CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND
INTERPRETATION OF CONTRACTS – where there is a dispute
between the
plaintiff, the majority participant in a mining joint venture and also the
Source
Original judgment source is linked above.
Catchwords
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION ANDINTERPRETATION OF CONTRACTS – where there is a disputebetween theplaintiff, the majority participant in a mining joint venture and also theManager, and the defendant, a minority participantin the joint venture, aboutthe defendant’s failure to pay funds called for by three Cash Call Noticesissued to it by theManager under clause 11.3 of the joint venture agreement– where the defendant sought, by interlocutory application, a declarationthat the challenged Cash Call Notices are not valid notices for called sums inaccordance with clause 11.3 – where it was notdisputed that, in somerespects, the Cash Call Notices did not strictly comply with clause 11.3 in thatthey did not refer to a CashAccounting Period, as defined, and were not issuedat least 5 days in advance of the commencement of such a Cash Accounting Periodbut the extent of non-compliance in other respects was disputed – whetheron a proper construction of clause 11.3 the stipulations
as to time, and time
frame, were of the essence and needed to be strictly complied with as a
condition precedent to the validity
of the notice – whether the Cash Call
Notices substantially and sufficiently complied with the relevant
provisions.
ESTOPPEL – ESTOPPEL BY DEED OR CONVENTION – ESTOPPEL BY
CONVENTION – where the plaintiff, as Manager, had issued
Cash Call Notices
on a regular basis, approximately twice a month, to the defendant since 2014,
many of which did not strictly comply
with the requirements of clause 11.3 of
the joint venture agreement, and all of which the defendant paid without
complaint as to
the form and content of the notice, in terms of compliance with
the relevant provisions – whether the parties, by the course
of dealing
between them, each adopted an assumption as the basis of their contractual
relationship, that the plaintiff as Manager
could issue Cash Call Notices which
did not strictly comply in particular respects and the defendant did not and
would not require
strict compliance in those respects and did not and would not
contend a Cash Call Notice was invalid on that basis, and both conducted
their
relationship on the basis of that mutual assumption, to the knowledge of the
other – whether it would be unjust to allow
the defendant to now insist on
a strict interpretation of the relevant provisions
AGL Sales (Qld) Pty Ltd
v Dawson Sales Pty Ltd & Ors [2009] QCA 262
Amalgamated Investment
& Property Co Ltd (in liq) v Texas Commerce International Bank Ltd
[1982] QB 84
Browning v ACN 149 351 413 Pty Ltd (in liq) (formerly known
as Enviren Constructions Pty Ltd) [2016] QCA 169
Commonwealth v
Verwayen (1990) 170 CLR 394
Callide Power Management Pty Ltd &
Ors v Callide Coalfields (Sales) Pty Ltd & Ors (No 5) [2016] QSC
199
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur
Insurance (Australia) Ltd [1986] HCA 14
(1986) 160 CLR 226
Ecosse Property Holdings
Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12
(2017) 261 CLR 544
Elcos Australia
Pty Ltd v James Hardie Building Services & Technologies Ltd (1999) 15
BCL 340
Electricity Generation Corporation v Woodside Energy Ltd
[2014] HCA 7
(2014) 251 CLR 640
Hilas v GGPG Developments (No 133) Pty Ltd
[2020] QSC 313
Mannai Investment Co Ltd v Eagle Star Life Assurance Co
Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904
Waste
Recycling & Processing Corporation v Global Renewables Eastern Creek Pty Ltd
[2009] NSWSC 453
Waterman v Gerling Australia Insurance Company Pty
Ltd [2005] NSWSC 1066
(2005) 65 NSWLR 300
Judgment (147 paragraphs)
[1]
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - where there is a dispute between the plaintiff, the majority participant in a mining joint venture and also the Manager, and the defendant, a minority participant in the joint venture, about the defendant's failure to pay funds called for by three Cash Call Notices issued to it by the Manager under clause 11.3 of the joint venture agreement - where the defendant sought, by interlocutory application, a declaration that the challenged Cash Call Notices are not valid notices for called sums in accordance with clause 11.3 - where it was not disputed that, in some respects, the Cash Call Notices did not strictly comply with clause 11.3 in that they did not refer to a Cash Accounting Period, as defined, and were not issued at least 5 days in advance of the commencement of such a Cash Accounting Period but the extent of non-compliance in other respects was disputed - whether on a proper construction of clause 11.3 the stipulations as to time, and time frame, were of the essence and needed to be strictly complied with as a condition precedent to the validity of the notice - whether the Cash Call Notices substantially and sufficiently complied with the relevant provisions.
[2]
ESTOPPEL - ESTOPPEL BY DEED OR CONVENTION - ESTOPPEL BY CONVENTION - where the plaintiff, as Manager, had issued Cash Call Notices on a regular basis, approximately twice a month, to the defendant since 2014, many of which did not strictly comply with the requirements of clause 11.3 of the joint venture agreement, and all of which the defendant paid without complaint as to the form and content of the notice, in terms of compliance with the relevant provisions - whether the parties, by the course of dealing between them, each adopted an assumption as the basis of their contractual relationship, that the plaintiff as Manager could issue Cash Call Notices which did not strictly comply in particular respects and the defendant did not and would not require strict compliance in those respects and did not and would not contend a Cash Call Notice was invalid on that basis, and both conducted their relationship on the basis of that mutual assumption, to the knowledge of the other - whether it would be unjust to allow the defendant to now insist on a strict interpretation of the relevant provisions
J Peden QC and J Hughes for the applicant/defendant
[22]
S Doyle QC, M Jones and M J Hafeez-Baig for the respondent/plaintiff
[23]
[1] The plaintiff (referred to as Glencore), the defendant (ICRA) and Sumisho Coal Australia Pty Ltd are participants in an unincorporated joint venture in relation to a coal mine near Rolleston in Queensland. Glencore holds a 75% interest and each of ICRA and Sumisho hold a 12.5% interest.
[2] The conduct of the joint venture is regulated by a joint venture agreement, originally entered into in 2004, amended over time and most recently restated on 8 March 2017;[1] as well as a sales agency agreement,[2] under which Glencore is appointed by each of ICRA and Sumisho as its sole and exclusive agent for the sale of all its Rolleston coal during the term of the agreement.
[3] Glencore is also the Manager under the joint venture agreement, with responsibility to manage, supervise and conduct the operations of the mine, and having the functions and duties set out in cl 8 of the joint venture agreement.
[4] Part of the Manager's role is to make all disbursements on behalf of the joint venturers, in accordance with an approved Annual Programme and Budget, in connection with the carrying out of the mining operations (cl 10.6 of the joint venture agreement). All of the costs, expenses and charges incurred for this purpose are to be borne and paid for by the joint venturers, in proportion to their respective individual shares (cl 11.2 of the joint venture agreement). In order to obtain the funds necessary to pay for this expenditure, the joint venture agreement sets out a procedure by which the Manager can give notice to the joint venturers on a regular basis, setting out the cash each joint venturer is required to pay to cover the disbursements (referred to as a cash call notice) (cl 11.3 of the joint venture agreement).
[5] In July this year a dispute arose between Glencore and ICRA, when ICRA failed to pay two cash call notices issued on 10 July 2020, and a further notice issued on 31 July 2020. Glencore commenced the present proceedings, seeking a declaration that it is entitled to hold ICRA's share of coal sale proceeds, for so long as ICRA fails to pay the cash calls; as well as declaratory relief in relation to steps taken by ICRA purporting to terminate the sales agency agreement with immediate effect. ICRA defends the proceeding on the basis that the cash call notices issued on 10 and 31 July 2020 are invalid, for failure to comply with cl 11.3 of the joint venture agreement, and counterclaims against Glencore for damages for breach of the sales agency agreement and the joint venture agreement.
[24]
[8] Clause 10.1(a) of the joint venture agreement requires the Manager, in September each year, to "consult the Joint Venturers on the general parameters for the draft Annual Programme and Budget and Three Year Plan for the next Financial Year".[3] Under cl 10.1(b), by November each year, the Management Committee is to meet and approve, in accordance with cl 10.3, the Annual Programme and Budget and Three Year Plan. If the Management Committee do not agree, before the commencement of the next financial year, the programme, budget and plan proposed by the Manager is, for the purposes of the joint venture agreement, deemed to have been approved (cl 10.3(a)).
[9] It was not controversial that the Annual Programme and Budget for 2020 was deemed to have been approved, under cl 10.3(a), and that it was therefore an approved Annual Programme and Budget for the purposes of cl 11.3.[4]
[10] Clause 10.6 requires the Manager to make all disbursements on behalf of the joint venturers in accordance with the approved Annual Programme and Budget and any approved amendments under cl 10.4 in connection with the carrying out of the Operations.
[11] By cl 8.10(b), the Manager has a right of indemnity against the joint venturers in respect of its obligations.
[12] Clause 8.13(a) contains an acknowledgment that the Manager is only obliged to perform its duties and obligations under the joint venture agreement "to the extent that funds, including any Called Sums, are furnished in a timely fashion by or for the account of the Joint Venturers respectively so as to enable the Manager to discharge those duties and obligations".
[13] Clause 11.2 of the joint venture agreement provides:
[25]
All costs, expenses and charges of whatsoever kind authorised or approved by the Management Committee and incurred pursuant to the Operations will be borne and paid for by the Joint Venturers in proportion to their respective Individual Shares as at the date incurred, and any receipts, payments or credits arising in the course of the Operations will be credited to the Joint Venturers in the same proportions as at the date received." [underlining added]
[26]
[14] Clause 11.3 of the joint venture agreement provides:
[27]
Based upon each approved Annual Programme and Budget the Manager will submit to the Joint Venturers at least five (5) days in advance of the commencement of the relevant Cash Accounting Period a notice stating current cash estimates for the next Cash Accounting Period. Such cash estimates shall be prepared in accordance with instructions from the Management Committee and must show:
[28]
(a) separately, the estimated cash disbursements which the Manager will be required to make during such Cash Accounting Period for the Operations;
[29]
(b) the extent (if any) to which such disbursements will be satisfied by cash in hand and (if the Manager considers it reasonable) expected cash receipts after allowing for a reasonable cash balance; and
[30]
(c) the aggregate cash amount (if any) which each Joint Venturer is required to furnish to the Manager ("Called Sum").
[31]
Each Joint Venturer must, no later than the date on which the next Cash Accounting Period commences (which date will be stated in the notice), furnish to the Manager its Called Sum in accordance with clause 11.2. Each Called Sum constitutes a debt due and payable to the Manager by such Joint Venturer and recoverable accordingly in any court of competent jurisdiction. The liability of the Manager to the Joint Venturers to account for Called Sums furnished to it by the Joint Venturers will be discharged by the payment by the Manager in accordance with clause 10.6 of the costs incurred by the Manager for the account of the Joint Venturers pursuant to this Agreement."
[32]
[15] In cl 1 of the joint venture agreement, "Accounting Period" means each calendar month during any Financial Year; and "Cash Accounting Period" is defined as "each of the two periods from:
[33]
[16] Clause 11.4 (invoice) provides that "[u]nless otherwise agreed by the Joint Venturers all Called Sums will be invoiced by the Manager to each Joint Venturer, and must be paid by each Joint Venturer, in Dollars". "Dollars" is defined in cl 1 to mean the lawful currency of the Commonwealth of Australia.
[17] Clause 11.7 provides that the Manager may call under cl 11.3 "only such Called Sums as are necessary to meet the cash disbursements required to be made by the Manager during the relevant Accounting Period and shall avoid calling and holding funds in excess of such requirements".
[18] Clause 17 sets out the procedure which applies if a joint venturer fails to pay in full any Called Sum within 14 days of the due date. The Manager is required to give notice to the joint venturers of the default (cl 17.1(a)(v)) and then any one or more of the other joint venturers (in this context called the acquiring joint venturer) may give the defaulting joint venturer a default notice, requiring the default to be remedied within 60 days (cl 17.1(a)(vi)). Each acquiring joint venturer also has the right to pay, on behalf of the defaulting joint venturer, any part of the Called Sum which is owing; which then becomes a debt due and payable by the defaulting joint venturer to the acquiring joint venturer (cl 17.4).
[19] As recorded in cl 17.6, the joint venturers and the Manager are also parties to a deed of cross charge. In the deed of cross charge "secured debt" is defined to mean, in relation to a joint venturer, among other things, each Called Sum owing and unpaid by that joint venturer after it has fallen due, together with interest on the Called Sum. By cl 2.1 of the cross charge, to secure the due and punctual payment of its secured debt, each joint venturer charges to each other joint venturer, among other things, its share of the coal and its share of the proceeds of coal sales.
[20] Under the joint venture agreement, if the default has not been remedied by the end of the 60 days, the acquiring joint venturer may elect to either exercise any of its rights as chargee under the cross charge, or, by further notice, to purchase the individual interest of the defaulting joint venturer (cl 17.7(a)(i) and (ii)). The process in the case of an election to purchase is set out in clauses 17.8, 17.9 and 17.10.
[34]
[21] On 10 July 2020 Glencore issued two documents described as cash call notices to ICRA. Each notice:
[35]
(b) is described as a "[c]ash call notice for the accounting period from 13 July 2020 to 02 August 2020";
[36]
(d) identifies three dates for payment of three respective instalments (not all of which ICRA was required to pay);
[37]
(e) was accompanied by a spreadsheet setting out what is referred to as "13 operations week rolling cashflow", starting with the week ending on Friday 17 July 2020, and continuing up to the week ending Friday 9 October 2020. For each week, this spreadsheet sets out the opening bank balance; the expected sales receipts; the cash payments required to be made; and (under the heading "funding") the expected distribution of sale proceeds to each participant and the expected proceeds from cash calls from each participant.[5]
[38]
[22] The first notice dated 10 July 2020 called for payment of the following amounts in AUD, on the dates specified, into a nominated bank account:
[39]
[23] The second notice dated 10 July 2020 called for payment of the following amount in USD, on the date specified, into a different nominated bank account:
[40]
[24] The third challenged notice was issued by Glencore to ICRA on 31 July 2020. This notice:
[41]
(b) is described as a "[c]ash call notice for the accounting period from 03 August 2020 to 23 August 2020";
[42]
(d) identifies two dates for payment of two respective instalments;
[43]
(e) was accompanied by a spreadsheet setting out the "13 operations week rolling cashflow", starting with the week ending on Friday 7 August 2020, and continuing up to the week ending Friday 30 October 2020, setting out the same information as described above;
[44]
(f) called for payment of the following amounts in AUD, on the dates specified, into a nominated bank account:[6]
[45]
[25]The competing contentions. ICRA contends that the first and second notices, issued on 10 July 2020, and the third notice, issued on 31 July 2020, did not comply with the requirements of cl 11.3 of the joint venture agreement in that each of them:
[46]
(a) do not relate to the next, or any, Cash Accounting Period;
[47]
(b) relate to a period that is longer than any Cash Accounting Period;
[48]
(c) was not submitted to ICRA at least five days in advance of the commencement of a relevant Cash Accounting Period;
[49]
(d) is not based upon the approved Annual Programme and Budget for 2020; and
[50]
(e) does not show on its face that it was prepared in accordance with instructions from the Management Committee.[7]
[51]
[26] In addition, in relation to the second notice, issued on 10 July 2020, which required ICRA to pay an amount in USD, ICRA also contends that this did not comply with clause 11.4 of the joint venture agreement in that the purported "Called Sum" was not invoiced by Glencore to ICRA in Dollars, as defined.[8]
[27] By reason of those matters, ICRA contends the three cash call notices were not valid notices for a Called Sum for the purposes of cl 11.3.
[28] There is no dispute that the three challenged cash call notices do not strictly meet the requirements of cl 11.3, at least in so far as the matters referred to in [25](a), (b) and (c) above are concerned. There is a dispute about the matters referred to in [25](d) and (e), as well as [26].
[29] In so far as there has been non-compliance, Glencore's case is that upon the proper construction of cl 11.3, the stipulations as to time were not of the essence and did not need to be strictly complied with for a cash call notice to be valid; the stipulations as to the form and content of the cash call notices were not preconditions required to be strictly complied with for a cash call notice to be valid; and, further, that the challenged cash call notices substantially and sufficiently complied with the requirements of cll 11.3 and 11.4 of the joint venture agreement.[9]
[30] ICRA says the stipulations as to time were of the essence and needed to be complied with in circumstances where:
[52]
(a) the provisions of the joint venture agreement as a whole contemplated such strict compliance, particularly in light of the potentially serious consequences of non-compliance with the cash call notice [a reference to cl 17]; and
[53]
(b) the framework of an Annual Programme and Budget with accurate forecasts of expenditure over the ensuing 12 month period, and cash call notices issued only on the basis of and in accordance with the timings in the Annual Programme and Budget, was necessary for ICRA to budget and provide for such payments.[10]
[54]
[31] The extent of non-compliance. It is convenient to address first the respects in which non-compliance with cl 11.3 is disputed.
[32] As noted, ICRA contends each challenged notice "is not based upon the approved Annual Programme and Budget for 2020". The basis for this contention, as pleaded, may have been the affidavit evidence of Mr Canavan, the director of ICRA, that he has been unable to reconcile "various" cash call notices with the Annual Programme and Budget.[11] Mr Canavan's evidence in cross-examination was that what he had difficulty reconciling was [some, or a] cash call notice[s] with what he called the "P and L", or profit and loss statement, in the monthly report provided by Glencore as Manager. He did not actually endeavour to reconcile the cash calls with the annual budget; rather, he tried to reconcile the costs identified in the spreadsheet attached to the cash call notices (or some of them, it is not clear) with the figures for actual accrued expenses which appeared in the monthly reports.[12] There is therefore no evidentiary basis for ICRA's contention, as pleaded, that the challenged cash call notices are not "[b]ased upon the approved Annual Programme and Budget...".
[33] However, for completeness, I record the evidence which was given about the process by which the cash call notices are prepared and checked against the monthly reports, which in turn are checked against the annual budget, which is such that there is no basis to contend there was a failure to comply with cl 11.3 in this respect in any event.
[34] The Annual Programme and Budget is prepared for the Rolleston mine in about July each year for the following year. The process involved is explained by Mr Fuller, who was the financial controller from mid-2013 up until February 2020.[13] The proposed budget for 2020 was emailed to the joint venturers at the end of September 2020.[14] As already noted, it became the approved budget by operation of cl 10.3(a).
[35] Glencore, as both Manager and sales agent, also reports regularly to the joint venturers about the operation of the mine and the joint venture. This includes providing a detailed monthly report.[15] As explained by Mr Fuller, Glencore monitors performance against the 2020 budget as part of its monthly reporting to joint venturers, in which actual and forecast expenditure is compared against and reconciled to the 2020 budget, to ensure any differences are identified as and when they arise; and actual expenditure is also reconciled with the monthly forecast figures, to enable Glencore to adjust and reforecast for following months as appropriate. Mr Fuller says this is intended to produce forecasts which are responsive and as accurate as possible, and can then be compared against cash calls made, when the cash call notices are prepared. This monthly process does not, however, affect the 2020 budget figures, as those figures are prepared for the entire 2020 calendar year, on an annualised basis.
[55]
"Stipulations as to the time at which a party was to perform a promise on his part were among the contractual stipulations which were not regarded as 'conditions precedent' if his failure to perform that promise punctually did not deprive the other party of substantially the whole benefit which it was intended that he should obtain from the contract.[30]
[56]
When the delay by one party in performing a particular promise punctually had become so prolonged as to deprive the other party of substantially the whole benefit which it was intended that he should obtain from the contract it did discharge that other party from the obligation to continue to perform any of his own promises which as yet were unperformed."[31]
[57]
[52] Consideration. There is no express provision in the joint venture agreement that the timing stipulated in cl 11.3 is essential, and neither party submitted there were any relevant surrounding circumstances to be taken into account in the construction of cl 11.3.
[53] In submitting that the stipulations in cl 11.3 as to the time ["at least five (5) days in advance of the commencement of the relevant Cash Accounting Period"] when the notice must be given, and the time frame to which the notice must relate [Cash Accounting Period] are essential, and should be construed as conditions precedent to the validity of any such notice, ICRA emphasises:
[58]
(a) the language used in cl 11.3, including words such as "will", "shall" and "must", which ICRA submits are unambiguous and demonstrate the parties intended that strict compliance was required;
[59]
(b) the context in which notices for called sums can be issued, within a strict contractual framework agreed by the parties, and as the first step in a process which can lead to the compulsory acquisition of a defaulting joint venturer's interest in the event of a failure to pay; and
[60]
(c) the purpose of cl 11.3, enabling the Manager to call for substantial sums of money, which must be paid, failing which serious consequences flow. ICRA submits there is a need for the joint venturers to know with a high degree of precision when, and how often, they will receive such notices, to which time periods they relate and in what currency they will be required to be paid.
[61]
[54] As to the first point, as United Scientific Holdings Ltd v Burnley Borough Council (at 931-934) demonstrates, the use of mandatory language (in that case, the word "shall" in rent review clauses) is not sufficient of itself to render a stipulation as to time of the essence of the contract.
[55] As to the context and purpose of cl 11.3, of particular significance is the obligation imposed on joint venturers by cl 11.2 to bear and pay for the costs, expenses and charges "incurred pursuant to the Operations", in proportion to their respective individual shares, "as at the date incurred". That is to be read with cl 8.10(b), cl 8.13(a) and cl 10.6.
[56] Clause 11.2 is the substantive provision which obliges the joint venturers to fund the operating expenses of the mine the subject of the joint venture, at the time they are incurred. As Mr Fuller says at [18] of his affidavit:
[62]
"The costs of operating the Rolleston Mine are significant and require payments to be made to employees, contractors, suppliers, government (for royalties), rail providers (which are 'take or pay'), shipping terminals (which are also 'take or pay') and other third parties. Glencore, as Manager, is in many circumstances the named contractual party for those agreements and its ability to discharge its duties as Manager is dependent on Called sums being received".
[63]
[57] Clause 11.3 provides the means by which, in a practical sense, the obligation under cl 11.2 is given effect. It is, in that sense, as Glencore submits, a machinery or facilitative provision. The purpose of the notice contemplated by cl 11.3 is to advise the joint venturers of the "estimated cash disbursements" (the costs, expenses and charges of the mining operation) which the Manager will be required to make in the next half a month; and, taking into account cash in hand, inform the joint venturers of how much cash they need to contribute, in order to satisfy their obligation under cl 11.2.
[58] The purpose of the provision is to inform the joint venturers of what they have to pay to meet their obligation under cl 11.2. It would be impractical for the Manager to call for each joint venturer's contribution to costs, expenses and charges at the time they are incurred. So cl 11.3 provides for notice of upcoming disbursements to be given, in time for the joint venturers to pay the cash required to meet those disbursements, to fund the mining operations.
[59] As it transpires, the Manager in fact provided more information than cl 11.3 strictly requires, with each of the three challenged cash call notices being accompanied by the attached spreadsheet setting out the "13 operations week rolling cashflow". By reference to that forecast, the joint venturers are informed not only of what they have to pay in the next week or so; but also what they can expect in the next few months. All that is required to be provided under cl 11.3 is the estimated cash disbursements the Manager will be required to make during the next Cash Accounting Period.
[60] So the question is, if a notice given under cl 11.3:
[64]
(a) is not in respect of a relevant Cash Accounting Period, as defined (1st to 14th, or 15th to the end of the month); and
[65]
(b) is therefore not given at least five days in advance of the commencement of such a Cash Accounting Period,
[66]
is it reasonable to conclude that it was, objectively, intended that the notice would be invalid, and of no effect, such as to impeach the right of the Manager to call in advance for payment of, and the obligation of the joint venturers to pay, what is necessary to fund the operations of the mine?
[67]
[61] In the circumstances of this case, it is difficult to see how that could be so.
[62] The two notices dated 10 July 2020:
[68]
(a) relate to the period from 13 July to 2 August 2020, which is five days longer than a Cash Accounting Period (which would be 15 July to 31 July); and
[69]
(b) were given on 10 July 2020, which is less than 5 days before the beginning of the period mentioned in the notice - but substantially more than 5 days before any of the called sum has to be paid, the earliest instalment being required on 24 July 2020.
[70]
(a) relates to the period 3 August to 23 August 2020, six days longer than a Cash Accounting Period (which would be 1 to 14 August); and
[71]
(b) was given on 31 July, which is less than 5 days before the beginning of the period mentioned - but more than 5 days before the first instalment is required to be paid, on 7 August 2020.
[72]
[64] In the words of Lord Diplock, what is the benefit that it was intended a joint venturer should obtain from the joint venture agreement, but of which it will have been deprived by its not being given a notice under cl 11.3 precisely referable to a Cash Accounting Period as defined, and therefore five days before such Cash Accounting Period? What is the detriment to a joint venturer, such as ICRA, if the period of time specified in a cash call notice is not precisely a "Cash Accounting Period" as defined (but not much longer), and therefore if the notice is not given at least five days before such a Cash Accounting Period (but is given with more than five days' notice before payment is required)? In the circumstances of this case, it is also difficult to identify any detriment.
[65] There would be a point at which a failure to strictly comply could be said to deprive the other party of substantially the whole benefit which it was intended they should obtain from the contract - for example, if no notice was given for a lengthy period of time, and then a notice was given calling for a substantial sum, with insufficient time to pay; or if a notice was given calling for cash a six month period (cf cl 11.7).
[66] But in the circumstances of this case, the notices are given regularly (as will be discussed below), covering back to back periods fairly close to a Cash Accounting Period and giving ample (in terms of what cl 11.3 requires) notice of the obligation to pay. The joint venturer is given notice of the upcoming cash disbursements that the Manager will be required to make, in a relatively short period of just over two weeks; as well as the additional information regarding forecast expenditure (and estimates of cash calls) for the next 13 weeks; and the joint venturer has time to pay the cash called, by reference to the nominated instalments. The purpose of cl 11.3 is met.
[67] I am not persuaded that the time, or time frame, stipulation in cl 11.3 should be regarded as essential. The giving of notices which do not strictly comply with cl 11.3 may be a breach of cl 11.3, which may sound in damages (although it is difficult to see what damage could have been suffered in the circumstances of this case). But is not such, in my view, as to lead to the conclusion that the notices are invalid.
[68] The fact that there is a process to enforce a failure to pay a called sum - which, at the extreme, may result in the acquisition of the defaulting joint venturer's interest - does not provide a contra-indication to displace the presumption that strict adherence to the time, and time frame, stipulations in cl 11.3 is not essential. That process can only begin if there is a failure to pay, which persists for 14 days after the due date, and after the giving of a further notice, and with the benefit of a 60 day period during which the default may still be remedied.
[73]
Is ICRA estopped from asserting the Cash Call Notices are invalid?
[74]
[71] Glencore argued, alternatively, that ICRA is, in any event, estopped from contending the challenged cash call notices are invalid on the basis either of a representation, arising from its conduct in paying without complaint strictly non-compliant cash call notices over many years (promissory estoppel); or alternatively, on the basis of a common assumption between Glencore and ICRA that strictly non-compliant cash call notices were nevertheless a valid means of calling for the funds required (estoppel by convention). A further alternative sought relief on the basis ICRA's conduct was misleading or deceptive.
[72] In light of my conclusion that the challenged notices were not invalid, it is not necessary to deal with these alternatives.
[73] However, in case a different view be taken of the construction of cl 11.3, I will deal with the estoppel by convention case, as in my view this is a very clear case of such an estoppel.
[74] Factual context. ICRA has been a participant in the Rolleston joint venture since it began in 2004, although its ownership changed in February 2019, when its parent company was acquired by Winfield Energy Pty Ltd from Itochu Minerals & Energy of Australia Pty Ltd (Itochu).
[75] In the period from January 2019 (immediately before Winfield acquired ICRA) to 26 June 2020, 51 cash call notices were issued by Glencore to ICRA. Each of them was paid by ICRA, without any complaint about the notices not complying with cl 11.3 of the joint venture agreement in the manner now alleged (or at all).[32] As is clear from the table in [73] of Mr Adamski's affidavit, only four of these notices (those issued on 28 June and 12 July 2019 and on 29 May 2020) relate to a Cash Accounting Period as defined; those are not issued at least five days before the beginning of that Cash Accounting Period (but are issued more than 5 days before any payment is due); a number call for payment in USD; and all provide for payments in two instalments.
[76] More broadly, the evidence establishes that from June 2014 to June 2020 some 188[33] cash call notices were issued, many of which did not strictly comply with the requirements of cl 11.3 (either in terms of the accounting period referred to, the date of issue, the provision for payment in USD or payment by two or more instalments) and which were paid by ICRA, without complaint about any of those matters.
[75]
"During my employment with ITOCHU, I was aware on occasion, of Glencore having issued a cash call notice other than strictly in accordance with the joint venture agreement, for example, where the Cash Accounting Period was a three week period. On at least one of those occasions [I] raised that non-compliance with my superiors, but was told not to raise any issue with Glencore about it because ITOCHU did not wish to 'rock the boat' with Glencore. At the time, ITOCHU was in a number of joint ventures with Glencore; not just the Rolleston mine."
[76]
[79] Mr Kua could not recall precisely when he recognised the cash call notices were not strictly in accordance with the joint venture agreement, although he thought perhaps around the "WICET time", 2016 or 2017.[37] Mr Kua said this occurred on more than one occasion, and on each occasion he raised it with the general manager of Itochu, who was also a director of ICRA, and on each occasion he was told not to raise any issue with Glencore. So he continued to pay the cash call notices whether or not they strictly were in accordance with the joint venture agreement. He agreed that was a conscious decision by his superiors, and that he acted on that instruction - the effect of which was to allow the cash call notices to be issued in a form which did not strictly comply with the joint venture agreement, and not to ask for them to be in a different form which would be strictly in accordance with the agreement.[38]
[80] Winfield acquired ICRA from Itochu in February 2019. Mr Kua ceased his involvement for a period of time during 2019, but then commenced employment with ICRA directly, as its chief financial officer, in about October 2019.[39] His role in this regard again included receiving and reviewing cash call notices.
[81] Mr Kua then says, at [10] and [11] of his affidavit:
[77]
"After I started working for ICRA under the control of Winfield Group Investments, in my capacity as Chief Financial Officer, I had responsibility for dealing with the Glencore cash call notices, including reviewing the sums claimed.
[78]
As ICRA was a private company with limited resources, I did not give attention to the same compliance details as when I was employed by ITOCHU. Once I started with ICRA under the control of Winfield Group, I never re-visited or re-considered the issue of whether the cash call notices were in compliance with the joint venture agreement, until it was brought to my attention by ICRA's lawyers in around August 2020 that some cash call notices might be irregular." [underlining added]
[79]
[82] Mr Kua's oral evidence was that he "just never turned his mind" to whether the cash call notices complied. What the relevance of ICRA being a company with limited resources is, to the ability of Mr Kua, its chief financial officer, to review cash call notices, was not clear. He plainly spent time analysing the substance of the figures in the accompanying 13 operations week rolling cashflow spreadsheet, and corresponding with Glencore about that.[40] I reject, as implausible, that he did this merely for his own information, as opposed to as part of his role in reviewing the cash calls received, for the purpose of being able to advise Mr Canavan and Mr Hammond if they were appropriate to pay. Mr Hammond confirms that was part of Mr Kua's role.
[83] In any event, the requirements for cash call notices, under cl 11.3, have not changed as the joint venture agreement has been amended and restated over time. Accordingly, I infer that Mr Kua was just as aware after October 2019 that the cash call notices did not strictly comply with the joint venture agreement, as he was prior to February 2019, even if he did not "re-visit" or "re-consider" the issue. It does not appear, having regard to the evidence of Mr Hammond and Mr Canavan, that he mentioned this to them.
[84] Mr Kua never had any communication or dealings with Glencore about whether the cash call notices complied with the joint venture agreement, whilst employed by Itochu or since being employed by ICRA. He agreed that both ICRA and Glencore, to his observation, had conducted their dealings on the basis that the cash call notices in the form issued by Glencore were appropriate means of raising cash to fund the operations of the mine.[41]
[85] Mr Hammond was a director of ICRA from February 2019, when Winfield acquired it, until he resigned in July 2020. It was part of his role to authorise payment of cash call notices issued by Glencore, which he did as part of an internal system set up as between Mr Canavan, Mr Kua and himself. This involved Mr Kua checking the calculations and either Mr Kua or Mr Canavan approving the payment, which was then provided to Mr Hammond for final checking and approval, and authorising payment from ICRA's bank account(s) to Glencore's account(s).
[86] In his affidavit, Mr Hammond says he did not otherwise review the cash call notices, in terms of whether they complied with the joint venture agreement or otherwise, and did not turn his mind to that. However, he did receive (by email) and look at the cash call notices, and accompanying documents, and was aware that the accounting period nominated in each notice varied and was seldom the 1st to the 14th (or 15th) of the month; he knew the cash calls provided for payments by instalments, a week apart; and knew that they called for payments sometimes in USD and sometimes in AUD. Each of ICRA and Glencore had separate bank accounts in USD and AUD. Approval of payment by ICRA would involve identifying an AUD amount to be paid from an ICRA AUD account to a Glencore AUD account; and similarly for the USD amount.
[80]
"From about May 2016 the Cash Call periods differed. For example this occurred where there was a 5 week month and the accountants input amounts for a two week period which extended over the end of the month and the start of the following month which meant that subsequent Cash Call Notices used slightly different time periods. Over time the Cash Call periods varied as to start and end dates, but there were generally two cash call notices per month and calls generally made for payment of two instalments a week apart."[52] [underlining added]
[81]
[91] Mr Fuller's oral evidence was consistent, describing the "key requirement" as being that there would be two cash calls a month, one in the first half and one in the second half (which sometimes might result in a notice being issued for a three week period), with the notices going out on a Friday, for the funds to be paid the next Friday.[53]
[92] ICRA raised no issue with Mr Fuller about the form of the cash call notices in the period from 2014 to February 2020, and he was not otherwise aware of any question being raised in this regard, prior to the issue being raised in the context of these proceedings in August 2020.[54] Until the 10 July 2020 cash call notice, all cash call notices issued were paid by ICRA without objection.[55]
[93] Mr Fuller says, at [44] of his affidavit, that he directed the preparation of cash call notices in the manner described in his affidavit in the belief that cash call notices prepared and issued by Glencore in this way were accepted and acceptable by ICRA.
[94] Mr Adamski says that, when he became financial controller, in February 2020, he worked with Mr Fuller to understand and plan for the issue of cash call notices in accordance with the practices described by Mr Fuller in his affidavit. Mr Adamski was familiar with those practices because he had, since 2014, worked as financial controller of other Glencore mines in which its joint venture partners were Sumitomo and ICRA Rolleston/Itochu (Newlands/Collinsville and Oaky creek) and the joint venture arrangements relating to cash calls in respect of those mines were almost identical to the cash call requirements in relation to the Rolleston mine.[56]
[95] Mr Adamski says, at [13] of his affidavit, that he has directed the preparation and issue of cash call notices, in the manner described in [33]-[40] of Mr Fuller's affidavit, in the belief that cash call notices prepared and issued by Glencore in this way were accepted by and acceptable to ICRA Rolleston.
[96] Mr Adamski was not aware of any objections made by ICRA in relation to the form of cash call notices, until the issue was raised in this proceeding. He also confirms that, until recently, the cash calls were paid by ICRA.[57]
[82]
"Such a form of estoppel is not founded on a representation. It is based on the conduct of relations between parties.[60] To establish a common law estoppel or estoppel by convention, a plaintiff must establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) the departure from the assumption will occasion detriment to the plaintiff.[61]"
"The analogies and distinctions between contractual variation and conventional estoppel appear from the observations of Lord Denning MR in Amalgamated Investment and Property Co Limited v Texas Commerce International Bank Limited (in liq)[1982] QB 84, 121, to the effect that if parties to a contract by their course of dealing put a particular interpretation on its terms, on the faith of which each to the knowledge of the other acted and conducted their mutual affairs, they are bound by that interpretation just as much as if they had recorded it as a variation of the contract. With reference to Grundt v Great Boulder Proprietary Gold Mines, his Lordship explained that such parties had by their course of dealing adopted a conventional basis for the governance of their relations and were bound by it - because, having regard to the dealings between the parties, it would be unjust to allow either to insist on the strict interpretation of the original terms. Nor is it necessary that the parties, in adopting their assumption, have adverted to the express terms of the contract. As Lord Denning MR said in Amalgamated Property Co v Texas Bank [at 121]:
[85]
'There is no need to inquire whether their particular interpretation is correct or not - or whether they were mistaken or not - or whether they had in mind the original terms or not. Suffice it that they have, by their course of dealing, put their own interpretation on their contract, and cannot be allowed to go back on it.'
[86]
Thus whereas an intention to vary the original terms is necessary to support a contractual variation, no advertence to the original terms is necessary to found a conventional estoppel having the same effect. An estoppel by convention depends upon the adoption by the parties of an assumption as to the conventional basis of their relationship."
[87]
"... conventional estoppel, a creature of the common law, is focussed on the consensual basis of the parties' relationship: it operates when both parties have adopted the same assumption as the basis of the parties' relationship, often without appreciating that any departure from the strict legal position is involved, so as to hold both parties to their common understanding."
[88]
[102] In Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6)(2015) 329 ALR 1; [2015] FCA 825 at [758]- [779] Edelman J (then of the Federal Court) clarified some of the elements as summarised in Moratic (and adopted in Browning). Relevantly, Edelman J observed that:
[89]
(a) the requirement for an assumption as to the terms of a legal relationship assumes an existing factual or legal state of affairs rather than one concerning future rights or conduct.[62] His Honour described this as the existing orthodoxy, but referred to academic analysis giving strong reasons to doubt that orthodoxy;[63]
[90]
(b) although not expressly articulated in the summary of elements, there must be a connecting link in the third element, between some action or inaction taken and the common assumption; and in the fifth element, between the action or inaction taken and the detriment that will be suffered if there is a departure from the common assumption.[64] As his Honour said, at [772]:
[91]
"In many cases both connecting links will be established by a plaintiff proving that (i) she relied upon the common assumption to act in a way in which she would not otherwise have done, and (ii) if there were departure from the common assumption, those acts would cause detriment that would not otherwise have occurred."
[92]
[103] The assumed or assented to factual (and legal) state of affairs pleaded by Glencore is that:
[93]
(a) Glencore as Manager could issue cash call notices pursuant to cl 11.3 of the joint venture agreement to ICRA:
[94]
(i) with some or all of the amount called for being expressed in USD;
[95]
(ii) other than at least 5 days in advance of the commencement of the accounting period;
[96]
(iii) with the accounting period not being the "Cash Accounting Periods" provided for in the joint venture agreement;
[97]
(iv) other than strictly in accordance with the timeframes or other requirements set out in cl 11.3;
[98]
(b) ICRA did not and would not require strict compliance with the dates for delivery of cash call notices;
[99]
(c) ICRA did not and would not require cash call notices to relate only to the "Cash Accounting Periods" identified in the joint venture agreement;
[100]
(d) ICRA did not and would not require cash call notices being issued only in AUD; and
[101]
(e) ICRA did not and would not contend that a cash call notice was invalid by reason of a cash call notice being issued:
[102]
(i) with some or all of the amount being expressed in USD;
[103]
(ii) other than at least 5 days in advance of the commencement of the accounting period;
[104]
(iii) with the accounting period not being the "Cash Accounting Periods" provided for in the joint venture agreement;
[105]
(iv) other than strictly in accordance with the timeframes or other requirements set out in cl 11.3.[65]
[106]
[104] ICRA submitted that estoppel by convention could not arise in this case, because:
[107]
(a) the alleged common assumption is as to future conduct;
[108]
(b) the entire agreement (cl 28.2) and no waiver (cl 28.4) provisions in the joint venture agreement preclude reliance on an estoppel by convention;[66] and
[109]
(c) in any event, there was no reliance by Glencore.
[110]
[105] As to [104](a), this is not a case of a representation by ICRA to Glencore only as to future conduct (although it does include such a representation). The assumption as pleaded (and, as I accept below, proved) by Glencore, was as to an existing factual state of affairs - that the form of notice issued by Glencore calling for cash payments was an appropriate and valid form for the issue of cash call notices (despite not strictly complying with the terms of cl 11.3), which it was appropriate for ICRA to pay to meet its contractual obligation.
[106] As to [104](b), with due respect to Einstein J in Waste Recycling & Processing Corporation v Global Renewables Eastern Creek Pty Ltd[2009] NSWSC 453 at [77], who decided otherwise, I am persuaded that both as a matter of principle, and having regard to authority, neither the entire agreement clause nor the no waiver clause in the joint venture agreement preclude an estoppel by convention arising. The estoppel arises from a course of dealing after the contract ha[67]been made.67 The foundation of it is that since the contract was made, the parties have acted on an assumed state of affairs, which is inconsistent with the contractual position. Having, by their course of dealing, adopted a conventional basis for the governance of their relations, the parties are bound by it just as much as if they had recorded it as a variation of the contract - because it would be unjust to allow either to insist on the strict interpretation of the original terms when, having regard to the dealings between the parties, it would be inequitab[68] to do so.68 In this context, the original terms must include general provisions such as an entire agreement or no waiver clause. To conclude otherwise would be to undermine the policy of the law, which is that contracting parties will be bound, as a matter of fairness and justice, by the manner in which they conduct their relations after the contract has been made. As Lander J said in at "[t]he very purpose of the erection of an estoppel is to preclude the party against whom the estoppel is claimed relying upon the express terms of the contract: " In it was held that neither the entire agreement nor the no waiver clause, precluded an estoppel by conventn arising.69
[111]
[118] For the reasons set out above, ICRA's application for declaratory relief the subject of paragraph 3 of the application filed on 13 August 2020 is dismissed.
[119] I anticipate that it will be appropriate to order that the defendant pay the plaintiff's costs of the hearing of paragraph 3 of the application, but will give the parties the opportunity to be heard as to this, at the time of delivering judgment.
[112]
[1] Canavan (CFI 3-5), at pp 67, 70, 77, 88 (cl 3.1) and 177-238.
[28] See s 62 of the Property Law Act1974 (Qld) ("Stipulations in contracts, as to time or otherwise, which under rules of equity are not deemed to be or to have become of the essence of the contract, shall be construed and have effect at law under rules of equity."); United Scientific Holdings Ltd v Burnley Borough Council[1978] AC 904 at 927; Elcos Australia Pty Ltd v James Hardie Building Services & Technologies Ltd (1999) 15 BCL 340 at [29] per Chesterman J; Callide Power Management Pty Ltd & Ors v Callide Coalfields (Sales) Pty Ltd & Ors (No 5)[2016] QSC 199 at [148]- [149] per Flanagan J.
[126]
[29]Elcos Australia Pty Ltd v James Hardie Building Services & Technologies Ltd (1999) 15 BCL 340 at [29] per Chesterman J.
[127]
[30] See also Callide Power Management Pty Ltd & Ors v Callide Coalfields (Sales) Pty Ltd & Ors (No 5)[2016] QSC 199 at [150].
[128]
[32] Adamski (CFI 9) at [72]-[74]; see also [10] of the third amended points of defence, admitted in [7(a)] of the points of response.
[129]
[33] This is the figure referred to in Glencore's submissions at [27], not controverted by ICRA.
[130]
[34] See Adamski (CFI 9) at [72]; [10] and annexure A to the third amended points of defence, which is the subject of a non-admission in [7(c)] of the points of response. There was no challenge to the accuracy of annexure A to the third amended points of defence.
[49] Canavan (CFI 38) at [5], [6] and [10]; as to the injunction application, see Rolleston Coal Holdings Pty Ltd v ICRA Rolleston Pty Ltd[2020] QSC 331 at [15] and following.
[134]
[51] Fuller (CFI 25) at [34], as clarified by exhibit 9; Fuller, T 2-65.
[135]
[52] Fuller (CFI 25) at [35], as corrected by exhibit 9.
[62] See Scottish & Newcastle Plc v Lancashire Mortgage Corporation Ltd[2007] EWCA Civ 684 at [62] per Mummery LJ.
[141]
[65] See [11] (the pleaded representations) and [12] (the pleaded assumptions) of the third amended points of defence and counterclaim.
[142]
[66] Relying on the decision of Einstein J in Waste Recycling & Processing Corporation v Global Renewables Eastern Creek Pty Ltd [2009] NSWSC 453 at [77].
[143]
[67] Cf Waste Recycling & Processing Corporation v Global Renewables Eastern Creek Pty Ltd[2009] NSWSC 453 at [77(ii)]: Einstein J's reference to an "entire agreement" clause as precluding estoppel by convention was by reference to pre-contractual conduct. That such conduct could give rise to an estoppel by convention in any event is inconsistent with principle.
[70]Commonwealth v Verwayen (1990) 170 CLR 394 at 445 per Deane J.
[147]
[71] See cl 1 (definition of "original document"), cl 2, cl 3.1 of the Rolleston Joint Venture Agreement Amending and Third Restatement Deed (at p 70 of the exhibits to Canavan (CFI 3-5) and recitals E, F and G (at p 179) and cl 3.1(b) (at p 190) of the joint venture agreement.
Parties
Applicant/Plaintiff:
Rolleston Coal Holdings Pty Ltd
Respondent/Defendant:
ICRA Rolleston Pty Ltd [2020] QSC 352
Cases Cited (9)
(1990) 170 CLR 394
(1986) 160 CLR 226
(2017) 261 CLR 544
(2014) 251 CLR 640
(2015) 329 ALR 1
(2015) 256 CLR 104
(2005) 65 NSWLR 300
(1988) 164 CLR 387
(1983) 152 CLR 406
[6] By paragraph 3 of an interlocutory application filed by ICRA on 13 August 2020, ICRA sought a declaration that "the documents described as Cash Call Notices dated 10 July 2020 (two) and 31 July 2020 are not valid notices for Called Sums in accordance with clause 11.3 of the Joint Venture Agreement".
[7] On 21 August 2020, orders were made for the separate hearing of the relief sought in paragraph 3 of that application, which is the subject of this decision.
[36] Mr Fuller explains the process for preparing cash call notices during the time that he was financial controller in [19] of his affidavit.[18] As part of the process, the estimated expenditure contained in the input spreadsheet (exhibit 1A) and 13 week rolling forecast is compared to the forecasts contained in the monthly reports, which in turn have been reconciled to the 2020 budget, "to reconcile to and track performance against the 2020 Budget so that Glencore as Manager makes calls consistent with it".[19]
[37] Mr Fuller explained in his oral evidence that it would never be possible to reconcile the spreadsheet attached to the cash call notice with the annual budget, because the budget is prepared annually, in September the prior year, and it is fixed. The cash call is for the period of the following two weeks (or so) and addresses expenditure which will be required to be paid in that period. He explained that, as the year progresses, each month, the forecast of expenditure is updated to provide a more accurate picture. That is reconciled with the annual budget, to ensure what is occurring as the year progresses is within the permitted variances and, if there are any differences, to explain that to the joint venturers and seek approval if necessary. The cash calls are reconciled with the forecasts in the monthly reports, to ensure they are reasonable and within expectations. But even in that respect there are differences, because the monthly reports are on an accruals basis, and the cash calls are on a cash flow basis. There is no direct reconciliation between the cash calls and the annual budget, because that would not be possible. However, as described by Mr Fuller, the operational expenditure is checked against the budget on a regular basis.[20]
[38] Mr Adamski took over as financial controller in February 2020. The process he used for preparing cash call notices was the same as outlined in [19] of Mr Fuller's affidavit.[21]
[39] On the basis of the evidence it can be said that the process undertaken by the Manager, under cl 11.3 is "[b]ased upon [the] approved Annual Programme and Budget".
[40] ICRA also contends each challenged notice "does not show on its face that they were prepared in accordance with instructions from the Management Committee". There is no requirement, under cl 11.3, for the notice to do so.
[41] As to the complaint about one of the notices calling for payment in USD, Mr Fuller explains that the reason for this arose in late 2016, when Glencore, as Manager, entered into the Take or Pay Agreement for the WICET terminal, on behalf of the joint venture, and became liable to pay WICET take or pay charges on a full tariff basis. These payments, which are significant, are invoiced and payable to WICET in USD. The foreign exchange fees which Glencore would have to pay to convert called sums paid in AUD to USD, to pay the WICET charges, would increase the amount of the sums called from joint venturers. So in January 2017, Glencore sent an email to the joint venturers, attaching a cash call notice dated 23 January 2017, and advising that Glencore proposed to make cash calls in USD where payments were due to WICET. Sumisho responded, and there was a further exchange between those parties. But no response or query was received from or made by ICRA. Both ICRA and Sumisho paid the USD cash call without objection, and continued to do so. No issue was raised, until in the context of this proceeding in August 2020.[22]
[42] Mr Kua is currently the chief financial officer of ICRA. He was previously employed by Itochu Minerals Energy of Australia Pty Ltd, the former owner of ICRA, and from about June 2014 was assistant chief financial officer, primarily responsible for administering the cash call notices issued by Glencore to Itochu in relation to a number of joint ventures, including the Rolleston mine. At [6] of his affidavit, Mr Kua says he recalls receiving the correspondence about the payments to be made in USD, but says he never responded to confirm Itochu's agreement or otherwise. He does not say why. But in any event, Mr Kua also confirms that after that time, Glencore issued cash call notices to Itochu in respect of WICET payments in USD and, on behalf of Itochu, he paid the amounts and never raised any complaint about that.[23]
[43] In the circumstances of this case the fact that one of the notices called for payment of an instalment in USD does not mean the notice failed to comply with the requirements of cll 11.3 and 11.4, such that it could be said to be invalid. Firstly, the spreadsheet which accompanied the cash call notice identified the called sums in AUD, and those responsible for approving payment of the called sums by ICRA understood that the USD amount called for on the face of the notice was referrable to the AUD amount identified in the accompanying spreadsheet.[24] It is clear on the evidence that the cash call notice was sufficiently clear and unambiguous to leave the recipient in no doubt as to what was required.[25] Accordingly, for the purposes of cl 11.4 it can be said that called sums were invoiced by the Manager to the joint venturers in Dollars, as defined.
[44] In any event, as cl 11.4 contemplates, the parties otherwise agreed to payment of part of the called sums in USD. Such agreement is to be inferred from the conduct of ICRA in continuing to pay instalments called for in USD, after Glencore expressly raised the matter in 2017.
[45] It is otherwise accepted that the challenged notices did not refer to a Cash Accounting Period, as defined; and therefore were not issued at least five days before a Cash Accounting Period. I will deal with these matters below.
[46] Another respect in which the form of the challenged notices differs from what is set out in cl 11.3 is the provision for payment of weekly instalments (as opposed to one payment, for each Cash Accounting Period). That was a change introduced in 2014, and the subject of agreement, on the basis that there would continue to be two cash calls per month, but the called funds would be paid in weekly instalments, in order to minimise surplus funds sitting in the joint venture bank account.[26]
[47] Legal principles. The meaning of the terms of a commercial contract is to be determined objectively, by what a reasonable businessperson would have understood the terms to mean, having regard to the known surrounding circumstances and the commercial purpose and objects to be achieved by it. The court is entitled to approach the task of construction of a contractual clause on the basis that the parties intended to produce a commercial result, one which makes commercial sense.[27] A commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience.
[48] In this case, there is no dispute about the meaning of the words used in cl 11.3 per se - they are clear and unambiguous. The question is whether, as a matter of construction of cl 11.3, in the context of the joint venture agreement as a whole, strict compliance with the provisions of cl 11.3, in terms of the time when a cash call notice is to be given, and the form and content of a cash call notice, is a condition precedent to the validity of such a notice; or whether substantial compliance is sufficient.
[49] In that regard, the following principles are also relevant. As a general rule, contractual stipulations as to the time by which various steps should be taken by the parties are not essential, unless equity would have regarded them as such.[28] To have that character the parties must agree that time is essential, or there must be something about the subject matter of the contract or the circumstances surrounding its making which shows that time is to be essential or it must appear by necessary implication from other terms that the parties regard a time as essential.[29]
[50] More broadly, the question is whether, on a proper construction, cl 11.3 establishes strict conditions precedent to the right of Glencore, as Manager, to make a call on the joint venturers to provide the cash necessary to fund the operations of the mine: is strict compliance with the requirements of a cash call notice under cl 11.3 a condition of the validity of such a notice, such that a failure to strictly comply impeaches the Manager's right to call for the cash and the joint venturer's obligation to pay the cash called?
[51] In United Scientific Holdings Ltd v Burnley Borough Council[1978] AC 904 at 928 Lord Diplock, in summarising a series of principles, observed that:
[69] I do not accept the submission on behalf of ICRA that strict compliance with the time, or time frame, stipulation in cl 11.3 is essential to avoid "commercial confusion"; nor that strict compliance is required because the notice is one which can unilaterally affect the rights of the parties to the contract (cf AGL Sales (Qld) Pty Ltd v Dawson Sales Pty Ltd & Ors[2009] QCA 262 at [111]). The notice contemplated by cl 11.3 is the practical means for the Manager to call for the joint venturers to contribute the cash required to fund the mining operations on a regular basis. Objectively, there is no basis to conclude commercial confusion could ensue in the absence of strict compliance - a matter borne out by the evidence, discussed below. In addition, the notice does not unilaterally affect any party's rights. The fact that the contract provides a mechanism for dealing with default, in the event a joint venturer fails to pay the called sum, does not support a contrary conclusion.
[70] I therefore find that the stipulations as to time, and time frame, of cash call notices under cl 11.3 of the joint venture agreement were not of the essence and did not need to be strictly complied with for a cash call notice to be valid; and that the challenged cash call notices substantially and sufficiently complied with the requirements of cll 11.3 and 11.4 of the joint venture agreement.
[77] As already mentioned, Mr Kua, who is the chief financial officer of ICRA, was previously employed by Itochu, from about 2004. From about June 2014 he was the assistant chief financial officer of Itochu and in that role he was "primarily responsible for administering the cash call notices issued by Glencore" to Itochu in relation to a number of joint ventures, including the Rolleston joint venture.[35]
[78] Mr Kua says that during his employment with Itochu he was aware of the obligations under the then versions of the joint venture agreement for the issue of cash call notices. He also says that whether cash call notices complied strictly with the joint venture agreement was a part of the compliance obligations within Itochu for which he was responsible.[36] In [9] of his affidavit, Mr Kua says:
[87] Mr Hammond accepted that, for the whole of the time that he was a director, he assumed and believed that, in terms of form, the cash call notices that he received were proper notices for Glencore to issue and (subject to queries raised about particular costs from time to time) for ICRA to pay.[45] Even where there was a particular cost item(s) which ICRA queried or disputed, the process adopted, during the time Mr Hammond was a director, was that the cash call notice would be paid, and then the complaint or question would be raised, and be the subject of negotiation and correction, if resolved, in a future cash call notice. But there was no complaint or objection raised at any time with Glencore about the form of the cash call notice, in terms of the accounting periods identified; the date of issue; calling for payment by instalments; or calling for some instalments to be paid in USD.[46]
[88] Mr Canavan, another (now the sole) director of ICRA, also says that he did not turn his mind to the specific manner or on what terms cash call notices were issued under the joint venture agreement, although he was aware, from reading the joint venture agreement that they would be issued bi-monthly.[47] He did not compare the cash call notices received with cl 11.3 of the joint venture agreement, to see whether they complied.[48] He knew cash calls were the mechanism to enable ICRA to meet its obligation to pay its share of the costs of the mining operations, but did not turn his mind to whether the notices were issued in accordance with the dates and for the correct periods in the joint venture agreement. It was not something he was aware of until it was raised with him by his legal team, prior to the injunction application which was heard on 21 August 2020.[49]
[89] Mr Canavan said at times enquiries were made with Glencore in relation to particular items of expense shown in the spreadsheet attached to the cash call notices. But apart from that type of enquiry, he proceeded on the basis that, in terms of the form of the notices, the cash call notices ICRA received were the proper means by which Glencore as Manager could make a call for the cash it needed to conduct the operations of the mine, and that it was proper for ICRA to pay.[50]
[90] Mr Fuller was responsible for directing the preparation of cash calls in the period from about August 2014 to about April 2016. He says in that time the periods used to determine cash calls was typically the 1st to the 15th of the month, and then the 16th to the end of the month, with the called sums being payable in weekly instalments each Friday of the month.[51] Mr Fuller says that:
[97] In his oral evidence, Mr Adamski said it came as a surprise to him, in August 2020, when he was told that ICRA complained about the form of the cash call notices; and agreed that was because he had never turned his mind to whether it was acceptable to ICRA or not.[58] I accept that there is no inconsistency between what appears in [13] of Mr Adamski's affidavit, and his oral evidence - because what Mr Adamski says in his affidavit is that, since he took over from Mr Fuller, he directed that cash call notices be prepared and issued by Glencore in the same way as they had been for many years before, believing that was accepted by and acceptable to ICRA; and it was a surprise to him when the complaint was made, because he did not turn his mind to it again. I did not form the view that there was any reason to doubt the truthfulness of Mr Adamski's evidence; and in any event these two aspects of his evidence are reconcilable.
[98] Both Mr Fuller and Mr Adamski say that if they had been told or become aware that ICRA objected to the cash call notices being issued in the way they were, and insisted on strict compliance with cl 11.3 and cl 11.4, they would have, first, sought to discuss the issue with ICRA; and, if agreement could not be reached, would have directed that the notices be prepared in accordance with those clauses, to ensure Glencore as Manager continued to have the funds necessary to operate the mine.[59]
[99] Legal principles. The elements of estoppel by convention were summarised by Applegarth J (with whom Gotterson and Morrison JJA agreed) in Browning v ACN 149 351 413 Pty Ltd (in liq) (formerly known as Enviren Constructions Pty Ltd)[2016] QCA 169 at [42] as follows:
[107] As a matter of fact, for the reasons discussed below, I do not accept the submission referred to in [104](c) above.
[108] Consideration. On the evidence, I find that Glencore did adopt an assumption that it could issue cash call notices to ICRA under cl 11.3 in the form in which it did (generally, twice per month, calling for the cash required in the next two week period, to be paid by instalments a week apart, sometimes in USD because of the WICET arrangement), even if that did not strictly comply with the timeframes or other requirements set out in cl 11.3, and that ICRA did not and would not contend that such a notice was invalid as a means of Glencore, as Manager, calling for payment by ICRA and the other joint venturers of the cash required to fund the mining operations. That same assumption was adopted by ICRA - that is, that the cash call notices issued by Glencore were an appropriate means by which Glencore could call for the cash required on a regular basis, and appropriate for ICRA to pay.
[109] The course of dealing between the parties, over a six year period from June 2014 to June 2016, of Glencore issuing and ICRA paying cash calls, without complaint as to matters of form, strongly supports the finding that, in the words of Lord Denning MR, the parties by their course of dealing adopted a "conventional basis" for the governance of their relations in this respect.
[110] As the passage quoted from Moratic demonstrates, the fact that neither Mr Hammond nor Mr Canavan, nor for that matter Mr Fuller or Mr Adamski, turned their minds specifically to the question whether the notices complied strictly with cl 11.3 does not matter.
[111] I further find that both parties knew, or ought to have known, the other was acting on that basis. That is the clear evidence of Mr Fuller and Mr Adamski on behalf of Glencore. In so far as ICRA is concerned, Mr Kua actually knew that the cash call notices did not strictly comply with the requirements of cl 11.3 and, on the basis of instructions from his superiors, prior to the change in ownership, consciously decided not to make anything of this, but to continue paying the notices. He also chose to, effectively, ignore the request to issue notices requiring part or all of the payment to be in USD, but again to continue paying, including in USD when that was the form of the call. As I have found, his knowledge continued, when he was employed directly by ICRA, after the change of ownership. But in any event, constructive knowledge is sufficient for this purpose.[70] ICRA must (or at least ought to) have known that in paying cash calls as they were issued, and in the currency in which they were issued, Glencore would assume that notices issued for that purpose were regarded by ICRA as valid. These were not trifling sums: according to Glencore's submissions (not controverted by ICRA), in the period from February 2019 to June 2020 ICRA received and paid cash calls for an amount totalling $192.6 million.
[112] I do not accept the submission for ICRA that Glencore did what it did purely as a matter of its own convenience, without regard to anything done by ICRA (that is, that there was no reliance by Glencore). On the evidence what mattered to those within Glencore with responsibility for preparing and issuing cash call notices was to ensure Glencore had the funds it needed to conduct the mine. It stands to reason that if Glencore had any reason to believe ICRA regarded the form of the notices as rendering the right to call for, and the obligation to pay, invalid, it would have acted differently. That it did not act differently, and continued to issue cash call notices for the six years referred to in the evidence - many of which did not strictly comply with cl 11.3 - was, I accept, because it believed and assumed - as Mr Fuller and Mr Adamski say - that the manner and form in which the cash call notices were being issued was acceptable to ICRA. That was a reasonable assumption, encouraged by the fact of ICRA continuing over the course of many years to pay the very substantial called sums in response to the notices issued.
[113] It can also be readily accepted that Glencore will suffer a detriment if ICRA was now permitted to depart from the common assumption, because of the need for Glencore to fund ICRA's share of the challenged cash calls. Against the background of the six year course of dealing between the parties, it would be unjust to allow ICRA to insist on a strict interpretation of cl 11.3 of the joint venture agreement, such as to impeach the right of Glencore, as Manager, to call for the cash required to fund the mining operations, because of the form of the challenged cash call notices.
[114] The sensible thing for ICRA to have done, having become aware (by its lawyers) that the cash call notices did not strictly comply with cl 11.3, was to advise Glencore of that, so that the matter could be remedied in future (or, as Mr Fuller and Mr Adamski suggest, another negotiated solution could be arrived at).
[115] There was also a submission on behalf of ICRA that, as the joint venture agreement was restated in March 2017, conduct prior to that date was not relevant to the estoppel by convention case. I reject that submission, as it is clear that there was not an entirely new agreement entered into in March 2017; rather the amendment and continuation of the original agreement entered into in 2004.[71] Consequently, I accept that it is relevant to have regard to the fact of the issue, and payment, of cash call notices from 2014 onwards. But in any event, the conduct from February 2019 onwards is sufficient to support the conclusion I have reached.
[116] It follows that, even if I had reached a different view about the proper construction of cl 11.3, I would have found that ICRA is estopped from now contending that the three challenged cash calls notices are invalid.
[117] Given the conclusions I have reached, firstly, on the construction issue and, secondly, in relation to conventional estoppel, it is unnecessary to address the remaining matters (promissory estoppel and misleading or deceptive conduct).