The 2004 Deed
63The recitals to the agreement set out those aspects of the background that give explanation to the transaction. There may be other background facts, but the recitals reveal the background chosen by the parties by way of the identification of relevant context. The recitals can assist in interpretation of operative provisions, though they do not control the latter's operation when clear and unambiguous: Moore v Magrath (1774) 1 Cowp 9 at 12; 98 ER 939 at 941 (Lord Mansfield); Walsh v Trevanion (1850) 15 QB 733; 117 ER 636 at 642 (Patteson J); In re Moon; Ex parte Dawes (1886) 17 QBD 275 at 286 (Lord Esher MR). Here, the recitals were in the following terms:
"A. The Buyer operates its Port Kembla Steelworks "Sinter Plant" and requires iron ore for use at the Sinter Plant.
B. The Seller has entered into a Contract of Affreightment with CSL Australia Pty Ltd for the services of the vessel "Iron Chieftain" between Whyalla and Pt. Kembla.
C. The Seller agrees to sell, and the Buyer agrees to purchase, Iron Ore in accordance with the terms and conditions of this Deed."
It is to be noted that the background material of relevance chosen by the parties in these recitals is directed to BlueScope's requirement for iron ore (see A and C) and the availability of Iron Chieftain. No recital refers to OneSteel's need for coal, or for OneSteel's desire to defray freight costs under the CSL Charter, they being two important considerations put forward by BlueScope as part of the commercial context of the 2004 Deed.
64Clause 2 of the 2004 Deed sets out the agreed purpose of the deed as follows:
"2. PURPOSE
This Deed is principally for the supply of Iron Ore by the Seller to be delivered to the Buyer on the Vessel named "Iron Chieftain" (or substitute Vessels) on a DEQ Port Kembla basis, for use at the Buyer's Sinter Plant at the Port Kembla Steelworks. The parties recognise certain exceptions to this purpose as set out in this Deed, most particularly the right of the Buyer to buy Iron Ore on a FOB Whyalla Port basis in certain circumstances when supply of Iron Ore on a DEQ Port Kembla basis is not available."
It is to be noted that both the expressed purposes (principal and by way of exception) related to the supply of iron ore to BlueScope.
65Supply of iron ore on a DEQ Port Kembla basis involved OneSteel arranging the carrying vessel (usually, and in respect of the voyages in question, Iron Chieftain) with delivery at Port Kembla and risk and title passing as the iron ore passed the vessel's spout (if self-discharging) or over the vessel's side (if non-self-discharging) at Port Kembla: cll 12.2 and 12.10. The price (the "DEQ Price") was, by cll 7.1(a) and 9.2, the sum of the "Material Price" and the "Freight Price" calculated in accordance with cl 9.2. It is unnecessary to descend into all aspects of the calculation of this, other than noting that the "Material Price" was based on a "Material Rate" being equal to 97 per cent of the published Mount Newman Iron Ore Fines Price settled with the Japanese steel mills for the corresponding financial year ending 31 March (this being the definition of the phrase "Japanese Rate" used in cl 7). The Freight Rate was AUD 5 per WMT, subject to adjustments.
66Supply of iron ore on a free on board (fob) basis, under the 2004 Deed the FOB Whyalla Port basis, involved BlueScope arranging the carrying vessel. The price (the "FOB Price") was set by cll 7.1(b) and 9.2. It was based on the "FOB Rate" being equal to 90 per cent of the Japanese Rate.
67Clause 4 contained the parties' obligations to supply and purchase. I have already set out cl 4.1. The Maximum Tonnage was 1,081,000 WMT of iron ore fines. Clause 4.1(a) was expressed as an entitlement, not an obligation, of OneSteel. It may supply to BlueScope up to the Maximum Tonnage on a DEQ Port Kembla basis. That entitlement did not, however, leave BlueScope without any stability or assurance of supply of iron ore fines under the 2004 Deed. Clause 4.2, dealing with FOB Whyalla Port basis supply, provided that protection, as follows:
"4.2 FOB Whyalla Port basis supply of Iron Ore
(a) If, in any Contract Year (part Contract Years pro rata), for any reason other than force majeure (as defined in Clause 13.1), the Seller is:
(i) not able to; or
(ii) in the reasonable opinion of the Buyer, is unlikely to be able to,
supply the Maximum Tonnage of Iron Ore on a DEQ Port Kembla basis in reasonably evenly spaced Shipments, then:
(iii) the Buyer may in its sole discretion elect to purchase any such shortfall from the Seller on a FOB Whyalla Port basis at times scheduled in accordance with the provisions of Attachment 4, at the FOB Rate; and
(iv) the Seller must supply such shortfall,
provided always that, subject to Clause 4.3, in any Contract Year, the Buyer is not entitled to purchase from the Seller, and the Seller is not obliged to supply to the Buyer, a total amount of Iron Ore exceeding the Maximum Tonnage.
(b) Any sale and purchase of Iron Ore on a FOB Whyalla Port basis will be on the terms and conditions in this Deed, including without limitation the terms set out in Attachment 4, except that Clause 12 (and Clauses 4.1 and 4.3) of this Deed will not apply."
68A number of things should be noted about cl 4.2. First, the parties were in agreement that the phrases "not able to" in cl 4.2 (a)(i) and "unlikely to be able to" in cl 4.2 (a)(ii) included OneSteel's lack of willingness so to supply by reference to, at least proper, commercial considerations. Secondly, that if OneSteel was not able (as understood above) to supply iron ore fines to BlueScope on a DEQ Port Kembla basis, BlueScope could require OneSteel to supply up to the same Maximum Tonnage on an FOB Whyalla Port basis. Thirdly, if cl 4.1(d) gave the right to BlueScope to refuse to take iron ore under the DEQ Port Kembla basis (subject to payment of dead freight) there was no equivalent right in OneSteel to refuse to deliver to the carrying vessel at Whyalla under the FOB Whyalla Port basis.
69This last consideration is of some importance. One plain and obvious aspect of the commercial context of the arrangement was the variability of the price of iron ore on the market. Although the evidence revealed that the spot market in iron ore began to be active only from 2004, nevertheless the variability of the price of a commodity such as iron ore was an obvious commercial consideration. Thus, the commercial context would include the obviously mutually understood consideration that the market price for iron ore may rise or fall to a significant degree. That is why supply contracts are entered into, here based on an annual rate fixed by a well-established negotiated arrangement (between Mount Newman and the Japanese mills). If, as BlueScope would have it, cl 4.1(d) gave it freedom (effectively for any reason) not to take iron ore, and indeed to take no iron ore during a relevant year, that would leave it free to go to the market to obtain its iron ore and take advantage of the lower price on the market, as long as that price reduction from the price by reference to the 2004 Deed was greater than the dead freight payable to OneSteel (about AUD 5 per WMT). On the other hand, if the market price rose dramatically, while OneSteel may not have to deliver on a DEQ Port Kembla basis, it would be required to deliver on a FOB Whyalla Port basis. Thus, OneSteel would be bound to deliver the Maximum Tonnage under the 2004 Deed at the price there dictated, but BlueScope would not be bound to take any tonnage, subject to paying dead freight.
70Not only would that be a curious commercial result, but also, bearing in mind the recitals and cl 2, textually it does not conform with the words, or at least the sense of the words, used in cl 4.1(a): "may supply to the Buyer up to the Maximum Tonnage ... on a DEQ Port Kembla basis ... and any Iron Ore so offered ... must be purchased ...". Of course, this was followed by "... subject to and upon the terms of this Deed". BlueScope submitted (and the primary judge accepted) that these last words picked up cl 4.1(d), giving it operative effect. The difficulty with that conclusion (logically correct though it may be) is that the subsidiary qualifying words remove all the force and sense from the balance of cl 4.1(a), being the part of cl 4.1(a) that appears to give linguistic sense and force to the clause. The words "must be purchased by [BlueScope]" in fact describe a circumstance properly understood, on this hypothesis, as "[BlueScope] may purchase".
71The words "so offered for supply" in cl 4.1(a) raise questions as to when the iron ore is offered, when the obligation to purchase arises and the place of cl 4.1(d) in connection therewith. I will return to these questions after dealing with cl 12.
72The use of FOB Whyalla Port basis was to be in accordance with Attachment 4 to the 2004 Deed. It was submitted on behalf of BlueScope that FOB Whyalla Port basis was a much less attractive option and much less attractive way to obtain the iron ore than on a DEQ Port Kembla basis. This submission was made by reference to Attachment 4. It was part of a submission that, without the freedom given by cl 4.1(d) to it, BlueScope was at a significant commercial disadvantage under the arrangement, the balance of rights and benefits against burdens being heavily weighted, it was submitted, in favour of OneSteel and against BlueScope. This submission rested not merely upon the asserted disadvantages in Attachment 4 and FOB Whyalla Port basis delivery, but also in particular upon the scheduling process in cl 12. For the present, I will address the asserted disadvantage of Attachment 4.
73In looking at Attachment 4, it is to be appreciated that it was agreed between two commercial entities undertaking similar businesses, both necessarily familiar with ocean transportation of dry bulk materials and neither apparently suffering from any particular disadvantage in bargaining power or negotiating position.
74It was submitted that some disadvantage arose from title and risk passing upon loading at Whyalla, and not at the point of unloading at Port Kembla, thereby requiring BlueScope to take out marine cargo cover. It was also submitted that BlueScope suffered the detriment of arranging the vessel in conformity with the requirements of Art 1 of Attachment 4, which requirements dealt with the type of vessel and its configuration and availability to the Whyalla Port and its authorities. None of these were other than apparently standard commercial terms and standard commercial steps to arrange. Insurance and ship brokers, in-house or retained, would be expected to attend to such tasks. The appropriateness of a vessel can be gauged from the nature of Iron Chieftain - a workhorse Handymax dry bulk carrier. The apparent additional costs of fob purchasing were compensated for in a reduced Material Price and the lack of necessity to pay a Freight Price. In a sale of goods requiring marine transportation, someone has to arrange the shipping and associated tasks. The contractual terms, including price, are varied accordingly. The arrangement for fob was agreed between parties apparently able to fend for themselves. There is no basis to consider that these arrangements reflect the product of unequal bargaining power or are in some fashion weighted in OneSteel's favour.
75Other parts of cl 4.1 are important. Clause 4.1(b) qualifies OneSteel's lack of obligation to supply BlueScope with iron ore on a DEQ Port Kembla basis. OneSteel was required to use Iron Chieftain on the Whyalla to Port Kembla to Whyalla run, carrying iron ore and coal, unless BlueScope gave consent otherwise. This was a powerful commercial consideration, and an element of control to BlueScope. Nevertheless, under cl 4.1(c), OneSteel could use other vessels to deliver on a DEQ Port Kembla basis.
76Central to OneSteel's argument were the terms of cl 12.3 (set out at [32] above) dealing with shipping arrangements and schedules and the relationship of cl 4.1(d) thereto. In particular, it was submitted by OneSteel that cl 4.1(d) should not be construed as giving BlueScope a right to have a vessel not loaded because of the clear statement (at least as to Iron Chieftain) in cl 12.3.6 that BlueScope had no right to require a ballast voyage of Iron Chieftain.
77BlueScope, on the other hand, submitted that the freedom given to OneSteel in the scheduling process (especially in cll 12.3.1, 12.3.3 and 12.3.4) reflected the superior position of OneSteel in the arrangement, which its construction of cl 4.1(d) alleviated. That approach overlays external commercial assumptions upon agreed contractual arrangements. Iron Chieftain was available to do this round trip on a regular basis. Other vessels could be used, but the exigencies of shipping were provided for. Though entitled "Sale and Purchase Deed", the 2004 Deed had elements of a contract of affreightment - a given annual tonnage, reasonably evenly spaced to suit the respective business of the parties, was to be shipped to a purchaser. Laytime and demurrage were provided for: cll 12.6 and 12.7. The sailing time and expected arrival times, over a regular and not extended voyage, were always subject to exigencies, which were provided for in cll 12.3.1 and 12.3.3 in an agreed manner. Coöperation was required between the parties, as illustrated by cl 12.3.2 and also by cl 12.12 which was in the following terms:
"12.12 Optimising Freight Practices
The parties agree to work together in good faith to achieve the greatest possible efficiency in the transport of Iron Ore between Whyalla and Port Kembla with reference to scheduling, cargo lift, loading, carriage and delivery. For purposes of this clause the parties acknowledge and agree that the Seller also needs to ship coal from Port Kembla to Whyalla using the Iron Chieftain."
78The word "schedule" (and the past participle "scheduled" in cl 4.1(d)) was not defined, but cl 12.3.5 makes clear what is meant. A schedule is a document produced every two weeks indicating forecast "Vessel movements" and "expected Shipments" for the following three months. The totality of the clause makes clear that a schedule will contain the identification of the carrying vessel, the quantity of iron ore in each shipment and the estimated time of arrival at the discharge port (Port Kembla). BlueScope submitted that in cl 12.3.6, especially the second sentence, "schedule" only referred to timing and not tonnage. I do not agree. The schedule contemplated by cll 12.3.5 and 12.3 generally, was a document dealing with shipping arrangements, involving necessarily the identity of vessels, the quantity of cargo (that would inevitably bear on time) and estimated delivery dates.
79The schedule is capable of change, but it stands as a "forecast of Vessel movements and expected Shipments". The arranging of a schedule is not a one-off event. It is an iterative process, governed by cl 12, and involving a degree of coöperation. The first sentence of cl 12.3.6 is not limited to a time before an anticipated voyage appears on the running fortnightly document. That is too fine a reading of the words in the context of shipping arrangements. The sentence is clear. BlueScope cannot require a "ballast voyage". The phrase "ballast voyage" is not defined. That is hardly surprising. It is a voyage in which no cargo is carried. A cargo ship is in ballast when she has discharged her cargo and has taken necessary ballast on to give stability and necessary trim: I Dear and P Kemp, The Oxford Companion to Ships and the Sea (2nd ed, Oxford University Press, 2006) p 29 and E Sullivan, Eric Sullivan's Marine Encyclopaedic Dictionary (6th ed, LLP, 1999) p 223. There was debate, however, about its meaning. BlueScope argued that a request not to load (under cl 4.1(d)) was not a request for a ballast voyage, because it did not carry with it a request for the ship to come to Port Kembla. The primary judge at [115] of the reasons saw a ballast voyage as not necessarily occurring after a request under cl 4.1(d) because Iron Chieftain could be used elsewhere. With respect, neither distinction is convincing. Once a schedule was in place there was or were a vessel or vessels nominated. Here Iron Chieftain was nominated for all relevant voyages. A request not to load, implicitly at any time, explicitly for any reason (other than pursuant to cl 6.4), would be, in the commercial context of a schedule that BlueScope had no right to change and involving a vessel (as it did), Iron Chieftain, which OneSteel had no unfettered right to use on any other seaborne trade (cl 4.1(b)), a request for a ballast voyage. That is the commercial sense and reality of such a request. It was the sense used by the drafter of the March request. That usage by the author of the March request is not to be used as an aid to construction, but it does give some comfort to a view that the expression "ballast voyage" should be understood in a way conformable with the commercial and shipping realities of the operation of the terms of the 2004 Deed.
80Read thus, cl 4.1(d) does create a significant difficulty for BlueScope in its construction of cl 12.3.6. It can be accepted that cl 4.1(d) is not limited to requesting that no cargo be loaded (thus requesting a ballast voyage) in that it extends to a request for part loading; but cl 4.1(d) includes a request that no cargo be loaded, and that was what occurred here. If one were to construe cl 4.1(d) as entitling BlueScope to request and require a ballast voyage once a schedule is established, this would be contrary to cl 12.3.6.
81Clauses 12.3.5 and 12.3.6 have another significance. Whilst some of the language of cl 12.3.5 may seem to have a precatory character - "indicate the forecast", "expected", "Estimated Time of Arrival", the commercial context is to be recalled: the seaborne transportation of goods. Absolute precision in time and date is rare in shipping, at least outside times for payment. The types of considerations referred to in cl 12.3.1 make a degree of estimation and approximation always necessary. Thus, these words should not detract from what cl 12.3.5 does - it "establishes" a schedule: cl 12.3.6. The schedule may be subject to a degree of variation brought about by contingencies, but it is not open to BlueScope to vary it. It makes, therefore, sound commercial and legal sense to view the shipments contained in a schedule established under cl 12.3.5 as "offered for supply" for the purposes of cl 4.1(a).
82In argument on appeal, BlueScope put various submissions as to when shipments were offered and when they must be purchased. These included a submission that the legal obligations to purchase only arose at the point of delivery (out of the spout of Iron Chieftain's discharging gear at Port Kembla): Transcript 25 October 2012 at pp 3 - 4. This was amended to a point immediately prior to the time of loading: Transcript 25 October 2012 at p 4. Then it was put that an offer is made under cl 4.1(a) when the schedule was issued and that offer was accepted when the vessel had been loaded and had left port: Transcript 25 October 2012 at p 5. Then there appeared to be a proposition that the offer was at the time of the end of the loading: Transcript 25 October 2012 at pp 11 - 12.
83At one level it may not matter precisely when the offer of Shipments (for cl 4.1(a)) is seen to be made, if one simply subjects the obligation to purchase in cl 4.1(a) to the effective right (as BlueScope would have it) in cl 4.1(d) to make a request at any time prior to loading. Thus, the legal obligation to purchase only arises, on this hypothesis, at the point of expiry of the opportunity to exercise cl 4.1(d).
84Nevertheless, viewing the schedule as an offer of Shipments, produced in accordance with cll 12.3.5 and 12.3.6, cl 4.1(a) has the effect of requiring BlueScope to purchase the Shipments. Clause 4.1(d) can then be understood in the context of cl 12.3 and, in particular, cl 12.3.6, as requiring agreement to the change to the schedule brought about by the request in cl 4.1(d). That way of looking at the matter accords with the use of the word "request" in cll 4.1(d) and 12.3.6 and recognises that a request under cl 4.1(d) concerns the contents of a schedule which, by cl 12.3.5, is concerned with quantity, and implicitly, through its relationship with cl 12.3.6, calls for agreement of OneSteel that is referred to in cl 12.3.6. To read cl 4.1(d) otherwise makes it inconsistent with cl 12.3.6.
85Further, if cl 4.1(d) has the broad effect contended for by BlueScope, questions arise as to why other provisions (cll 6.4, 12.8(c), 13 and 14) took the form they did.
86Clause 6.4 is part of the provisions dealing with quality and composition of the fines. Clause 5 provides for the specification as follows:
"5. IRON ORE SPECIFICATION
5.1 The Iron Ore supplied and delivered by the Seller pursuant to this Deed shall conform to the Guaranteed Specification and the Seller will use its reasonable endeavours to ensure that the Iron Ore conforms to the Target Specification.
5.2 The Seller shall use all reasonable endeavours to blend the Iron Ore in each Shipment to the extent required to ensure that there are no significant step changes in the Chemical Properties or Sizing between consecutive Shipments."
The Schedules and the specifications concerned the chemical properties of the ore.
87Clause 11 deals with the provision of information about grade of iron ore. Clause 11.1 provided for a predicted analysis of each shipment at least 24 hours before loading:
"11.1 Predicted Shipment Analysis
11.1.1 At least twenty four (24) hours prior to loading of a Shipment (whether on a FOB Whyalla Port basis or DEQ Port Kembla basis), the Seller agrees to provide to the Buyer a predicted analysis for the Chemical Properties contained in each Shipment. The predicted Shipment analysis shall be distributed by the Seller via electronic mail to the Buyer.
11.1.2 If the predicted Shipment analysis indicates a potential non-conformance with the Guaranteed Specification (as set out in column 3 in Attachment 1), the Seller shall use its best endeavours to remedy any potential non-conformance prior to loading of the Iron Ore onto the Vessel.
11.1.3 If the predicted Shipment analysis indicates that there has been a significant step change in any of the values of the Chemical Properties from previous Shipments, then the Seller will notify the Buyer and provide an explanation of the difference or shift, when the predicted Shipment analysis is transmitted under Clause 11.1.1."
88By cl 11.2, OneSteel was to provide BlueScope on the fifteenth day of each month a forecast analysis of the Chemical Properties of the next month's shipments. Clause 11.3 provided for the method of analysis. Clause 11.4 provided for a shipment advice to be given as soon as possible after sailing, being a Certificate of Analysis. Clause 11.5 provided for rolling long term forecast of quality. Clauses 6 and 7.4 dealt with non-conformance. Clause 7.4 provided for an adjustment of the price of a "Non-Conforming Shipment" in accordance with attachment 2. Sub-clauses 6.1 - 6.6 were as follows:
"6.1 If a Shipment (on either a FOB Whyalla Port basis or DEQ Port Kembla basis) does not conform with any part of the Guaranteed Specification as determined in accordance with Clause 11, (each a "Non-Conforming Shipment"), the Seller shall give notice to the Buyer of the non-conformance of the Iron Ore as soon as possible.
6.2 Notwithstanding any other provision of this Deed, if any Shipment delivered to the Buyer does not meet in whole or any part of the Guaranteed Specification, the Buyer shall accept such Shipment but the Material Price or the FOB Price (as applicable) will be adjusted in accordance with Clause 7.4
6.3 If a Non-Conforming Shipment is made the Buyer may request the Seller, in writing, to take appropriate action to improve the quality of the Iron Ore in future Shipments. If the Seller is so requested, the Seller shall implement (provided always that the Seller considers that any requested action is reasonably feasible and financially acceptable to it), at its cost, appropriate quality control programs to make all reasonable efforts to ensure that future Shipments comply with the Guaranteed Specification.
6.4 In addition to the Buyer's rights under Clause 7.4 of this Deed if, within the period of twelve (12) weeks from the date the Buyer has given a written request in accordance with Clause 6.3, one (1) or more Non-Conforming Shipments are made, then following the expiry of that twelve (12) week period, the Buyer may:
(a) suspend further Shipments or parts of Shipments from the Seller until the Seller establishes to the satisfaction of the Buyer that the Iron Ore to be supplied under this Deed will comply, in all material and substantial respects with the Guaranteed Specification; or
(b) terminate this Deed by giving the Seller one (1) months prior written notice.
A party shall not be responsible for any cost, expense, loss (including loss of profits) or damage suffered by the other Party or any third party acting on behalf of the other Party as a result of the suspension of Shipments or terminating this Deed in accordance with this Clause 6.4.
6.5 If the Buyer has elected to suspend further Shipments or parts of Shipments from the Seller in accordance with Clause 6.4(a), the Buyer shall advise the Seller whether the Buyer wishes to take the foregone tonnage at a later time (on either a FOB Whyalla Port or DEQ Port Kembla basis) and the Seller shall respond to the Buyer's request within a reasonable time (for the avoidance of doubt, the Seller is not obliged to agree to any such request for the foregone tonnage but will not unreasonably withhold its agreement).
6.6 If the Buyer suspends Shipments or parts of Shipments for a continuous period of twelve (12) weeks or more (or suspends Shipments or parts of Shipments for a cumulative period of twelve (12) weeks or more during any single Contract Year) pursuant to Clause 6.4(a), then the Seller may terminate this Deed by giving the Buyer one (1) months prior written notice of its intention to do so and in such event the Seller shall not be responsible for any cost, expense, loss (including loss of profits) or damage suffered by the Buyer or any third party acting on behalf of the Buyer as a result of the Seller electing to terminate this Deed in accordance with this Clause 6.6.
89Clauses 6.1 - 6.3 make clear that non-conformance of shipments as a fact, ascertained by Certificates of Analysis under cl 11.4, being pre-shipment analyses by way of forecasts: cll 11.1 and 11.2, was not a basis for rejection of a shipment. It is a basis for a price adjustment: cl 7.4. Clause 6.4 provides an entitlement to suspend shipments in accordance with cl 6.4 (a) or terminate under cl 6.4(b). The last paragraph of cl 6.4 makes clear that BlueScope's right to suspend is without financial effect to it. The wording of the paragraph is to be noted in that regard.
90Thus, suspension of shipments, without financial penalty, can only be effected after the regime in cll 6.1- 6.4. Yet, if cl 4.1(d) has the effect contended for by BlueScope, it could request a vessel not be loaded because of the content of a predicted shipment analysis, though it would have to pay dead freight.
91Clause 6.5 uses similar phraseology to cl 4.1(d).
92Clause 6.6 gives OneSteel an entitlement to terminate the 2004 Deed, even though the suspension upon which it is based has been brought about by non-conformance under the deed. It is also to be noticed that cl 6.6 uses phraseology similar to the last paragraph of cl 6.4 in its exculpation of OneSteel from financial responsibility for a termination under cl 6.6.
93It can be accepted, to a point, that, as the primary judge said, cll 4.1(d) and 6.4 deal with different subjects. Nevertheless, the ability to invoke cl 4.1(d) for a reason of anticipated or even actual non-conformance (subject to paying dead freight) set against the elaborate structure of suspension based on cause, and OneSteel's right under cl 6.6, leaves one with the sense that cl 4.1(d) was not intended to be as broad as contended for by BlueScope and to be available for use in this way.
94Clause 12.8(c) is also difficult to explain fully coherently if cl 4.1(d) has the scope contended for by BlueScope. It can be accepted that it was a specific contingency that the parties provided for. Again, it concerns reduction of volume. It was hedged with operative qualifications (reasonable proportionality and a relationship with the Works). Dead freight was payable, though subject to an express obligation in OneSteel to mitigate the dead freight. The clause had to be invoked according to its terms, including its qualifications, otherwise a reduction would involve a breach of the 2004 Deed. Yet, why would BlueScope not use cl 4.1(d) if it wanted to reduce supply for the relining? It would still have to pay dead freight but there would be no requirement to demonstrate proportionality or a causal connection with the Works.
95It is to be noted that again, as in cll 6.4 and 6.6, substantially identical phraseology is used to exculpate a party (here BlueScope) from financial responsibility.
96Clause 13 deals with force majeure. It provides expressly for suspension of Shipments in cl 13.4. Clause 13 was in the following terms:
"13. FORCE MAJEURE
13.1 In the event that either Party ("the affected Party") is unable, wholly or in part, to perform any of its obligations under this Deed, due to a cause beyond the affected Party's reasonable control the consequences of which could not have been avoided or minimised by the affected Party acting prudently, such as but not limited to act of God, unavoidable accident, war, threat of war, act of terrorism, restrictions, rules or regulations of any duly constituted Government authority, strike, industrial action or industrial dispute, fire, flood, a failure by a supplier (excluding an iron ore supplier to Seller) that is not a related body corporate of the affected Party, or an accident or breakdown at the Port Kembla Steelworks or the Seller's mine(s) from which Iron Ore is mined ("force majeure"), then the affected Party will give to the other Party ("the other party") prompt written notice of the existence of the condition of force majeure ("the intervening event") and, insofar as known, the probable extent to which it will be unable wholly or in part to perform or be delayed in performing its obligations under this Deed.
13.2 Upon the receipt of the notice referred to in Clause 13.1 the obligations of the affected Party (not including any obligation to pay money) will be suspended, so far as the affected Party is affected by such cause during the continuance of the intervening event. Within ten (10) days of the occurrence of the intervening event, the affected Party will (if possible) provide proof to the other Party of the existence of the intervening event.
13.3 The affected Party will use reasonable endeavours to eliminate the intervening event and will resume performance of its obligations under this Deed as promptly as is practicable but will not, by virtue of this provision, be required to settle strikes, lockouts or other industrial disturbances on terms contrary to its wishes.
13.4 Shipments that would have been made under this Deed but for the existence of the intervening event and during the period in which performance by the affected Party is suspended shall be made at a time mutually agreed by both Parties and as soon as practicable following termination of the intervening event and, if necessary, the Term shall be extended for such period as is necessary to achieve the intent of this Clause 13.4.
13.5 If Force Majeure continues for a period longer than four (4) continuous months, then either Party may terminate this Deed immediately upon giving written notice to the other Party. Upon such notice being given, this Deed is immediately terminated without any further obligations, rights or liability whatsoever on either Party other than such liabilities, rights or obligations which had accrued up to the time of such termination."
97It can be accepted that such a clause having general operation would be expected to be in the deed, irrespective of the place of cl 4.1(d) (with the content asserted by BlueScope). The dealing of the matter without dead freight and pursuant to the regime in cl 13.4 does distinguish the position from the use of cl 4.1(d). Nevertheless, "for any reason" in cl 4.1(d) would pick up a force majeure event, cl 4.1(d) could be invoked, and dead freight may be excepted by cl 12.8(b)(iii). Further, the rescheduling of shipments under cl 13.4 is different to the secondary request under cl 4.1(d).
98Clause 14.2 entitled BlueScope to reduce the level of purchases by reason of the effect of acts of regulatory bodies:
"14.2 The Parties acknowledge that the Chemical Properties contained in the Iron Ore supplied by the Seller contribute to the level and content of emissions from the Sinter Plant at Port Kembla Steelworks. If the Buyer is required by any Government Authority or by law to change, vary or alter the emission standards or levels, emission contents or emission targets at its Sinter Plant and if the Seller's Iron Ore can be shown with reasonable certainty to be a major contributor to the emissions, the targets, standards, contents or levels of the emissions, then:
(a) the Buyer may, at its option, reduce the level of purchases of Iron Ore from the Seller under this Deed to the extent required to achieve the required emission standards, levels, targets or contents, but the Buyer must pay the Seller Dead Freight for any Dead Freight Events that arise as a result of such reduction(s); and/or
(b) if the reductions pursuant to this clause last longer than three (3) months (cumulatively) then either Party may terminate this Deed without any penalty or liability to the other Party on one month's written notice.
99Again, dead freight was payable. The reduction could have been achieved by cl 4.1(d). There can be overlap of provisions in a contract or deed, but the general right to reduce volume delivery under cl 4.1(d) does make the inclusion of cl 14.2(a) unnecessary.
100Further, cl 15 in dealing with termination makes reference in cl 15.1(b) to cll 6, 13, and 14 as the "Buyer's rights to suspend or reduce Shipments". Sub-clauses 15.1(a) and (b) were as follows:
"15. TERMINATION
15.1 General Termination
This Deed is terminated:
(a) by either Party by giving notice to the other Party:
(i) immediately, if the other party is subject to an Insolvency Event; or
(ii) in accordance with Clause 6.4, 6.6, 13.5 or 14.2; or
(iii) immediately, if (subject to the other specific terms regarding termination rights in this Deed) the other Party commits a material breach of this Deed and fails to remedy, within thirty (30) days of written notice, that material breach.
(b) immediately by the Seller, if the Buyer does not, within seven (7) days of being notified in writing by Seller, accept any DEQ Shipment of Iron Ore on arrival at the Discharge Port as provided for by this Deed or fails to grant priority to the Iron Chieftain (or substitute Vessel) as provided for by Clause 12.3.4 of this Deed (for the avoidance of doubt, this right of termination in the Seller does not in any way limit the Buyer's rights to suspend or reduce Shipments pursuant to Clauses 6, 13 or 14 of this Deed)."
101The submissions of the parties reveal a degree of difficulty in the precise content of cl 15.1(b). In particular, the notification is innominate by reference to other clauses, and the relationship between the notification, and acceptance and arrival is not entirely clear. What is clear, however, is that the last part of the clause in parenthesis, being expressly "for the avoidance of doubt", sought to set out the clauses that gave BlueScope the right to suspend or reduce shipments. Surely, if cl 4.1(d) had the effect contended for by BlueScope, it would have been included in that category, for the avoidance of doubt.
102Returning to the words of cl 4.1(d), it is important, as in examining other clauses, such as cl 12.3.6, not to approach the wording too finely or pedantically by detailed scrutiny more appropriate to the interpretation of a text such as revenue legislation: see Re Sigma Finance Corp [2009] UKSC 2; [2010] 1 All ER 571 at [12] (Lord Mance SCJ) and [35] (Lord Collins SCJ). There are bound to be degrees of ambiguities, infelicities and inconsistencies in any commercial instrument; though it should be said that the 2004 Deed overall reveals a careful, straightforward and consistent use of language.
103Emphasis was placed by BlueScope on the words "then" and "foregone tonnage" in seeking to show that the "request" led, by way of operative pre-condition, to the necessary consequences in paras (i) and (ii). Linguistically that has some force, but so does OneSteel's argument that cl 4.1(d) is to be read in the context and against the background of cl 12.3 dealing with scheduling and request for alteration of schedules (which, in one sense, cl 4.1(d) is). In light of cl 12.3.6, is cl 4.1(d) to be viewed as capable of freeing BlueScope from taking any tonnage, at the cost only of dead freight? The apparent commercial purpose of the arrangement derived from the structure and text of the deed, especially cll 2 and 4 read with the recitals (not the presumed and imposed commercial considerations lacking foundation or emphasis in the document, such as carriage of coal and defrayment of the freight under the CSL charter) would be turned on its head by the broad construction of cl 4.1(d) favoured by BlueScope. Further, it would make the mechanisms of reduction of tonnage for various reasons, cll 6.4(a), 12.8(c) and 14.2(a), curiously expressed, at the least. The apparently clear and emphatic words of cl 4.1(a) of the obligation to purchase offers of tonnage by Shipments (established by shipping schedules including volume or tonnage) would be drained of real content by the subsidiary phrase "subject to and upon the terms of this Deed", and cl 4.1(d) would come to define the essential lack of obligation of BlueScope in respect of DEQ Port Kembla basis Shipments, not its essential obligation by cl 4.1(a). This would be so in circumstances where OneSteel could be held to an obligation to provide the Maximum Tonnage by BlueScope's right under cl 4.2 to require delivery under FOB Whyalla Port basis.
104Overall, I would not construe cl 4.1(d) as entitling BlueScope to request and require, as a matter of right, that the vessel not be loaded so as to reduce the tonnage it is obliged to take.
105This construction leaves cl 4.1(d) with a purpose - it requires, subject to cl 12.8, dead freight to be paid and grants BlueScope a valuable right to have OneSteel consider the secondary request and not withhold consent unreasonably.
106The essential difference between the parties is whether cl 4.1(d) gives BlueScope the right to require (through a request and the operation of the clause) a vessel not to be loaded in part or fully, and such not to be a breach of contract with the consequence that damages be paid. The above construction propounded by OneSteel, that I favour, denies BlueScope that right. Another way of looking at the clause is that it was dealing with the physical loading and delivery of ore, but not the consequent contractual breach. In other words, it might be seen to be a mechanism whereby BlueScope could effectively require OneSteel not to force ore on it (for instance in circumstances where it had no room in its yards) but the clause did not exonerate BlueScope from breach of contract in failing to purchase the shipments offered to it under cl 4.1(a). This is not to utilise the argument referred to in ground 2 of the appeal. Rather, it is to recognise that BlueScope was obliged to purchase the shipments offered (cl 4.1(a)) but could require that the physical ore not be delivered. Absent from cl 4.1(d) is the exculpation from financial responsibility that one finds in cll 6.4, 6.6, 12.8(c) and that is implicit in cll 13 and 14.2. This way of putting the matter was not explored in any detail at the appeal and is not necessary for my conclusion.
107Subject to the matters in the notice of contention, the above is sufficient to found a conclusion of a breach of contract by BlueScope in failing to accept the seven shipments.