. A reasonable person would have understood the clauses operated so as to provide for certification that the Facility could process 55,000 tpa from a source who would not benefit from declaring that it could. In this way, the commercial objective would be met. The City would not have to pay merely because DiCOM asserted the Facility could process 55,000 tpa.

1. The trial judge ultimately accepted that cl 3.2 should be construed as the City contended. Her Honour concluded:[52]

To contractually establish Final Completion under the City Agreement, the Facility must be certified in accordance with the [agreement under which the Facility was constructed] to be able to process waste at a rate of 55,000 tpa. Final Completion will not occur before that happens.

1. The trial judge went on to conclude that the DC Contract was the agreement under which the Facility was constructed,[53] and that:[54]

Under the DC Contract, the first (and only) certification of the ability of the Facility to process 55,000 tpa is when a certificate of 'Practical Completion' is issued.

1. The trial judge said that cl 3.2 referred to a contract, the identity and contents of which would not be known until it was known under what contract the Facility would be constructed.[55] Her Honour noted DiCOM's acceptance that, at the time the City Agreement was executed, the common understanding was that the agreement under which the Facility was constructed would provide for certification of the capacity to process the expected tonnage under the DiCOM System.[56] The plain meaning of cl 3.2 was that the parties agreed to accept whatever the future agreement under which the Facility was constructed required for the Facility to be certified as able to process 55,000 tpa.[57] She concluded that the Facility would be certified in accordance with the DC Contract to be able to process Waste at a rate of 55,000 tpa when there has been certification under the DC Contract of Practical Completion.[58]
2. The trial judge made the following relevant declarations:

On the proper construction of the [City Agreement]:

(a) 'Final Completion' for the purposes of clauses 3.5, 4.2 and 10.2 of the City Agreement will not occur before the Facility has been certified in accordance with the agreement under which the Facility has been constructed to be able to process Waste at a rate of 55,000 tonnes per annum.

...

As from 3 December 2010, 'Final Completion' for the purposes of clauses 3 .5, 4.2 and 10.2 of the City Agreement requires certification of Practical Completion of the Facility in accordance with the DC Contract.

1. DiCOM appeals against the Primary City Decision on the sole ground that the trial judge erred in law in making the above declarations.[59] As noted above, ground 2 of the Council Appeal also contends that the trial judge erred in law in making the equivalent declarations in the Primary Council Proceedings.
2. In oral submissions, DiCOM's counsel put a submission that was different from the case advanced at trial and in its written submissions on appeal. The argument as ultimately advanced on appeal involved the following steps:[60]

(1) At the time the City Agreement was executed, the EPCM Contract was in place, but did not provide for certification that the Facility was able to process Waste at a rate of 55,000 tonnes per annum. (The EPCM Contract identified the specification for Stage 1, but left the project specification in respect of stage 2 to be settled at a later time).[61]

(2) In that context, the definition of 'Final Completion' in clause 3.2 was only applicable if the contract under which Stage 2 was constructed provided for certification that the Facility was able to process Waste at a rate of 55,000 tonnes per annum.

(3) If the contract under which Stage 2 was constructed did not provide for certification that the Facility was able to process Waste at a rate of 55,000 tonnes per annum, then the definition of 'Final Completion' in sch 1 applied.

(4) The DC Contract (being the contract under which Stage 2 was constructed) did not provide for certification that the Facility was able to process Waste at a rate of 55,000 tonnes per annum. Rather, it provided for a higher standard before Practical Completion would be certified.

(5) Because the DC Contract did not provide for certification of the kind contemplated by cl 3.2, that clause does not apply and the definition in sch 1 operates.

Senior counsel for DiCOM accepted that if the fourth and fifth steps were not established, the appeal could not succeed.[62]

1. We accept the first step in the argument summarised at [155] above. However, for the following reasons, we are unable to accept the remaining steps in that argument.

Steps 2 and 3: Reconciling different definitions of 'Final Completion'

1. The language of cl 3.2 is unqualified. Nothing in its terms makes its operation contingent upon whether the agreement under which the Facility is constructed provides for the stipulated certification. That feature of cl 3.2 counts against DiCOM's construction.
2. The only textual foothold for DiCOM's construction is the presence of the definition of Final Completion in sch 1 to the City Agreement.
3. We accept that, in construing the City Agreement, preference is to be given to a construction by which some operation is given to the definition in sch 1, given the presumption against surplusage.[63]
4. However, as explained below, operation can be given to the definition in sch 1 in a different manner, which is consistent with the unqualified terms of cl 3.2 and which is consistent with the evident commercial purposes of the City Agreement.
5. In our view, the trial judge correctly identified the commercial purposes of the City Agreement in terms consistently with the purposes of the Council Agreement noted at [[94 It may be that a reasonable person would have also understood that the Schedule Definition gave DiCOM the right to refuse to accept that Final Completion had occurred, even after a certificate had been issued under the Construction Contract. In other words, perhaps Final Completion will occur when a certificate is issued, but DiCOM is not obliged to commence providing 'Services' under cl 3.5 until it itself is satisfied that the Facility can process waste at 55,000 tpa.

If this construction is adopted, there would be complete harmony among cl 3.2 and 3.5 and the Schedule Definition, and each would have work to do. Further, this construction is businesslike. DiCOM would be protected from having to deliver 'Services' before it felt that it could. The City would be protected from having to pay until there had been a certification of the Facility's ability to process 55,000 tpa.

1. The trial judge did not reach any concluded view on the Alternative Construction, as neither party advanced it at trial. However, in the City Appeal both parties accepted the force of the trial judge's Alternative Construction.[67] In our view, that conclusion as to the effect of the definition of 'Final Completion' in sch 1 to the City Agreement is correct. It explains the existence of the definition of 'Final Completion' in sch 1 while giving effect to the express terms of cl 3.2 requiring, for Final Completion to occur, that the ability of the Facility to process Waste at a rate of 55,000 tonnes per annum be 'certified in accordance with' the relevant agreement.
2. Once the presence of the definition of 'Final Completion' in sch 1 is explained in that way, there is no justification for qualifying the express terms of cl 3.2, by construing the requirement for certification as contingent.

Steps 4 and 5: Did the DC Contract relevant provide for certification

1. In any event, the argument summarised at [155] above also fails at the fourth and fifth steps. That is, the DC Contract did provide for certification that the Facility was able to process Waste at a rate of 55,000 tonnes per annum for the purposes of cl 3.2 of the City Agreement. Therefore, even on the construction of the City Agreement for which DiCOM now contends, the definition of 'Final Completion' in cl 3.2 applied and it required certification under the DC Contract before Final Completion would occur.
2. Clause 2.1 of the DC Contract required AnaeCo and Monadelphous to carry out and complete the 'Works' in accordance with the DC Contract, and ensure Practical Completion was achieved on or before the Date for Practical Completion. By cl 2.2, AnaeCo and Monadelphous relevantly warranted that the Works had been designed to meet the Project Specification, and the completed Works would deliver an operating facility that would meet the Project Specification. Clause 1.1 relevantly defined 'Practical Completion' for the purposes of DC Contract to mean the stage in the execution of the Work when the Works are complete, except for minor omissions and minor defects which do not prevent the Works from being reasonably capable of being used in accordance with Project Specifications.
3. Clause 1.1 of the DC Contract defines 'Project Specification' to mean the specifications contained in Annexure A to that contract. Clause 4.1(e) of Annexure A specifies that the Facility shall be able to Process 55,000 tonnes of MSW in a Financial Year (Nominal Annual Capacity). 'Process' and 'MSW' are defined in the DC Contract consistently with the City Agreement.
4. Clause 34.6 of the DC Contract provides for a Superintendent to issue a certificate of Practical Completion if he or she is of the opinion that Practical Completion has been reached. Clause 20(a) requires that the Superintendent acts independently of, and impartially as between, the parties to the DC Contract.
5. A certificate of Practical Completion under the DC Contract therefore certifies that the Facility shall be able to Process 55,000 tonnes of MSW in a Financial Year. In our view, the above provisions of the DC Contract provide for the Superintendent to certify that the Facility is able to process Waste at a rate of 55,000 tonnes per annum. The requirement which DiCOM identifies as the prerequisite for cl 3.2 to apply is satisfied. Therefore, even on DiCOM's construction, certification under the DC Contract must occur before Final Completion will occur for the purposes of the City Agreement.
6. DiCOM submits that there are other requirements which must be met before a certificate of practical completion can issue under the DC Contract. DiCOM also submits that the DC Contract establishes a higher standard than cl 3.2 of the City Agreement, in that cl 4.2(e) of Annexure A to the DC Contract provides an additional Project Specification that the Facility is able to process a maximum amount equal to 110% of the Nominal Annual Capacity. That is, before a certificate of Practical Completion can be issued under the DC Contract, the Facility must have a Maximum Annual Design Capacity of 60,500 tonnes per annum rather than only the 55,000 tonnes per annum provided for by cl 3.2 of the City Agreement.
7. The above matters do not detract from the conclusion that the DC Contract provided for certification that the Facility was able to process Waste at a rate of 55,000 tonnes per annum, for the purposes of cl 3.2 of the City Agreement. Clause 3.2 identifies what must be certified before Final Completion occurs. There is nothing in the City Agreement which suggests that this is all that might be certified under the anticipated construction agreement, or that a separate specific certification of that capacity and nothing else would be required.
8. Further, in the broader contractual context, cl 3.2 would be understood by a reasonable business person to refer to a minimum, rather than an exact or maximum, tonnage which the Facility is able to process. It could not reasonably be read as requiring the Facility to be able to process exactly 55,000 tonnes per annum and not a kilogram more. At the time of execution of the City Agreement, the Council Agreement required the Council to deliver, and DiCOM to receive, 33,000 tonnes of Municipal Solid Waste in a Financial Year. The Council Agreement identified the necessity of delivery of 55,000 tonnes of Waste per annum to assure continuous operation of the Facility.[68] The City Agreement provided for the City to deliver, and DiCOM to receive, up to 22,000 tonnes per year (depending on the option which the City elected). In combination, the Council Agreement and the City Agreement potentially required the delivery of 55,000 tonnes of Waste per annum and required DiCOM to receive that delivery. Further, cl 9.1 of the Council Agreement required DiCOM to accept up to 110% of the annual base capacity of 33,000 tonnes in any financial year. Given the above provisions, it would be a commercial nonsense for cl 3.2 to require certification that the Facility was able to process no more than 55,000 tonnes of Waste per annum.
9. It is unnecessary to resolve the City's and the Council's objection to DiCOM running a different case on appeal, as the different construction which DiCOM advances should not be accepted in any event.

1. The above is sufficient to dispose of the City Appeal and ground 2 in the Council Appeal. Particularly having regard to the principles referred to at [100] above, it is unnecessary to deal with all of DiCOM's complaints about the trial judge's reasoning. However, we note the following additional matters for completeness.
2. DiCOM's written submissions emphasised that the consequence of the trial judge's construction was that DiCOM would never be entitled to receive payment under the City Agreement. That is because, under cl 10.2 of the City Agreement, DiCOM is only able to issue invoices in respect of its monthly claim following the date of Final Completion. Final Completion can never occur on the trial judge's construction, as there is no prospect that there will ever be a certificate of Practical Completion issued under the DC Contract.[69]
3. While that is the outcome of the trial judge's construction as circumstances have transpired, that outcome is not a reason for rejecting the trial judge's construction. The comments made at [109] - [110] above in relation to a similar submission made in relation to the Council Agreement apply with equal force here.
4. DiCOM also submits that the construction the trial judge adopted means that the Operational Period will never commence under the City Agreement.[70] We do not agree with that submission. It is correct that, as events have transpired, the Operational Period can never begin under the City Agreement. But that is because of the absence of any Bank Test period. As noted at [129] above, under the City Agreement the Operational Period begins on the day immediately following the end of the Bank Test Period. The Bank Test Period ends when the Financiers conclude that the bank tests are satisfied. It appears that will not occur, so that the Operational Period will never commence. However, that is not a consequence of the construction of the phrase 'Final Completion'. The Bank Test Period and Operational Period are not defined by reference to when Final Completion occurs.
5. DiCOM submits that the City Agreement was intended to complement the operation of the Council Agreement, and the operational periods under both agreements were intended to correspond.[71] The trial judge's declarations are consistent with that intent, by requiring certification of Practical Completion under the DC Contract before the obligation to make and pay for regular deliveries of Waste arises under either Waste Supply Agreement.
6. DiCOM submits that the completion of the Bank Test Period must, by definition, occur after Final Completion and prior to the commencement of the Operational Period.[72] We do not accept that submission so far as it asserts that the Bank Test Period must occur after Final Completion. There is no basis in the text of the City Agreement for requiring the Bank Test Period to necessarily follow Final Completion. The timing of the Bank Test Period is left as a matter between DiCOM and its financiers, and there is no reason why whatever testing might be agreed could not occur before Final Completion. In that event, cl 4.2 would not apply, as there would be no period from Final Completion to the commencement of the Operational Period. Clause 4.2 accommodates the possibility that the end of the Bank Test Period might occur after Final Completion, but does not mandate that sequence.

1. For the above reasons, none of the grounds of appeal are established. Both the Council Appeal and the City Appeal should be dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

Research Associate/Orderly to the Honourable Justice Mitchell

[7] Primary Council Decision [76], [79].

[8] Primary Council Decision [81] - [87].

[9] Primary Council Decision [88] - [92].

[10] Primary Council Decision [76] - [77].

[11] Primary Council Decision [95], [109].

[12] Primary Council Decision [37] - [43].

[13] Primary Council Decision [71] - [73].

[14] Primary Council Decision [133] - [136].

[15] Appellant's Submissions, pars 43 - 44; appeal ts 6, 9, 14, 29 - 30.

[16] Appellant's Submissions, par 44, appeal ts 32, 129, 132.

[17] Appellant's Submissions, pars 53 - 56, appeal ts 44 - 47.

[18] See Appellant's Submissions, par 78.

[19] Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219 [42].

[20] Primary City Decision [71], incorporated by [3] of the Primary Council Decision.

[21] Electricity Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35].

[26] Primary Council Decision [21] - [26].

[27] Appeal ts 7, 9 - 11, 44, 125 - 129.

[30] Life Insurance Company of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60, 78 - 79; Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; (2018) 92 ALJR 713 [154]; Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80 [172].

[31] Appellant's Submissions, par 80(a).

[32] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352. See also Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544 [16], [24], [45], [73] and Onley v Catlin Syndicate Ltd [2018] FCAFC 119; (2018) 360 ALR 92 [33].

[33] See Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 [35], [163]; KWS Capital Pty Ltd v Love [2015] WASCA 237 [22], [117]. See also the discussion in J D Heydon Heydon on Contract (Law Book Co, 2019) at [9.1600] - [9.1780].

[36] Appellant's Submissions, par 80(a) - (b).

[37] Appellant's Submissions, par 80(c).

[38] Paragraph 1 of s 1 of sch 4 to the Council Agreement.

[39] Appellant's Submissions, pars 62 - 65, 80(d), 81 - 83.

[40] Appellant's Submissions, pars 66 - 72, 84.

[43] Appellant's Submissions, pars 54 - 55.

[44] See Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564, 581 - 582.

[46] Appeal ts 49, 77. A similar typographical error appears in cl 3.5(b), where the context makes it clear that the date of Financial Completion and the date of Final Completion are being treated as the same thing.

[47] Primary City Decision [68] - [69].

[49] Primary City Decision [82] - [88].

[50] Primary City Decision [92] - [128].

[51] Primary City Decision [103] - [104].

[56] Primary City Decision [265]. See trial ts 421.

[59] Another ground was abandoned at the hearing of the appeal: see appeal ts 48.

[61] Clause 2.5(j) of the EPCM Contract.

[63] George 218 Pty Ltd v Bank of Queensland [2016] WASCA 182; (2016) 313 FLR 287 [88]; Tokio Marine & Nichido Fire Insurance Co Ltd v Hans Bo Kristian Holgersson trading as Holgerssons Complete Home Service [2019] WASCA 114 [52] ‑ [58].

[64] Primary City Decision [72] - [75].

[66] Primary City Decision [105] - [106].

[67] Appellant's Submissions, par 53; appeal ts 63.

[68] Clauses 4.13 and 9.2 of the Council Agreement.

[69] Appellant's Submissions, pars 17 - 19, 66 - 74, 80(c), 83.

[71] Appellant's Submissions, pars 22 - 41.

[72] Appellant's Submissions, pars 49 - 52.