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[2020] QCA 289
General information, not legal advice.
Court of Appeal (Qld)
2020-12-15
Fraser and Philippides JJA and Crow J
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Source: Queensland Judgments (Supreme Court Library Queensland) (www.queenslandjudgments.com.au). Converted to plain text by ZoeLaw. Not the official version.
SUPREME COURT OF QUEENSLAND
CITATION: Wagners Cement Pty Ltd & Anor v Boral Resources (Qld) Pty Limited & Anor [2020] QCA 289
PARTIES: WAGNERS CEMENT PTY LTD / ACN 126 029 481 / (first appellant) / WAGNERS QUEENSLAND PTY LTD / ACN 122 170 745 / (second appellant) / v / BORAL RESOURCES (QLD) PTY LIMITED / ACN 009 671 809 / (first respondent) / BORAL LIMITED / ACN 008 421 761 / (second respondent)
FILE NO/S: Appeal No 7375 of 2020
DIVISION: Court of Appeal
PROCEEDING: General Civil Appeal
ORIGINATING COURT: Supreme Court at Brisbane – [2020] QSC 124; [2020] QSC 163 (Bond J)
DELIVERED ON: 15 December 2020
DELIVERED AT: Brisbane
HEARING DATE: 22 October 2020
JUDGES: Fraser and Philippides JJA and Crow J
ORDER: In default of agreement between the appellants and the respondents upon the orders (including declarations, monetary orders, and orders about costs) that are appropriate to give effect to the Court’s reasons, the appellants and the respondents have leave to lodge and serve a submission in writing upon that topic, any such submission not to exceed 10 pages (in addition to any draft order annexed to the submission) and to be made within 10 business days of this order unless the Registrar otherwise directs.
CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the parties entered into a long term contract under which the first appellant (“the Supplier”) agreed to supply cement products to the first respondent (“the Purchaser”) – where the contract contained a price adjustment mechanism which allowed the Purchaser to serve a notice on the Supplier containing market pricing evidence – where such a notice would have the effect of reducing the price of products under the contract unless the Supplier elected to suspend supply for six months – where the Purchaser served a notice containing market pricing evidence that consisted of a quotation for supply commencing at a future date, rather than at the date of the notice – whether this was a valid and effective pricing notice under the clause / CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where, in response to the purported pricing notice served by the Purchaser, the Supplier gave the Purchaser a notice stating that the notice was invalid and referring the matter to the dispute resolution process under the contract – where this notice also stated that if, as the Purchaser contended, the notice was valid, the Supplier elected to suspend supply under the contract – whether the Supplier waived any invalidity in the Purchaser’s notice by its notice electing to suspend supply – whether the Supplier’s notice was effective to suspend supply under the contract / CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the price adjustment clause provided that if, during a suspension period, the Purchaser ceased to be able to or chose not to procure supply at the price specified in the pricing notice giving rise to the suspension, the Purchaser was obliged to resume purchasing cement products from the Supplier at the prevailing prices under the contract – whether “supply” in this clause referred to supply of the quantity of cement products the Purchaser was obliged to purchase from the Supplier under the Agreement or supply of a lesser quantity set out in the pricing notice – whether any suspension period was brought to an end pursuant to this clause / CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the Purchaser gave a further pricing notice during a later suspension period – whether, upon the proper construction of the clause, the Purchaser was permitted to serve a pricing notice during a suspension period – whether the pricing notice was effective to reduce the price under the contract / Ace Property Holdings Pty Ltd v Australian Postal Corporation [2011] 1 Qd R 504; [2010] QCA 55, considered / Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57, cited / Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305; [1920] HCA 64, considered / Freshmark Ltd v Mercantile Mutual Insurance (Australia) Ltd [1994] 2 Qd R 390; [1993] QCA 222, cited / Gange v Sullivan (1966) 116 CLR 418; [1966] HCA 55, cited / Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1959) SR (NSW) 122; (1957) 76 WN (NSW) 72, considered / Glencore Grain Ltd v Flacker Shipping Ltd (The Happy Day) [2002] 2 Lloyd,s Rep 487; [2002] EWCA Civ 1068, distinguished / Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, cited / Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; [1982] HCA 29, cited / Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153; [1983] HCA 46, cited / Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2011] NSWCA 149, considered
COUNSEL: J McKenna QC, with D Chesterman, for the appellants / S Couper QC, with S Eggins, for the respondents / M Stewart QC for Cement Australia Pty Ltd
SOLICITORS: Norton Rose Fulbright for the appellants / Herbert Smith Freehills for the respondents / Ashurst for Cement Australia Pty Ltd
FRASER JA: The appellants sued the respondents for money alleged to be owing under take-or-pay provisions in a long term contract made on 8 December 2011 (“the Agreement”) under which the first appellant (“the Supplier”) agreed to supply cement products to the first respondent (“the Purchaser”). Under cl 7 of the Agreement, if the Purchaser gives the Supplier a “Pricing Notice” setting out “Market Pricing Evidence” that provides for a price payable by the Purchaser for a cement product that is lower than the prevailing price under the Agreement, the price payable under the Agreement for that product is from the date of the notice reduced to the lower price unless within 20 business days the Supplier gives notice that it elects to suspend supply of products under the Agreement, in which event the Purchaser’s obligations under the Agreement will be suspended for a stipulated period.
The trial judge rejected the appellants’ claim upon the ground that the Purchaser’s obligation to purchase under the Agreement had been suspended under cl 7 during the periods relevant to the claim. That decision resulted from the trial judge’s conclusions about the proper construction and application of provisions in cl 7 and that the Supplier had waived compliance by the Purchaser with part of cl 7. Declarations were made to give effect to the trial judge’s conclusions.
The issues resolved by those declarations are raised in this appeal by the appellants’ notice of appeal and the respondents’ notices of contention and cross appeal.
The context in which the Agreement was made
“Before 2011, the Supplier and companies associated with it owned and operated both a cement plant located at Pinkenba (where cement products were manufactured) and various concrete plants (which were supplied with cement produced by the cement plant and which produced concrete therefrom).
By an asset sale agreement dated 14 April 2011, the concrete plants were sold to interests associated with the Purchaser. The Pinkenba cement plant was not sold. The only other established suppliers of bulk cement in South East Queensland were Sunstate Cement Ltd (which was a company in which an associate of the Purchaser had a half interest) and Cement Australia Pty Ltd.”1
The Agreement
The Agreement of 8 December 2011 obliged the Supplier to supply and the Purchaser to purchase certain cement products (referred to as “Products”) during a 10-year fixed term commencing on the date of the Agreement. As contemplated by the Agreement, the term was subsequently extended for a further 10 years.
Clause 3.2 of the Agreement obliged the Purchaser to purchase a “Minimum Quantity” of Products in each “Agreement Year”.2 The Minimum Quantities required to be taken by the Purchaser were 125,000 tonnes in the first Agreement Year, 140,000 tonnes in the second Agreement Year, and 175,000 tonnes in the third Agreement Year. For later Agreement Years the Minimum Quantity was calculated by reference to a formula.
Clause 3.4 provided for the Minimum Quantity to be adjusted downwards during any “Affected Period” in which the Supplier could not supply all of the Purchaser’s requirements for Products. By cl 3.5 the Supplier acknowledged that during an Affected Period the Purchaser would need to make alternative arrangements for cement products and a lead time would be required for the Purchaser to switch its purchases back to the Supplier. The clause provided that “for the purposes of clause 3.4 the Supplier will be taken to be unable to supply Products until the time which is 72 hours after the relevant Supply Interruption (or other supply failure) ceases and normal supply of the Products resumes (or, if later, 72 hours after the Purchaser first receives notice that such cessation and resumption have occurred) and the duration of the relevant Affected Period will be determined accordingly.”
By cl 6 the Purchaser was obliged to pay the applicable “List Price” for the relevant type of Product “at the time of the purchase” or “if a lower price is applicable for the relevant type of Product under clause 7 at the time of the purchase, that lower price.” In the first Agreement Year the List Price was in a schedule that specified three types of cement products and an initial price per tonne applicable to each product.
Clause 6 provided for annual adjustments to the prices set out in a schedule over successive three-year cycles during the term of the Agreement. From the beginning of the second Agreement Year on 1 July 2012, cl 6 provided for an annual CPI adjustment for the first two Agreement Years of the cycle and, in the third year, a price adjustment by an independent expert review taking into account market movement. The CPI adjustments and expert review provisions could result in increases or decreases in the price.
The take-or-pay provision is in cl 8.6. Clause 8.2 provided that there would be a shortfall in relation to a particular month if the quantity purchased in that month fell below one twelfth of the Minimum Quantity for the relevant Agreement Year, and cl 8.4 required the Supplier to notify the Purchaser of any such shortfall. Clauses 8.3 and 8.5 made similar provisions in relation to an annual shortfall in the Minimum Quantity. Clause 8.9 obliged the Purchaser to purchase one quarter (plus or minus 20 per cent) of the Minimum Quantity during any period of three consecutive months, calculated as a rolling average taking into account that parts of the three-month period might fall within different Agreement Years. No payment obligation was imposed upon the Purchaser in relation to those provisions. Clause 8.4 provided that the Purchaser was obliged to make payments only in respect of annual shortfalls in accordance with cl 8.6, which obliged the Purchaser to make a payment only for an annual shortfall in the Minimum Quantity for the relevant Agreement Year.
“7.1 For the purposes of this clause 7 Market Pricing Evidence means:
(1)a bona fide offer or quotation by another supplier (excluding any supplier in which any Related Body Corporate of the Purchaser holds a material shareholding), which provides for:
(a)the supply of the relevant type of Product ex-plant in South East Queensland or the Darling Downs region; and
(b)supply for a period of at least 6 months; and
(c)supply of an aggregate volume of at least 10,000 tonnes per month (on average); and
(d)confirmation that the supplier has been supplying cement in South East Queensland or the Darling Downs for at least 3 months; or
(2)any other evidence reasonably acceptable to the Supplier of the price at which the relevant type of Product can be purchased from another supplier (excluding any supplier in which any Related Body Corporate of the Purchaser holds a material shareholding) on the basis set out in (a), (b) and (c) above and confirmation that the supplier has been operating for at least 3 months,
(and for the purposes of this clause 7.1 it is acknowledged that at the date of this Agreement a Related Body Corporate of the Purchaser holds a material shareholding in Sunstate Cement Ltd).
7.2 If at any time and from time to time the Purchaser gives notice to the Supplier (a Pricing Notice) setting out Market Pricing Evidence in respect of any type of Product which provides for a price for that type of Product (per tonne and excluding GST) which is lower than the then prevailing price under this Agreement, then subject to clause 7.4 the price for that type of Product under this Agreement will from the date of the Pricing Notice be reduced to the price specified in the relevant Market Pricing Evidence.
7.3 If the price of any type of Product is reduced under clause 7.2, the Purchaser may not give a further Pricing Notice under clause 7.2 seeking a further adjustment to the price of that type of Product for at least 6 months after the date of the relevant Pricing Notice.
7.4 If the Supplier is unwilling to supply any type of Product at the price specified in a Pricing Notice, it may by notice to the Purchaser within 20 Business Days after the date of the Pricing Notice elect to suspend supply of Products (but if the Supplier does not elect to suspend within that 20 Business Days’ period the price reduction will take effect in accordance with clause 7.2).
7.5 If the Supplier elects to suspend supply of Products under clause 7.4, then:
(1)the suspension will last from the date of the election until the earliest of:
(a)the date 6 months after the date of the election;
(b)if the parties agree a mutually acceptable price, the date the parties agree to resume supply; and
(c)if clause 7.6 applies, the Purchaser becomes obliged to resume purchasing Products from the Supplier,
the duration of the suspension being the Suspension Period;
(2)during the Suspension Period, the Supplier will have no obligation to supply Products, and the Purchaser will have no obligation to purchase Products; and
(3)any period during an Agreement Year falling within the Suspension Period will be treated as an ‘Affected Period’ for the purposes of clause 3.4 (and clause 3.5 will also apply accordingly), and the Minimum Quantity in respect of the relevant Agreement Year will be adjusted down accordingly; and
(4)at the end of the Suspension Period, the Supplier will recommence supply of the Products to the Purchaser at the prevailing List Prices applying under clause 6 of this Agreement, subject to the Purchaser’s right to provide further Pricing Notices in accordance with clause 7.2.
7.6 Where the supply of Products has been suspended in accordance with clause 7.4, the Purchaser must resume purchasing Products from the Supplier if it ceases to be able to (or for any reason chooses not to) procure supply from a third party supplier (excluding any supplier in which any Related Body Corporate of the Purchaser holds a material shareholding) at the price specified in the Pricing Notice giving rise to the suspension.”
Issue 1: Was the Purchaser’s March notice a valid and effective notice under cl 7.2?
On 1 March 2019 the Purchaser gave to the Supplier a notice that purported to be a Pricing Notice under cl 7.2 (“the Purchaser’s March notice”). What purported to be Market Pricing Evidence as defined in cl 7.1(1) set out in the notice as required by cl 7.2 was a quotation from Cement Australia for supply of identified cement products to the Purchaser between 1 May and 31 December 2019. The trial judge accepted the Supplier’s argument that the quotation did not conform with paragraph (1) of the definition of Market Pricing Evidence in cl 7.1 because the quoted price was for the supply of cement commencing two months after the date the notice was given and nothing in the quotation suggested that the quoted price was applicable at the date of the notice.
The Purchaser contends that the trial judge erred by implying into cl 7.1(1) an unexpressed requirement that the offer or quotation provide for the immediate commencement of supply. It argues that cl 7.1(1) provides a comprehensive statement of the necessary elements of an offer or quotation and that the trial judge’s implication does not satisfy the tests for implying a term in a written contract.
The starting point for analysis of this issue is cl 7.2, the first part of which uses the defined term Market Pricing Evidence. The definition of that term in cl 7.1 is not a comprehensive statement of what constitutes an effective Pricing Notice. The first clause of cl 7.2 specifies the equally essential attribute of a Pricing Notice that it provides for a price per tonne, excluding GST, that is lower than the then prevailing price under the Agreement.
The trial judge adopted the orthodox process of ascertaining the parties’ contractual rights and obligations objectively by determining what a reasonable businessperson would have understood the disputed contractual provisions to mean. As the trial judge remarked, the relevant principles of construction were sufficiently identified by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd3 and subsequently approved in Victoria v Tatts Group Ltd.4 In determining what a reasonable businessperson would have understood the disputed terms to mean, it is necessary to consider “the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract”, and, in the absence of any indication in the contract of a contrary intention, “a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption ‘that the parties … intended to produce a commercial result’” or to avoid the commercial contract “‘making commercial nonsense or working commercial inconvenience’”.
Issue 2: Was the Supplier’s March suspension notice a valid and effective notice under cl 7.4?
On 5 March 2019 the Supplier informed the Purchaser that at that point the Supplier did not treat the Purchaser’s March notice as a valid Pricing Notice, it was considering its position, and it reserved its rights. The Purchaser replied on 7 March 2019 stating that the Supplier’s response did not affect the operation of the Agreement, the Supplier had 20 business days from 1 March 2019 within which to decide whether to elect to suspend supply, and if it did not elect to suspend supply the price would reduce in accordance with cl 7.2.
On 15 March 2019 the Supplier wrote a letter to the Purchaser contending that:(a)The Purchaser’s March notice was not a valid Pricing Notice in accordance with cl 7 for various reasons, one of which was that the Cement Australia quotation did not relate to supply from the date of the notice.(b)The Supplier reserved its rights under the Agreement, including in respect to the Purchaser’s March notice.(c)The letter was a “Notice of Dispute” under cl 20 of the Agreement.
Clause 20 of the Agreement obliged the parties to a dispute arising in connection with the Agreement to give a Notice of Dispute specifying the dispute and requiring its resolution under cl 20. It required authorised representatives of each party to confer to try to resolve the dispute, failing which the dispute would be submitted to mediation. The time limits specified for various actions in cl 20 make it clear that the Supplier could not expect resolution of the dispute about the validity of the Purchaser’s March notice to occur within the 20-business day period provided in cl 7.4. Clause 20 provided that despite submission of a dispute to mediation or the commencement of litigation the parties were obliged to continue to perform their obligations under the Agreement.
On 18 March 2019 the Supplier gave to the Purchaser a notice (“the Supplier’s March notice”) in the following terms:
“NOTICE OF SUSPENSION OF SUPPLY UNDER CLAUSE 7.4 OF [THE AGREEMENT]
In this letter, capitalised terms have the same meaning as used in [the Agreement].
We refer to [the Purchaser’s] correspondence dated 1 March 2019 purporting to be a Pricing Notice issued in accordance with clause 7.2 of [the Agreement].
[The Supplier] does not accept that the Pricing Notice is a valid notice and reserves its rights in that regard.
However, [the Supplier] is unwilling to supply the Product at the price specified in the purported Pricing Notice. The Notice given in this letter is given on the basis contended for by [the Purchaser], that the Pricing Notice is valid.
Notice of suspension of supply under [the Agreement].
Pursuant to clause 7.4 of [the Agreement], [the Supplier] gives [the Purchaser] notice that it has elected to suspend supply of Products under [the Agreement]. This suspension will take effect immediately.
We remind you of the obligations under clause 7.6 of [the Agreement] that if [the Purchaser] ceases to be able, or for any reason chooses not to, procure supply of the quantities required under [the Agreement] from an unrelated third party supplier at the price specified on the Pricing Notice, [the Purchaser] must resume purchasing Product from [the Supplier] under [the Agreement].
Without Prejudice to the Notice of Dispute
We also refer to our letter of 15 March 2019 giving a Notice of Dispute in respect to the validity of the Pricing Notice. This letter is without prejudice to that Notice of Dispute.”
The trial judge held that by giving the Supplier’s March notice the Supplier waived any invalidity in the Purchaser’s March notice, with the consequence that the Supplier’s March notice was effective as a notice under cl 7.4 electing to suspend supply as at 18 March 2019. The trial judge reasoned as follows:(a)Clause 29 of the Agreement contemplated that a party to the Agreement might waive the other party’s non-compliance with a term or condition of the Agreement that was for the benefit of that party. (Clause 29 provides that a party “shall not allege or purport to rely upon any waiver of any breach of or non-compliance with any warranty, term or condition of this Agreement unless that waiver is in writing and signed by the party against whom that waiver is claimed” and such a waiver “shall not be and shall not be deemed to be a waiver of any other or subsequent breach or non-compliance”.)(b)The term of the Agreement “which required the Purchaser to present Market Pricing Evidence in order to obtain a reduction in the prevailing price under the Agreement or a six-month suspension of its take-or-pay obligation” was for the Supplier’s benefit because it had a character which was protective of the Supplier’s take-or-pay rights under the Agreement.6(c)It followed that, although cl 29 would be read down so that it did not contemplate waiver of non-compliance of conditions for the benefit of a non-waiving party, the Agreement contemplated that the Supplier could waive the Purchaser’s alleged non-compliance with the criteria in cl 7.1 and treat a non-compliant Pricing Notice as valid.(d)A “second choice” for a Supplier who received a purported Pricing Notice which it contended was invalid was to dispute the validity of the purported Pricing Notice and “assert the rights which would follow consequent upon that contention”.7(e)The ability of the Supplier to contest an invalid Pricing Notice was not circumscribed. The dispute resolution clause did not interfere with the Supplier’s choice because an invalid Pricing Notice that was not the subject of any waiver by the Supplier could not bring about a reduction in the prevailing List Price under the Agreement. To vindicate the Supplier’s contention that a Pricing Notice was invalid it need merely supply Products as requested by the Purchaser, issue invoices upon the footing that the Pricing Notice was invalid, and in the event of any shortfall in payment of the invoices sue the Purchaser for the unpaid balance as a liquidated debt.(f)The reservation of rights by the Supplier in its March suspension notice preceding the statement in that notice treating the Purchaser’s March notice as a valid Pricing Notice and electing to suspend supply under cl 7.4 could not be regarded as rendering the Supplier’s conduct equivocal; the exercise of the right to waive any invalidity, treat the Pricing Notice as valid, and elect to suspend supply under cl 7.4 was inconsistent with the right purportedly reserved.
“[147] At the outset of the discussion under this heading, some brief reference to what is meant by ‘waiver’, as that term is used in relation to the loss of contractual rights, is desirable. In Sargent v ASL Developments Ltd, Stephen and Mason JJ preferred to treat cases where a party’s words or conduct are regarded as precluding him or her from exercising a legal right which would otherwise be available, as cases of election or estoppel. In such cases the doctrine of ‘waiver’ is subsumed within the doctrine of election. Stephen J explained that, within a binary classification of estoppel and election, ‘Estoppel depends upon what a party causes his adversary to do. Waiver by election depends upon what the party himself intends to do, and has done’. …
[148] In Freshmark Limited v Mercantile Mutual Insurance (Australia) Limited, Dowsett J, with whom McPherson JA agreed, referred to Sargent v ASL Developments Ltd and to the examination by the High Court in Commonwealth of Australia v Verwayen of the ‘boundaries’ of estoppel, waiver and election and concluded:
‘The better view is that a mere indication of an intention not to rely upon contractual rights will not generally constitute a waiver sufficient to bar a future action to enforce such rights. Waiver should not be seen as an alternative weapon to estoppel in the war against the doctrine of consideration. However, where a party elects between alternative rights available under a contract, such election will usually be final.’
[149] The view of Dowsett J, viz that there is no separate doctrine of waiver of contractual rights based on representations or conduct by a party unless the representations or conduct amount to a binding election or are accompanied by detrimental reliance sufficient to support an estoppel or consideration sufficient to support a contractual variation, has been vindicated by the decision of the High Court in Agricultural & Rural Finance Pty Ltd v Gardiner.
[150] In light of the discussion of this point in Agricultural & Rural Finance Pty Ltd v Gardiner, it would seem prudent no longer to speak of ‘waiver’ of contractual rights and obligations and to confine its use to other fields of legal discourse such as the waiver of the right to legal professional privilege and waiver of a defence under a limitation statute.”
That analysis is not inconsistent with a right of waiver that is found to form part of a contract upon application of conventional principles of contractual construction or implication of a contractual term.
In the course of considering whether there was a waiver the trial judge referred to evidence of what occurred in relation to the supply of Products under the Agreement after the Supplier gave the notice of 18 March 2019. Senior counsel for the Purchaser acknowledged during the hearing of the appeal that the case advanced by the Purchaser in relation to the present issue at trial and again on appeal concerned only the effect of that notice. Its case stands or falls upon what was represented by that notice.
The Purchaser might have a viable claim if the Supplier represented to the Purchaser that an ineffective notice was effective as a Pricing Notice under cl 7.2 and the Purchaser acted upon the representation to its detriment. In such a case the Supplier might be precluded by an estoppel from disputing the efficacy of the notice as a Pricing Notice. Alternatively, the parties might be held to have varied the Agreement to treat an ineffective notice as though it were instead effective as a Pricing Notice when it was given. The Purchaser makes no such claim. It does not claim to have given any consideration for a variation of cl 7.2 or that it suffered any detriment in reliance upon any representation by the Supplier that the notice was effective as a Pricing Notice.
The Purchaser’s argument is instead to the effect that the Supplier is precluded by an election between inconsistent contractual rights from denying that the Purchaser’s notice was effective as a Pricing Notice under cl 7.2. The elements of an election of that kind were not in dispute at the trial and are not in dispute in this appeal. The doctrine of election requires for its application that the person make an unequivocal election between inconsistent rights, that the person make that election with knowledge of the relevant facts (although not necessarily with knowledge of the legal effect of the facts), and that the person communicate that election to the person against whom the rights are exercisable.10 It is the requirement for an unequivocal election between inconsistent rights that is in issue upon the parties’ arguments about election.
In my respectful opinion the Agreement did not give the Supplier a contractual right to waive non-conformity of the purported Pricing Notice with the definition of such a notice in cl 7.2 and it was not confronted with the choice between alternative contractual rights advocated by the Purchaser. The purpose of cl 29 is to restrict the ambit of waiver. The very general language of that clause is not open to a construction that it confers upon the Supplier an unexpressed contractual right to enliven the operation of cl 7 with retrospective effect by waiving non-conformity of a notice with the definition of Pricing Notice in cl 7.2. Nor did the Supplier have the contractual right it was found to have waived; the Agreement does not impose any contractual obligation upon the Purchaser or confer any right on the Supplier to the effect that a notice given by the Purchaser that purports to be a Pricing Notice will be a Pricing Notice conforming with the definition in cl 7.2. The ineffectiveness of a notice that purports to be but is not a Pricing Notice as defined does not depend upon the Supplier taking any step to dispute it or to assert rights that are inconsistent with it being a Pricing Notice. Clause 7.2 is self-executing. Its “If…, then” language makes it clear that it operates if, and only if, the Purchaser gives to the Supplier a notice that is a Pricing Notice as defined. As was submitted for the Supplier, the doctrine of election between inconsistent rights has no application to a party who relies simply upon the absence of a legal right in the other party.
“Waiver of performance connotes that a person has a right to have a condition performed and that that right has been waived. But [the option clause] gave the lessor no right to have the plaintiff perform any of the conditions stated in that clause. The conditions specified were conditions which, so far as that clause was concerned, the plaintiff might or might not perform as it thought fit. It was not bound, for example, to give notice in writing or at all, any more than [the option clause] bound it to pay the rent punctually. Performance of the conditions … was necessary only if the plaintiff wished to accept the offer contained in the clause, and performance of those conditions was the only way by which that offer could be accepted.”13
That reasoning does not depend upon characterisation of an option as an irrevocable offer rather than a conditional agreement to grant a renewal upon the due exercise of the option.14
The same conclusion is consistent with reasoning in other analogous contexts in Agricultural and Rural Finance Pty Ltd v Gardiner,15 Freshmark Ltd v Mercantile Mutual Insurance (Australia) Ltd,16 Helicopters Pty Ltd v Bankstown Airport Ltd,17 and Foote v Barton Property Partnership (No 2).18
In cases cited by the Purchaser,19 conditions that made completion of a contract for the sale or lease of land contingent upon one party securing a third party approval were construed as having been included in the contract for the exclusive benefit of and capable of being waived by that party. (Those cases are examples of the use of the word “waiver” in a sense other than waiver by election between inconsistent contractual rights.20) The first part of cl 7.2 is a “condition” only in the sense that it defines the only way in which the Purchaser may exercise its option to obtain the benefit of cl 7. Clause 7.2 bears no resemblance to the conditions discussed in the cases cited by the Purchaser. It was not included in the Agreement for the exclusive benefit of the Supplier. Where it operates it will benefit the Purchaser, either by reducing the prevailing price payable to the Supplier under the Agreement or (if the Supplier gives a notice under cl 7.4) suspending the Purchaser’s obligations under the Agreement to purchase or in any event pay for a stipulated minimum quantity of cement at the prevailing price under the Agreement.
The trial judge considered that the decision in Glencore Grain Ltd v Flacker Shipping Ltd (The Happy Day)21 supported the conclusion that a notice that was ineffective as a Pricing Notice could give rise to an election by the Supplier in the sense of “waiver as an exercise of a contractually contemplated power capable of founding an inconsistency of rights”.22 In Glencore, a charterparty entitled shipowners to recover for laytime in certain circumstances in which the charterers were given a “Notice of Readiness” to load (“NOR”), the purpose of the requirement to serve a NOR being “to trigger the charterers’ obligation to unload whereby laytime starts to run immediately”. The master gave a NOR that was found to be premature and therefore invalid when it was given. On the following day the ship entered the port. A valid NOR could have been given but was not given. Despite the charterers’ awareness of the facts giving rise to the invalidity of the NOR the charterers did “nothing to indicate any rejection or reservation in respect of the NOR, but instead [commenced] unloading”, when there was “every good reason for the reasonable shipowner to assume an intention and acceptance by the charterers that laytime should start to run without the formal necessity of a fresh notice, such intention and acceptance being unequivocally communicated by involvement in the operation of unloading”.
“There is a later case where Lord Parker (then Parker J) summarized the law to the same effect, the case of Matthews v Smallwood [(1910) 1 Ch., 777, at pp. 786 et seq.]. His Lordship said:— ‘It is also, I think, reasonably clear upon the cases that whether the act, coupled with the knowledge, constitutes a waiver is a question which the law decides, and therefore it is not open to a lessor who has knowledge of the breach to say “I will treat the tenancy as existing, and I will receive the rent, or I will take advantage of my power as landlord to distrain; but I tell you that all I shall do will be without prejudice to my right to re-enter, which I intend to reserve.” That is a position which he is not entitled to take up. If, knowing of the breach, he does distrain or does receive the rent, then by law he waives the breach, and nothing which he can say by way of protest against the law will avail him anything.’”31
Applying that principle, the insurance company in Craine was considered to have engaged in conduct amounting to an election notwithstanding purported reservations in correspondence when it exercised a right given to it by an insurance policy to retain possession of the insured’s premises and goods and otherwise “exerted rights which [it] could only exercise on the assumption that [its] obligation [to indemnify the insured in accordance with the policy] still existed”.32
The Purchaser does not contend that the Supplier did any act that was consistent only with the Purchaser’s notice being a Pricing Notice under cl 7.2. In particular, the Purchaser does not contend that the Supplier ceased to make available supply to the Purchaser in the usual way at the price prevailing under the Agreement. Nor does the Purchaser contend that it ceased to obtain supply from the Supplier in reliance upon a belief induced by any representation made by the Supplier that it would not supply to the Purchaser in the usual way at the price prevailing under the Agreement. The Purchaser relies only upon the content of the Supplier’s March notice itself as an election. That being so, in order to decide whether or not the Supplier elected between the suggested inconsistent rights it is necessary to take into account all of the statements in that notice that affect its meaning, including the reservations.
My conclusion is that if (contrary to my view) the Supplier held relevant inconsistent and alternative contractual rights or a contractual right of waiver, it did not by its 18 March notice elect against or otherwise waive reliance upon the ineffectiveness of the Purchaser’s purported Pricing Notice.
Upon my view that the Purchaser’s March notice was not a Pricing Notice under cl 7.2 and it should not be treated as such as a result of any election or “waiver” by the Supplier, cl 7.4 did not empower the Supplier to elect to suspend supply of Products. That accords with the same view expressed by the trial judge upon the assumption that, contrary to his Honour’s conclusion, there was no waiver or election by the Supplier. I would hold that the Supplier’s March notice was not effective as a notice under cl 7.4 and it did not create any Suspension Period under cl 7.5.
In the way in which I would resolve the issues it is not necessary for me to decide whether, as the Supplier contended in reliance upon observations by Sheppard J in Nabalco Pty Ltd v BP Australia Limited,33 the Supplier’s March notice would be an effective election to suspend supply under cl 7.4 if the Purchaser’s March notice were effective as a Pricing Notice under cl 7.2.
The Purchaser’s alternative defence to the take-or-pay claim
Clause 3.4 of the Agreement records the parties’ agreement that “if for any period during an Agreement Year (whether by reason of Supply Interruption or otherwise) the Supplier cannot supply in full the Purchaser’s requirements for Products (each such period being an Affected Period) the Minimum Quantity in respect of the relevant Agreement Year will be adjusted down by an amount determined as follows”. There follows a formula which is designed to ensure that the Purchaser is not required to purchase or pay for Products the Supplier does not supply.
The Purchaser argued in its outline of submissions in the Supplier’s appeal that, if (as I would hold in relation to the Supplier’s notice of 18 March 2019) the Supplier had no contractual right to suspend supply, the Supplier’s “ongoing actual suspension of supply … until supply resumed” was “an unauthorised suspension in breach of [the Supplier’s] obligation to supply under clause 3 of the [Agreement].” Upon that premise the Purchaser argued that it could have no liability during such a period either because it would constitute an “Affected Period” under cl 3.4 of the Agreement or because the Supplier’s breach of contract had prevented the Purchaser from complying with its obligation to purchase Products in the relevant period.34
The Supplier submitted that this alternative defence should be rejected. It argued that, given that the Supplier’s notices of suspension made it clear that the Supplier elected to suspend supply only if the relevant Pricing Notice was effective under cl 7.2, the conduct of the Purchaser in neither withdrawing the invalid Pricing Notice nor insisting upon being supplied with the Supplier’s cement until the dispute was resolved amounted to the Purchaser taking the risk that if its Pricing Notice was found to be invalid then it would suffer a commercially inconvenient result. The Supplier also argues that the Purchaser’s argument is contrary to the evidence because on and from 18 March 2019 the Purchaser did not communicate to the Supplier that the Purchaser required any Products at the List Price, so that it could not be said that the Supplier had breached any obligation under cl 3.2 of the Agreement or that it had prevented performance by the Purchaser.
In oral argument the Purchaser submitted that this issue had little significance. It did not develop its argument about it or respond to the Supplier’s argument. I accept the Supplier’s argument. The Purchaser did not establish the premise of its argument. Instead it acted upon the basis that, contrary to my conclusion, it had given a valid Pricing Notice and for that reason it was not obliged to purchase at the List Price prevailing under the Agreement.
Issue 3: Was any Suspension Period created by the Supplier’s March notice brought to an end pursuant to cl 7.6?
In light of my conclusion that the first two issues should be resolved against the Purchaser it is not necessary to resolve Issue 3. It remains necessary to adjudicate upon the underlying construction question, which is determinative of Issue 6.
The trial judge set out in some detail the facts out of which Issue 3 arose at the trial.35 It is sufficient for present purposes to summarise those facts as follows:(a)Between 19 and 26 March 2019 the Purchaser negotiated with Cement Australia with a view to entering into a contract along the lines of Cement Australia’s quotation, culminating in a contract (“the Cement Australia Agreement”) for the supply by Cement Australia to the Purchaser of cement products at the price specified in the purported Market Pricing Evidence set out in the Purchaser’s March notice for nine months from 1 April to 31 December 2019.(b)After a hiatus between 26 and 31 March 2019 when the Purchaser did not make any relevant purchase of Products, between 1 April and 21 October 2019 the Purchaser purchased Products under the Cement Australia Agreement at a rate that seemed to approximate the 12,000-tonne maximum monthly amount for which the Cement Australia Agreement provided.(c)The amounts the Purchaser purchased from Cement Australia were far less than the extent of the Purchaser’s take-or-pay obligation under the Agreement with the Supplier in two respects:Pursuant to cl 8 of the Agreement the total Minimum Quantity for the 2019 Agreement Year was 249,891 tonnes, which is equivalent to approximately 20,470 tonnes per month.The amounts purchased by the Purchaser also fell far below the minimum quantities required to meet the three-month rolling average provisions of cl 8.9 of the Agreement. The Purchaser did not contest the Supplier’s submission that cl 8.9 required purchases during any period of three consecutive months of not less than 16,659 tonnes per month or greater than 24,989 tonnes per month in this period.(d)From about 19 March to 28 August 2019 the Purchaser purchased Products from its Related Body Corporate, Sunstate Cement, at a higher price per tonne (excluding GST) than the price per tonne provided for in the Market Pricing Evidence set out in the Purchaser’s March notice (which the trial judge treated as a Pricing Notice).(e)From about 15 May to 14 June 2019 the Purchaser purchased Products from Georgiou Group Pty Ltd at a higher price per tonne (excluding GST) than the price per tonne provided for in that Market Pricing Evidence.
The trial judge concluded that the Suspension Period created by the Supplier’s March notice was not brought to an end pursuant to cl 7.6, with the consequences under cl 7.5 being that the duration of the Suspension Period was six months from 18 March 2019 and the Purchaser’s take-or-pay obligations were reduced accordingly.
In relation to this issue the question agitated in this appeal is whether the trial judge was correct in rejecting the Supplier’s argument that, on the proper construction of cl 7.6, the words “procure supply” refer to supply of a quantity equivalent to the minimum quantity to be supplied by the Supplier for the relevant period under cl 8.9 or, alternatively, the amount to be taken by the Purchaser under cl 8.2. The trial judge accepted the Purchaser’s argument that the words “procure supply” refer to supply of a kind and quantity comparable to the criteria for Market Pricing Evidence provided for in cl 7.1. That proved to be decisive for uncontroversial reasons given by the trial judge.
Issue 4: Was the Purchaser’s April notice a valid and effective notice under cl 7.2?
On 1 April 2019 the Purchaser gave a notice to the Supplier (“the Purchaser’s April notice”) purporting to be a Pricing Notice under cl 7.2. It set out as Market Pricing Evidence the Agreement it had made with Cement Australia on 26 March 2019 for the supply of cement between 1 April and 31 December 2019 at the price per tonne specified in the purported Market Pricing Evidence set out in the Purchaser’s March notice.
There is no challenge to the trial judge’s finding that the Purchaser’s April notice did not have the defect that was found to render the March notice ineffective as a Pricing Notice. The trial judge held that the Purchaser’s April notice was not a Pricing Notice under cl 7.2 because cl 7 did not permit the Purchaser to serve a Pricing Notice during a Suspension Period. I consider that question in the context of Issue 7.
The Supplier concedes that if, as I have concluded, its March notice was not effective as a notice electing to suspend supply under cl 7.4, the Purchaser’s April notice was effective as a Pricing Notice under cl 7.2.
I would resolve this issue in accordance with that concession.
Issue 5: Was the Supplier’s May notice a valid and effective notice under cl 7.4?
On 1 May 2019 the Supplier gave a notice to the Purchaser (“the Supplier’s May notice”) purporting to suspend supply in substantially the same form as its March notice.
The trial judge held that the Supplier’s May notice was not effective as a notice suspending supply under cl 7.4 because the Supplier could not waive the absence of contractual power for the Purchaser to give a Pricing Notice during a Suspension Period.
The Supplier concedes that if, as I have concluded, the Purchaser’s April notice was effective as a Pricing Notice under cl 7.2, the Supplier’s May notice was effective as a notice suspending supply under cl 7.4. I would therefore hold that the Supplier’s May notice created a Suspension Period from 1 May 2019 in accordance with cl 7.5.
Issue 6: Was any Suspension Period created by the Supplier’s May notice brought to an end pursuant to cl 7.6?
Issue 6 concerns the same facts and question of construction raised by Issue 3. It was unnecessary for the trial judge to resolve Issue 6 because of his Honour’s conclusion that the Supplier’s May notice was ineffective as a notice suspending supply under cl 7.4. The trial judge observed that if (as I would hold) a Suspension Period had been created by the Supplier’s May notice, this question should be answered in the negative by applying his Honour’s reasons for giving a negative answer to Issue 3.
For the reasons I have given in relation to Issue 3, I would hold that the Suspension Period created by the Supplier’s May notice, in force from 1 May 2019 in accordance with cl 7.5, was not brought to an end pursuant to cl 7.6.
Issue 7: Was the Purchaser’s October notice a valid and effective notice under cl 7.2?
On 2 October 2019 the Purchaser gave a notice to the Supplier (“the Purchaser’s October notice”) purporting to be a Pricing Notice under cl 7.2. The Market Pricing Evidence set out in the notice was that on about 1 October 2019 the Purchaser made a contract with Cement Australia which extended the original Cement Australia Agreement at a new price per tonne.
On 10 October 2019 the Supplier disputed the effectiveness of the Purchaser’s October notice as a Pricing Notice under cl 7.2 of the Agreement. The Supplier did not give any notice under cl 7.4 purporting to suspend supply under the Agreement.
The only ground upon which the Supplier contends that the Purchaser’s October notice was not effective as a Pricing Notice under cl 7.2 is that the notice was given during a Suspension Period. In the way in which the trial judge analysed the preceding issues, when the Purchaser gave its October notice there was no Suspension Period in effect. Upon my analysis there was a Suspension Period in effect at that time.
Resolution of Issue 7 depends upon resolution of the question of construction whether a purported Pricing Notice is ineffective as a Pricing Notice if it is given during a Suspension Period. The trial judge’s reasons for accepting the Supplier’s argument that a purported Pricing Notice was ineffective in such circumstances may be summarised as follows:(a)If the Purchaser gave a Pricing Notice the Supplier was put to an election:The Supplier could elect to accept the new lower price. In that event the price under the Agreement would be reduced to the lower price in the Market Pricing Evidence, under cl 7.3 the Purchaser could not give another Pricing Notice for at least six months, and the parties otherwise would remain subject to the obligations under the Agreement to supply and to purchase products, including the Purchaser’s take-or-pay obligation to pay at the reduced price for a Product it had not purchased.The Supplier could elect to suspend supply under cl 7.4. In that event cl 7.5 would apply to regulate what happened during the Suspension Period, including that the Purchaser would be under no take-or-pay obligation in that period (cl 7.5(2)).(b)Clause 7.5(4) governed what happened at the end of the Suspension Period, “namely the Supplier would recommence supply at prevailing List Prices, subject to the possibility of that changing in the event of a further cl 7.2 Pricing Notice being given. Or, to put it another way, at the end of the Suspension Period the Purchaser would be under a qualified obligation to recommence purchasing Products from the Supplier at prevailing (not reduced) List Prices”, subject to a further cl 7.2 Pricing Notice.38 The structure of cll 7.2 and 7.5(2) precludes a conclusion that the Supplier could be put to another election by a Pricing Notice during a Suspension Period.(c)In a period in which the parties’ obligations to supply and purchase Products do not exist there is no sense in the idea that the Supplier could be put to an election between the obligations under the Agreement continuing but at a new price and the suspension of obligations under the Agreement.(d)It was not necessary to protect the Purchaser from adverse market prices during a Suspension Period for it to have the ability to give a further Pricing Notice: the Purchaser could take advantage of any fall in the market price during a Suspension Period. Although cl 7.6 might operate to determine the Suspension Period if the market price rose during the period, cl 7.5(4) gave the Purchaser in such circumstances a right to give a further Pricing Notice. There was no reason to think the parties would have intended that the period allowed (by cl 7.4) for the Supplier to decide whether or not to suspend supply would be abbreviated.
Summary of conclusions and disposition
In summary, my conclusions upon the issues agitated in the appeal and cross appeal are as follows:(a)The Purchaser’s notice dated 1 March 2019 was not a Pricing Notice under cl 7.2, the Supplier’s related notice dated 18 March 2019 was not a notice electing to suspend supply under cl 7.4, and the Supplier’s notice did not result in any period being an Affected Period described in cl 3.4.(b)The Purchaser’s notice dated 1 April 2019 was a Pricing Notice under cl 7.2, the Supplier’s related notice dated 1 May 2019 was a notice electing to suspend supply under cl 7.4, that notice created a Suspension Period from 1 May 2019 under cl 7.5, and that Suspension Period was not brought to an end under cl 7.6.(c)The Purchaser’s Notice dated 2 October 2019 was a Pricing Notice under cl 7.2.
The following orders appear to be appropriate (subject to considering further submissions lodged by the parties in accordance with the order I propose below):
Allow the appeal and the cross appeal.
Set aside the orders numbered 2 to 7 made in the Trial Division on 4 June 2020.
In addition to the orders numbered 1, 8 and 9 made in the Trial Division on 4 June 2020, order that: It is declared that the notice of 18 March 2019 from the first plaintiff to the first defendant was not valid or effective as a notice under clause 7.4 of the Agreement electing to suspend supply as at 18 March 2019.It is declared that the notice of 1 April 2019 from the first defendant to the first plaintiff was a valid and effective Pricing Notice under clause 7.2 of the Agreement.It is declared that the notice of 1 May 2019 from the first plaintiff to the first defendant was a valid and effective notice under clause 7.4 of the Agreement.It is declared that, pursuant to clauses 7.4 and 7.5 of the Agreement, the effect of the notice of 1 May 2019 from the first plaintiff to the first defendant was that the supply of Products under the Agreement was suspended for six months from 1 May 2019.It is declared that, for the purposes of clauses 3.4 and 3.5 of the Agreement, the period which should be treated as an Affected Period is the period commencing on 1 May 2019 and ending on 22 October 2019.40
Proposed order
I propose the order that, in default of agreement between the appellants and the respondents upon the orders (including declarations, monetary orders, and orders about costs) that are appropriate to give effect to the Court’s reasons, the appellants and the respondents have leave to lodge and serve a submission in writing upon that topic, any such submission not to exceed 10 pages (in addition to any draft order annexed to the submission) and to be made within 10 business days of this order unless the Registrar otherwise directs.
PHILIPPIDES JA: I agree with the order proposed by Fraser JA for the reasons given by his Honour.
CROW J: I agree with the order proposed by Fraser JA for the reasons given by his Honour.
Reasons [13] – [14]. ↩
In the first 10-year term commencing on 8 December 2011, the “Agreement Years” were 8 December 2011 to 30 June 2012, 1 July to 30 June in each of the following 12-month periods until 30 June 2021, and 1 July 2021 to 7 December 2021. ↩
(2015) 256 CLR 104 at 116 – 117 [46] – [51]. ↩
(2016) 90 ALJR 392 at 401 [51] per French CJ, Kiefel, Bell, Keane and Gordon JJ. ↩
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd at 116 [47], 117 [51], quoting Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640. ↩
Reasons [78]. ↩
Reasons [82]. ↩
See Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at 586 – 588 [50] – [54]. ↩
[2011] 1 Qd R 504 at 550 – 551 [147] – [150] (Fryberg J, Douglas J agreeing at 561 [204]). Internal footnotes have been omitted. ↩
See Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; Commonwealth v Verwayen (1990) 170 CLR 394; Sargent v ASL Developments Ltd (1974) 131 CLR 634; Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 at 326. ↩
(1957) 76 WN (NSW) 72.
Wagners Cement Pty Ltd & Anor
Boral Resources
(2008) 238 CLR 570
(1920) 28 CLR 305
(1966) 116 CLR 418
(2015) 256 CLR 104
(1982) 149 CLR 537
(1983) 153 CLR 153
(2016) 90 ALJR 392
(2014) 251 CLR 640
(1990) 170 CLR 394
(1974) 131 CLR 634
(1973) 131 CLR 8
(1987) 16 FCR 15
Clause 7 provided:
As the trial judge considered, the construction propounded by the Supplier accords both with the text of the definition of Market Pricing Evidence in cl 7.1 and with the context in which that definition appears:(a)The language and tense of cll 7.1 and 7.2 suggest that what must be evidenced by an offer or quotation described in cl 7.1(1) is a price that is current at the date the Pricing Notice is given.The reference in cl 7.1(2) of the definition of Market Pricing Evidence to any other evidence of the price at which the relevant type of product “can be purchased” from another supplier suggests that both kinds of evidence described in cl 7.1 are intended to identify the price at which the Product can be purchased upon the date when the Pricing Notice is given.The term “Market Pricing Evidence” itself suggests as much, having regard to definitions in the Macquarie Dictionary of “Market Price” (“the price at which a commodity … is selling in the open market”) and “quotation” (“the statement of the current or market price of a commodity …”).(b)The last part of cl 7.4 confirms that, absent an effective election by the Supplier to suspend supply, the price reduction takes effect “from the date of the Pricing Notice” as stated in cl 7.2.(c)The parties must have contemplated that the Purchaser would be able to procure supply at the price specified in the Pricing Notice from the commencement of the Suspension Period because:under cl 7.4 that period could commence on the date of the Pricing Notice or at any time within 20 business days thereafter;under cl 7.5(1)(c) and cl 7.6, the suspension would cease if and when the Purchaser “ceases to be able to … procure supply from a third party supplier … at the price specified in the Pricing Notice”. This provision of itself implies that for the whole period of a suspension the Purchaser is able to procure supply at the price specified in the Pricing Notice; andunder cl 7.2, if the Purchaser gives a Pricing Notice to the Supplier “which provides for a price … which is lower than the then prevailing price under this Agreement” the price under the Agreement will be reduced to the price specified in the Market Pricing Evidence unless supply under the Agreement is suspended under cl 7.4.
The Purchaser accepted in argument that what must be evidenced by an offer or quotation described in cl 7.1(1) is a price that is current at the date of the Pricing Notice but it argues that a quotation might supply such evidence even though it provides a price only for a supply commencing after the date of the Pricing Notice.
As the trial judge concluded, nothing in the Cement Australia quotation suggested that the quoted price was current at the date of the purported Pricing Notice. There is no indication in the purported Pricing Notice that supply was also available to the Purchaser at the quoted price two months before the commencement of the supply for which the quote was given. The notice therefore lacked the essential attribute of a Pricing Notice under cl 7.2 that it set out Market Pricing Evidence providing for a price at which the product “can be purchased” (in terms of cl 7.1(2)) that is lower than the price prevailing under the Agreement when the Pricing Notice is given.
The essentiality of that attribute in a Pricing Notice is consistent with the potential volatility in market prices catered for in cl 7 itself, particularly the provision in cl 7.6 for the resumption of the Purchaser’s obligation to pay the higher price under the Agreement if the Purchaser at any time ceases to be able to procure supply of Products from a third party supplier at the price specified in the Pricing Notice. That provision is capable of application on and from the first day of a Suspension Period, a day which itself may be very soon after, and must be no later than only 20 business days after, the day a Pricing Notice is given. Given that cl 7 augments the provision in cl 6 for market reviews only every three years (albeit only in favour of the Purchaser and in a way that is very different from cl 6), cl 6 could not support an implication or a conventional assumption that the market price is to be treated as being stable for any two-month period of this long term contract.
The Purchaser argues that it is in the nature of a quotation that supply might not commence until some period has elapsed after the quotation is given and it relies upon vague evidence given by one of its managers, Bill Sioulas, to the effect that time is required to put into place necessary operational arrangements for the supply of cement products. There is no evidence that it would be impractical for the Purchaser to procure a quote or offer (cl 7.1(1)) or other evidence (cl 7.1(2)) that would remain current until the Purchaser concluded the alternate supply arrangements and was ready to give a Pricing Notice. It is noteworthy in this respect that Cement Australia’s quotation dated 27 February 2019 included a statement that the quotation was open for acceptance until 1 April 2019.
Nor is the provision in cl 7.4 allowing the Supplier 20 business days after the date of the Pricing Notice to decide whether to suspend supply of Products inconsistent with the requirement for the operation of cl 7.2 that the Market Pricing Evidence provide a price for which the Purchaser is able to procure supply of the Product for a period commencing upon the date of the Pricing Notice. There is no evidence that it would be impractical for the Purchaser to procure a quote or offer of a price applicable for supply commencing at any time within that 20-business day period.
The Purchaser argues that it would be impractical for it to obtain a quotation of a price applicable to supply of a Product for a period of supply of at least six months commencing upon the date of the Pricing Notice without misleading the prospective supplier. In the absence of any evidence suggesting such a conclusion the difficulty is not apparent. As the Supplier argued, there is, for example, no apparent obstacle to the Purchaser asking a prospective supplier for a quotation the acceptance of which would be conditional upon the Supplier electing to suspend supply to the Purchaser under the Agreement.
The Purchaser advances a new argument in this appeal. It argues that cl 7.1(2) confers upon the Supplier a contractual right to accept that evidence which does not conform with cl 7.1(1) constitutes Market Pricing Evidence and that the Supplier elected to accept the Cement Australia quote as such evidence by giving notice on 18 March 2019 of an election to suspend supply of Products under cl 7.4.
The expression in cl 7.1(2) “reasonably acceptable to the Supplier” contemplates evidence that objectively establishes the acceptability of the price regardless of the Supplier’s subjective attitude. Clause 7.2 operates with reference to cl 7.1(2) only if the reasonable acceptability of the price is evident from the Market Pricing Evidence set out in the Pricing Notice. The Purchaser’s March notice did not contain anything capable of satisfying that necessary attribute of a Pricing Notice. Of course the Supplier and the Purchaser might agree upon a reduction of the price under the Agreement at any time, but any such agreement would amount to a variation of the Agreement. Clause 7.2 operates only if the Purchaser gives the Supplier a Pricing Notice in conformity with the first part of that provision.
Nor does cl 7.2 contain provisions that would be expected if the Purchaser’s construction were correct, regulating how and when the Supplier may accept a price specified in Market Pricing Evidence of the kind described in cl 7.1(2). The use of a notice of suspension of supply under cl 7.4 as a vehicle for the Supplier’s acceptance of a price described in cl 7.1(2) is not contemplated by the Agreement. For reasons given under the next heading I also conclude that the Supplier’s purported notice of suspension did not convey acceptance of the price quoted by Cement Australia.
I would affirm the trial judge’s conclusion that the notice given by the Purchaser to the Supplier on 1 March 2019 was not a Pricing Notice under cl 7.2 of the Agreement.
Senior counsel for the Purchaser submitted that the Purchaser’s case was that the Supplier had made an election between inconsistent contractual rights. The trial judge’s reasons refer both to election and waiver. The content of the latter term is notoriously uncertain; it has often been used to describe election in addition to various other matters.8 In Ace Property Holdings Pty Ltd v Australian Postal Corporation9 Keane JA discussed the distinction in a relevant context:
In the absence of any claim based upon an estoppel or a variation of the Agreement, there was nothing to disentitle the Supplier from contending that cl 7 had not operated because the Purchaser had not given a Pricing Notice as defined in cl 7.2. That conclusion accords with a series of decisions rejecting the applicability of the “waiver” doctrine in the context of an ineffective exercise of an option to renew a lease. The leading decision is Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd,11 in which Owen J, Roper CJ in Eq and Herron J discussed the doctrine in the context of a lessee’s purported exercise of an option to renew that was exercisable upon the lessee giving a written notice, punctual payment of the rent, and the due observance of covenants by the lessee. There had been many instances of unpunctual payment of rent. The lessor refused to grant a new lease when the lessee purported to exercise the option. The Full Court held that the purported exercise of the option was not an acceptance of the offer but was a counter-offer and the question whether that counter-offer had subsequently been accepted by the lessor was not litigated. In reasoning that was referred to with approval by Stephen J (Menzies J agreeing) in Bowman v Durham Holdings Pty Ltd12 the Full Court observed:
The trial judge quoted a passage in which Potter LJ concluded that “it is clear that whether or not the party entitled to notice has waived a defect upon which he subsequently seeks to rely will depend upon the effect of the communications or conduct of the parties, the intention of the party alleged to have waived his rights being judged by objective standards”, such that “in an appropriate commercial context, silence in response to the receipt of an invalid notice in the sense of a failure to intimate rejection of it may, at least in combination with some other step taken or assented to under the contract, amount to a waiver of the invalidity or, put another way, may amount to acceptance of the notice as complying with the contract pursuant to which it is given”.25
There is nothing in this case that is analogous to the relationship in Glencore between service of the NOR upon the charterer and its obligation to unload and conduct in unloading the ship. The deficiency in the purported Pricing Notice given by the Purchaser is not merely a “formal” defect of the kind found in Glencore. That decision turns upon the very different terms and commercial purpose of the charterparty. The differences between this case and Glencore are too significant to regard it as supplying substantial support for the Purchaser’s argument.
I conclude that there was no scope for application of the doctrine of election between inconsistent contractual rights or for a “waiver” of the kind for which the Purchaser contended.
I would also hold that the Supplier’s March notice did not represent, or at least unequivocally represent, that the Purchaser’s March notice was a Pricing Notice under cl 7.2. The submission for the Purchaser to the contrary understandably focused upon the heading of the notice, the statement that the notice was “given on the basis contended for by [the Purchaser], that the Pricing Notice is valid”, the sub-heading “Notice of suspension of supply under [the Agreement]”, and the text under that sub-heading. If those parts of the text are read in isolation from related parts of the text in the notice and the context in which the notice was given they might be regarded as conveying a representation that the Purchaser’s March notice was effective as a Pricing Notice under cl 7.2, but that is not a legitimate way of ascertaining the meaning of the document.
The Supplier’s letter of 15 March 2019 communicated the Supplier’s contention that the Purchaser’s March notice was not effective as a Pricing Notice under cl 7.2. The Supplier referred the dispute thereby created about the effectiveness of the Purchaser’s March notice as a Pricing Notice for resolution under the dispute resolution provision in cl 20 of the Agreement. Consistently with the 15 March letter, the Supplier’s 18 March notice described the Purchaser’s March notice as “purporting” to be a Pricing Notice under cl 7.2 and reserved the Supplier’s rights in that regard, thereby affirming that the Supplier continued to contend that the Purchaser’s purported Pricing Notice was not effective as a Pricing Notice under cl 7.2. The Supplier made it clear that it was unwilling to supply at the price specified in the purported Pricing Notice; that statement is consistent with the purported Pricing Notice being ineffective to reduce the price payable under the Agreement. After making statements that are emphasised in the Purchaser’s argument, the last paragraph in the notice refers to the Supplier’s reference of the dispute about the validity of the Purchaser’s March notice to resolution under cl 20 of the Agreement and states the letter is without prejudice to that dispute, thereby reaffirming that the Supplier continued to contend that the Purchaser’s purported Pricing Notice was not effective as a Pricing Notice under cl 7.2.
In that context, the statements upon which the Purchaser relies, including in particular the sentence immediately preceding the heading “Notice of suspension of supply under [the Agreement]”, do not convey that the Supplier accepted that the Purchaser’s March notice was effective as a Pricing Notice under cl 7.2. When the Supplier’s March notice is read as a whole and in its context it instead conveys that if, contrary to the contention made by the Supplier in correspondence and by its referral of the dispute for resolution under cl 20 of the Agreement, the Purchaser’s March notice resulted in the operation of cl 7.2, then the Supplier elected to suspend supply of Products under the Agreement with immediate effect. That strikes me as being the dominant message conveyed by the Supplier’s March notice when it is read as a whole and understood in its context. If I am wrong about that, I would conclude that the Supplier’s March notice still could not be regarded as an unequivocal election by which compliance with the first part of cl 7.2 was retrospectively rendered unnecessary for the efficacy of the Purchaser’s purported Pricing Notice.
That conclusion finds additional support in another aspect of the context in which the Supplier gave its 18 March notice. Under cl 20 the Supplier would be unable to secure a resolution of the dispute about the validity of the Purchaser’s March notice within 20 business days. A reasonable businessperson in the position of the Purchaser must be taken to have known that the Supplier would be unable to secure a resolution within that time period and that, if the Purchaser’s March notice ultimately were held to be a Pricing Notice under cl 7.2, the Supplier might wish to avoid being saddled with a reduction of the price of Products under the Agreement. That background knowledge would tend to confirm what I consider is in any event the natural meaning of the Supplier’s March notice, that the Supplier elects to suspend supply only if the Purchaser’s March Notice is effective as a Pricing Notice under cl 7.2.
The trial judge held that the Supplier’s March notice was not rendered equivocal by the statements I have discussed. The trial judge’s reasons for that conclusion depend upon his Honour’s conclusion that by giving the Supplier’s March notice the Supplier exercised a right to waive any invalidity in the Purchaser’s March notice as a Pricing Notice under cl 7.2. The trial judge considered that the exercise of that right was inconsistent with the right the Supplier purportedly reserved to insist that the Purchaser’s March notice was not a valid Pricing Notice so the Purchaser was obliged to continue to take or pay for the Minimum Quantity of Products at the prevailing price.
The trial judge quoted the observation made by Macfarlan JA in Summer Hill Business Estate Pty Ltd v Equititrust Ltd26 that “a reservation of [inconsistent] rights would likely have been ineffective because the outright exercise of one such right usually constitutes an election not to exercise the other, whatever reservation might have been made (see Haynes v Hirst (1927) 27 SR (NSW) 480 where a party unsuccessfully sought to ‘protect himself against the legal consequences of his acts by stating that he [did] them without prejudice’ (at 489))”. That statement concerned a case in which the party found to have made an election exercised a right by doing an act that was inconsistent with the subsistence of an alternative right available to the same party, whilst at the same time stating that it reserved its rights. Macfarlan JA added that, “If there has not been any outright exercise of one of the rights, reservations by a party of its rights may assist in depriving its conduct of the necessary unequivocal character.”27
Similarly, in Craine v Colonial Mutual Fire Insurance Co Ltd28 Knox CJ, Isaacs and Starke JJ cited Davenport v The Queen29 for the proposition that “[a] man is bound by what he does, and he cannot alter what he does by saying he is doing it ‘without prejudice’” and observed:30
The trial judge’s reasons for preferring the Purchaser’s construction may be summarised as follows:(a)Clause 7.6 must be construed in the context of the Agreement as a whole, particularly the adjustment mechanism in cl 7.(b)That mechanism could be engaged when the Purchaser could demonstrate a fall below the price prevailing under the Agreement of the market price upon the bases described in paragraphs (a) – (d) of the definition of Market Pricing Evidence in cl 7.1(1). (For present purposes the most significant part of the definition is the provision in paragraph (c) that the price be for “supply of an aggregate volume of at least 10,000 tonnes per month (on average)”.)(c)The words of cl 7.6 provide some support for the Supplier’s argument, but when the Agreement was made a reasonable businessperson would have thought that the parties intended supply to recommence when the circumstances relied upon to justify suspension no longer existed.(d)Such a person therefore would have concluded that the inability to procure supply or the choice not to procure supply described in cl 7.6 was referrable to supply upon the bases described in paragraphs (a) – (d) of cl 7.1(1).
The Supplier referred to aspects of the text of cl 7 and the context as support for the construction rejected by the trial judge. The Supplier’s argument is not insubstantial but I am persuaded that the trial judge’s construction is correct. In particular, the reason for that construction summarised in subparagraph (c) of the preceding paragraph is compelling.
It is appropriate first to focus attention upon the text of the contested provision in its context. The circumstance that cll 7.2 and 7.3 are directly concerned with the price of supply under the Agreement whereas cll 7.4 to 7.6 are directly concerned with suspension of supply under the Agreement arguably supports the Supplier’s contention that the term “supply” in cl 7.6 is related to characteristics of supply under the Agreement, rather than supply upon the terms described in the definition Market Pricing Evidence in cl 7.1(1). As the Supplier also pointed out, in the first part of cl 7.6 the reference to the “supply of Products” suspended under cl 7.4 refers to supply of the quantities stipulated in the Agreement. The reference to the obligation of the Purchaser to “resume purchasing Products” equally clearly refers to purchasing the quantities stipulated in the Agreement. The Supplier argued that in that context the word “supply” in “procure supply from” in the second part of the clause is shorthand for “supply of Products”, meaning a supply of Products in the quantities stipulated in the Agreement.
The force of that argument is diminished by other parts of the text:(a)The first part of cl 7.6 (before the word “if”) describes what had been suspended and would be resumed under the Agreement, whereas the second part of the clause addresses the different topic of the condition, the satisfaction of which would result in the operation of the first part of the clause.(b)The reference in the second part of cl 7.6 to supply from “a third party supplier (excluding any supplier in which any Related Body Corporate of the Purchaser holds a material shareholding)” directs attention to a supply by a supplier of the kind described in the definition of Market Pricing Evidence in cl 7.1. That is not to say that cl 7.6 would operate merely if the Purchaser procured supply from a supplier other than the supplier who made the offer or gave the quote set out in the Pricing Notice – the use of the indefinite article before “third party supplier” is opposed to such a construction – but it remains significant that the characteristic of the supplier described in the second part of cl 7.6 corresponds with the expression in each paragraph of cl 7.1 “another supplier (excluding any supplier in which any Related Body Corporate of the Purchaser holds a material shareholding)”.(c)The condition upon which cl 7.6 operates is that the Purchaser “ceases to be able to … procure supply … at the price specified in the Pricing Notice”. That requires the conclusion that cl 7.6 does not operate whilst the Purchaser obtains supply from a supplier at the price that was provided by a supplier upon the bases described in cl 7.1. The implication is readily available that cl 7.6 is not triggered whilst the Purchaser obtains supply from a supplier in the quantities, at the price, and otherwise in accordance with cl 7.1(1)(a) – (c).(d)The word “Products” is repeatedly used in conjunction with the word “supply” to identify the many references to “supply” in cl 7.4, cl 7.5 and the first part of cl 7.6 as a supply under the Agreement and in none of those provisions is the single word “supply” used as a shorthand reference to supply under the Agreement. That usage is to be contrasted with the repeated use in cl 7.1 of the word “supply” to connote supply by an independent third party supplier outside the Agreement. In that context, the fact that the single word “supply” in the second part of cl 7.6 appears shortly after the expression “supply of Products” in the same clause does not provide substantially more support for the Supplier’s construction than it does for the Purchaser’s construction.(e)The Supplier’s construction requires “supply” to be construed, not as a shorthand reference to supply of Products under the Agreement, but as meaning something along the lines of “supply of quantities the Purchaser would be required to purchase from the Supplier if supply under the Agreement were not suspended”. No departure from the text of that magnitude is required if “supply” is instead construed as a reference back to supply in accordance with paragraphs (a) – (d) of cl 7.1(1).
As to the broader context, cl 7 empowers the Purchaser to obtain a reduction in the price for supply by the Supplier of a Product under the Agreement to a lower price quoted or offered by an independent third party supplier in accordance with cl 7.1(1) (or otherwise evidenced in accordance with cl 7.1(2)) for supply during a period of at least six months of an aggregate volume of the Product of 10,000 tonnes (or a larger tonnage at the Purchaser’s option) per month (on average), unless the Supplier duly elects to suspend supply of Products under cl 7.4, in which event it is to be expected that the Purchaser could purchase Products at the lower price from an independent third party supplier without being bound to fulfil what otherwise would be its take-or-pay obligations under the Agreement.
Clause 7 thereby provides for a major revision of the parties’ bargain reflected in other provisions of the Agreement merely upon the Purchaser giving to the Supplier Market Pricing Evidence providing for a price for supply of Products in conformity with cl 7.1(1), including as to the quantity described in paragraph (c) of that clause. That consideration tends to confirm the force of the trial judge’s observation that “a reasonable businessperson standing in the shoes of the parties at the time of entering into the contract … would have thought that the parties intended supply to recommence when the circumstances relied upon to justify suspension in the first place no longer existed”.36
The weight of the considerations favouring the trial judge’s construction is not diminished by the fact that the words “at least” in cl 7.1(1)(c) allow for Market Pricing Evidence that does provide for a price for supply of the quantity otherwise required under the Agreement. The circumstance that an average monthly quantity of 10,000 tonnes is approximately equivalent to a monthly average derived from the Minimum Quantity applicable at the commencement of the Agreement is not an indication that cl 7.1(1)(c) contemplated minimum tonnages that increased year by year in accordance with increases in the Minimum Quantity under the Agreement. The stark difference between the text of cl 7.1(1)(c) and the provisions about quantity in the Agreement suggests the opposite conclusion.
The Supplier argues that the trial judge’s construction of cl 7.6 could not reflect the contractual intention because it would be practically impossible before the end of the Suspension Period (at the latest, six months after the Supplier elects to suspend: cl 7.5(1)) to prove that the Purchaser had ceased to be able to, or had chosen not to, procure “supply for a period of at least 6 months” (cl 7.1(1)(b)) “of an aggregate volume of at least 10,000 tonnes per month (on average)” (cl 7.1(1)(c)). The Supplier argues that its construction is preferable because (after one month of the suspension period had elapsed) there would be no difficulty in proving whether or not the Purchaser had purchased the minimum quantity that it otherwise would have been required to purchase for a consecutive three-month period.37
Even upon the Supplier’s construction it never could prove that the Purchaser had not procured from a third party supplier the annual tonnage the Purchaser otherwise would have been required to purchase from the Supplier or pay for if it did not purchase. More importantly, it is not a condition of the operation of cl 7.6 that the Purchaser had not in fact procured supply from an independent supplier of the quantities to which the clause refers. The condition refers instead to an inability to procure such supply or a choice by the Purchaser not to procure such supply. In a particular case evidence that the Purchaser had not procured supply of the relevant quantities by the end of a relevant period might support an inference that one or other of those conditions had been satisfied, but there is no reason to think that these well-resourced parties could not obtain other relevant evidence, such as evidence about the availability of supply by a third party supplier unrelated to the Purchaser for relevant periods at the price specified in a Pricing Notice and about whether or not the Purchaser had entered into supply contracts upon the relevant terms.
The Supplier argues that the purpose of cl 7 is to allow the List Prices under the Agreement to be adjusted downwards to the current market price for cement on an ad hoc basis or to allow the Purchaser an opportunity to achieve the same result by buying cement in the general market. Upon that premise the Supplier argues that the contractual purpose is not served if, during a Suspension Period which the Purchaser precipitated by serving a Pricing Notice, the Purchaser is not willing or able to purchase its full contractual quota of cement from an independent supplier at the price specified in the Pricing Notice; that would suggest that the Market Pricing Evidence did not accurately indicate the market price for the full contractual quota of cement being sold under the Agreement or that the Purchaser was using the suspension to benefit a related company.
I earlier mentioned that cl 7 may be seen to be an augmentation of the provisions for market reviews. That is consistent with the use of the quantity specified in cl 7.1(1)(c) in relation to the operation of both cl 7.2 and cl 7.6. The Supplier’s argument about the contractual purpose of a suspension does not establish but instead assumes that the purpose is to permit the Purchaser to purchase from an independent supplier the Minimum Quantity of cement it otherwise would have been required to purchase or pay for under the Agreement. The argument does not explain why the definition of Market Pricing Evidence in cl 7 allows for the Purchaser to give a Pricing Notice providing a price at which the Purchaser can procure a quantity that is clearly described in cl 7.1(1) by reference to a specified minimum quantity that differs markedly from the descriptions in cl 8.2 and cl 8.9 (one of which is said to be applicable on the Supplier’s construction).
Clause 7 does not support the assumption of the Supplier’s argument that during a Suspension Period it is inappropriate for the Purchaser to choose to purchase cement from a supplier related to it whilst it continues to purchase from an independent supplier the quantity of cement described in the Market Pricing Evidence. The Purchaser’s conduct in obtaining supply from a related company in those circumstances has no adverse impact upon the Supplier, given that the Supplier must earlier have elected to suspend supply after deciding to forgo the benefit to it of the Purchaser’s take-or-pay obligations upon the basis of the lower price in the Pricing Notice. Nor should such conduct by the Purchaser be taken to indicate that the market price had risen after the date of the Pricing Notice; that would be inconsistent with the parties’ agreement that the price under the Agreement would be reduced to a price provided for in the Market Pricing Evidence described in cl 7.1 unless the Supplier elected to suspend supply.
For these reasons, which largely reflect reasons given by the trial judge, I consider that the trial judge’s construction is correct.
Accordingly, if (contrary to my view) the Supplier’s March notice created a Suspension Period from 18 March 2019 in accordance with cl 7.5, I would hold that the Suspension Period was not brought to an end pursuant to cl 7.6.
In my respectful opinion the different construction contended for by the Purchaser is also reasonably open on the text and should be adopted for the following reasons.
The Supplier emphasises the proposition that an entitlement to give a Pricing Notice during a Suspension Period is inconsistent with cl 7.5(4). The Supplier argues that the right reserved by the concluding words of that provision arises only “at the end of the Suspension Period” as provided in the introductory text. That argument does not give effect to the text of cl 7.5(4) when it is read as a whole and in its context. The effect of that provision is that the right given to the Purchaser by cl 7.2 to give a Pricing Notice “at any time and from time to time” qualifies the obligation of the Supplier to recommence supply at the prevailing List Prices “at the end of the Suspension Period”. Upon the trial judge’s construction, the giving of a further Pricing Notice never could qualify the Supplier’s obligation to recommence supply at the prevailing List Prices “at the end” of a Suspension Period. The Purchaser would instead be obliged to wait until the end of the Suspension Period before giving a further Pricing Notice, resume purchasing from the Supplier at the List Prices, and then await the Supplier’s decision at a time of its choice within 20 business days whether to elect to suspend supply with reference to the further Pricing Notice. If the Supplier then elected to suspend supply again, the Purchaser would again need to change its supplier after the short period during which it had purchased from the Supplier at the prevailing List Prices. (That disruption would be avoided only in a case in which the Supplier did not again elect to suspend supply, in which event the concluding clause of cl 7.4 would result in effect being given to the reduction of the prevailing price to the Pricing Notice price.) Furthermore, that construction of cl 7.5(4) renders its concluding words otiose, there being no possible doubt that cl 7.2 allows a Pricing Notice to be given at the end of a Suspension Period.
Clause 7.2 both expressly contemplates the Purchaser giving Pricing Notices “at any time and from time to time” and adverts to cl 7.4, which empowers the Supplier to respond to a Pricing Notice by electing to suspend supply. Clause 7.2 must also be understood in the context that the only other provision that directly addresses the circumstances in which a Pricing Notice is effective, cl 7.3, qualifies the right of the Purchaser under cl 7.2 to give successive Pricing Notices at times chosen by it only in a case in which the Supplier does not elect to suspend supply in response to the Pricing Notice. In these circumstances cl 7.2 powerfully supports a construction of cl 7 under which effect is given to a Pricing Notice (or Notices) given during a Suspension Period.
Clause 7.5(4) is readily reconcilable with cll 7.2 and 7.3 by construing the introductory words “at the end of the Suspension Period” as relating only to the immediately following words obliging the Supplier to recommence supply at the prevailing List Prices. The concluding words after the second comma then have their required effect “in accordance with clause 7.2” of allowing a Pricing Notice to be given during the Suspension Period. Consistently with the language of the second part of cl 7.5(4), a Pricing Notice given at least 20 business days before the end of a Suspension Period will produce either a reduction of the relevant List Price payable at the end of the Suspension Period or avoidance of what otherwise would be the Supplier’s obligation at the end of the Suspension Period to recommence supply at the prevailing List Prices.
Upon that construction of cl 7.5(4), which is in my view the most natural construction when the context is considered, that clause is consistent with and confirms the Purchaser’s right under cl 7.2 to give successive Pricing Notices at times that suit it, including during Suspension Periods. Otherwise, cll 7.5 and 7.6 directly address the parties’ rights and obligations only in relation to one Suspension Period created with reference to one Pricing Notice, rather than the effectiveness of a further Pricing Notice given after the commencement of a Suspension Period created with reference to an earlier Pricing Notice.
Furthermore, the commercial purpose of cl 7 is to ensure that the Purchaser can take advantage of a reduction in the market price that is otherwise not catered for by the relatively infrequent market price reviews under the Agreement. One obvious case for its application is where a fall in the market price after a market review is followed by a gradual increase (or fluctuations) in the market price during which it remains below the prevailing List Price for the relevant Product for a long period before the next market review years later. In such a case, a succession of Pricing Notices might be met by a succession of suspensions, each of which would (on the Supplier’s construction) be punctuated by short periods. The purpose of cl 7 would not be fulfilled by construing it as allowing for those short periods every six months during which the Purchaser would be obliged to revert back to purchasing at above the market price (ascertained in the way required by cl 7.1) from the Supplier before reverting to a different supplier to continue purchasing below the prevailing price under the Agreement. The purpose also would be frustrated by premature cessation of a Suspension Period under cl 7.5(1)(c) and cl 7.6 even when the Purchaser is able to give a Pricing Notice providing for a price lower than the prevailing List Price. The Supplier did not develop its argument that subjecting the parties to such disruptive arrangements would have a conciliating effect upon them. That seems singularly unlikely.
The Purchaser’s construction does not involve any incongruity in the text of cl 7 in circumstances where the giving of a Pricing Notice during a Suspension Period does not result in the Supplier electing to suspend supply; the resulting reduction in the prevailing List Price does not imply that the Purchaser has an obligation to pay that price during the Suspension Period.
There remains the significant textual incongruity upon the construction I prefer that the Supplier’s election to suspend supply during a Suspension Period will have no effect upon the already suspended contractual rights and obligations during the period in which the subsequent Suspension Period overlaps with the existing Suspension Period. The apparent significance of the incongruity is reduced by an appreciation that cll 7.4 to 7.6 are directly addressed to the consequences of a particular Pricing Notice rather than the relationship between different Pricing Notices or different Suspension Periods resulting from them. Notwithstanding the incongruities of that kind that arise upon the Purchaser’s construction, that construction is preferable; it serves the evident commercial purpose of cl 7, it avoids the possibility of the inconvenient disruptions that may arise upon the Supplier’s construction, and it avoids the unacceptable result of the Supplier’s construction that, despite the provision in cl 7.2 allowing the Purchaser to give Pricing Notices “at any time and from time to time”, a Pricing Notice could not be given sooner than six months after a preceding Pricing Notice (except when a Suspension Period related to the earlier notice is prematurely brought to an end before six months).
I would hold that the Purchaser’s October notice was effective as a Pricing Notice under cl 7.2.
(1973) 131 CLR 8 at 17 – 18. ↩
(1957) 76 WN (NSW) 72 at 74 – 75. ↩
BS Stillwell & Co Pty Ltd v Budget Rent-A-Car System Pty Ltd [1990] VR 589 at 603 – 604 (Gray J, Crockett J agreeing) and Tripple A Pty Limited v WIN Television Qld Pty Ltd [2018] QCA 246 at [37] – [51] (Bowskill J, Morrison and Philippides JJA agreeing). ↩
(2008) 238 CLR 570 at 591 – 592 [64] – [66] (Gummow, Hayne and Kiefel JJ). ↩
[1994] 2 Qd R 390 at 395 (McPherson JA), 403, lines 17 – 29 (Dowsett J). Fitzgerald P’s dissenting judgment does not turn upon the point in issue here. ↩
[2010] NSWCA 178 at [66] – [68] (Handley AJA, McColl and Basten JJA agreeing). ↩
[2015] ACTCA 53 at [73] (Murrell CJ, Perry J and Walmsley AJ). ↩
Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153; Gange v Sullivan (1966) 116 CLR 418; Bedroff Pty Ltd v Rennie [2002] NSWSC 928; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Excel Quarries Pty Ltd v Payne (1996) Q Conv R 54-473; and Hawker v Vickers [1991] 1 NZLR 399. Those kinds of cases are discussed in Donaldson v Bexton [2007] 1 Qd R 525. ↩
Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at 587 [52] and footnote 69 (Gummow, Hayne and Kiefel JJ). ↩
[2002] 2 Lloyd’s Rep 487. ↩
Reasons [84] – [85]. ↩
[2002] 2 Lloyds Rep 487 at [3] and [72] (Potter LJ, Arden LJ and Sir Denis Henry agreeing). ↩
[2002] 2 Lloyds Rep 487 at [72] (Potter LJ). ↩
Reasons, quoting from Potter LJ’s reasons at [66]. ↩
[2011] NSWCA 149 at [26] (Campbell and Young JJA agreeing). ↩
[2011] NSWCA 149 at [26]. ↩
(1920) 28 CLR 305. The High Court’s decision in that case was based upon estoppel rather than election: see at 311 – 314, 319 (“… the only contested element of estoppel having been found against the defendant, the question is whether the evidence was sufficient in law to support the finding of the jury”), and 326 – 329. ↩
3 App Cas 115 at 131. ↩
(1920) 28 CLR 305 at 324 – 325 (Knox CJ, Isaacs and Starke JJ). ↩
(1920) 28 CLR 305 at 325. ↩
(1920) 28 CLR 305 at 325. ↩
Unreported, Supreme Court of New South Wales, 27 August 1975 at 3 – 14, 57, 65 – 67. ↩
For the latter proposition, the Purchaser cited GSS Investments Pty Ltd v Lopiron Pty Ltd (1987) 16 FCR 15 at 31; Mitchell v Pattern Holdings Pty Ltd (2002) 11 BPR 20,241; [2002] NSWCA 212 at [55] – [57] (Powell JA, Stein JA and Rolfe AJA agreeing); Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd [2014] 2 Qd R 132 at 145 [75] – 146 [77] (Jackson J). ↩
Reasons [100] – [102]. ↩
Reasons [110](d). ↩
The Supplier could do so if the proper construction of cl 7.6 allows for reference to the preceding two months’ supply from the Supplier to the Purchaser for the purpose of determining the question. ↩
Reasons [132]. ↩
The trial judge explained that, despite the literal meaning of the expression “at the price specified in the Pricing Notice” in cl 7.6, given that cl 7.6 protected the Supplier’s choice not to lower its prices to meet the price specified, the relevant focus of cl 7.6 was upon the Purchaser procuring supply at prices above the price specified. ↩
It appears from the parties’ submissions that supply under the Agreement resumed from 22 October 2019. ↩