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[2025] NSWSC 747
General information, not legal advice.
Supreme Court of NSW
2025-07-14
Harrison AsJ
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Weston Energy Pty Ltd v National Ceramic Industries Pty Ltd [2025] NSWSC 747
Hearing dates: 1 October 2024 – 4 October 2024, 10 October 2024
Date of orders: 14 July 2025
Decision date: 14 July 2025
Jurisdiction: Common Law
Before: Harrison AsJ
Decision: (1) Costs are reserved.
(2) The parties are to file short submissions as to costs (a maximum of three pages each) by 5pm 21 July 2025.
(3) The parties are to file short minutes of order: reviewing my calculations regarding the quantum of damages (for example, calculation of GST) by 5pm 21 July 2025.
Catchwords: RESTITUTION — unjust enrichment — contractual interpretation
CONSUMER LAW — misleading or deceptive conduct — wholesale price-capped gas contract — representations — insurance — causation — reliance
EQUITY — equitable set-off — proper time of application
Legislation Cited: Civil Procedure Act 2005 (NSW)
Competition and Consumer Act 2010 (Cth)
Trade Practices Act 1974 (Cth)
Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited: AMP v Specialist Funding Consultants (1991) 24 NSWLR 326
Australian Securities & Investments Commission v Fortescue Metals Group Ltd [No 5] [2009] FCA 1586
Australian Securities & Investments Commission v Rich (2009) 75 ACSR 1
Blatch v Archer (1774) 1 Cowp 63
Briginshaw v Briginshaw (1938) 60 CLR 336
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304
Concrete Constructions v Dalma Formwork [1999] NSWCA 16
Cullen v Trappell (1980) 146 CLR 1
Dedakis v Deligiannis [2024] NSWSC 1018
Dig It Landscapes Pty Ltd (in liq) v Bupa Aged Care Australia Pty Ltd (No 2) [2024] FCA 31
Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640
Equuscorp Pty Ltd v Glengallen Investments Pty Ltd (2004) 218 CLR 471
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Henville v Walker (2001) 206 CLR 459
Hexiva Pty Ltd v Lederer (No 2) [2007] NSWSC 49
Ho v Powell (2001) 51 NSWLR 572
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216
Jobbins v Capel Court Corporation Ltd (1989) 91 ALR 314
Jones v Dunkel (1959) 101 CLR 298
Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1988] FCA 88
Manly Council v Byrne and Anor [2004] NSWCA 123
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506
Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 105
O’Donnell v Reichard [1975] VR 916
Parkdale Custom Built Furniture Pty Ltd v Puxu (1982) 149 CLR 191
Rawson v Samuel (1841) Cr & Ph 161; 41 ER 451
Roadshow Entertainment v (ACN 053 006 269) Pty Ltd Receiver & Manager Appointed (1997) 42 NSWLR 462
Self-Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd (2023) 277 CLR 186
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Stapley v Gypsum Mines Ltd [1953] AC 663
Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125
Wardley Aust Ltd v Western Australia (1992) 175 CLR 514
Warner v Hung (No 2) (2011) 297 ALR 56
Watson v Foxman (1995) 49 NSWLR 315
Westpac Banking Corporation v Jamieson [2015] QCA 50
Wilson v Arwon Finance Pty Ltd [2020] WASCA 137
Texts Cited: C Lockhart, The Law of Misleading or Deceptive Conduct (LexisNexis, 6th ed, 2023)
J J Spigelman, ‘Contractual Interpretation: A Comparative Perspective’ (2011) 85 ALJ 412
R Meagher, D Heydon, M Leeming, and P Turner, Meagher Gummow & Lehane’s Equity Doctrines & Remedies (LexisNexis, 5th ed, 2015)
S A Christensen and W D Ducan, The Construction and Performance of Commercial Contracts (Federation Press, 3rd ed, 2023)
Category: Principal judgment
Parties: Weston Energy Pty Ltd (Plaintiff/Cross-Defendant)
National Ceramic Industries Australia Pty Ltd (Defendant/Cross-Claimant)
Representation: Counsel:
S Fitzpatrick SC (Plaintiff/Cross-Defendant)
M S White SC (Defendant/Cross-Claimant)
Solicitors:
Unsworth Legal (Plaintiff/Cross-Defendant)
Hall and Wilcox (Defendant/Cross-Claimant)
File Number(s): 2022/00260597
Publication restriction: Nil
JUDGMENT
Introduction
Background
Pleading framework
Existing contract and offers
2020 contract
First Weston Offer
Second Weston offer
Third Weston Offer — Final Contract
The witnesses’ evidence
The evidence of Christopher Paul Schneider
The evidence of Amin Gholami
The evidence of Garbis Simonian
The evidence of James Aram Simonian
The absence of Ralph Willy — Jones v Dunkel inference?
Unjust enrichment
Principles of contractual interpretation
Ceramics’ submissions
Weston’s submissions
Resolution
Section 18 of the Australian Consumer Law
Ceramics’ submissions
Weston’s submissions
Overview of the law
Evidentiary onus
State of mind of the contravenor
Characterisation of the impugned conduct
Causation
Damages
Equitable set-off
Conclusion
Interest
Costs
Orders
Proposed Orders
This judgment involves a ‘price cap’ agreement for the wholesale supply of natural gas.
The plaintiff/cross-defendant is Weston Energy Pty Ltd (‘Weston’), represented by S Fitzpatrick of senior counsel. The defendant/cross-claimant is National Ceramic Industries Australia Pty Ltd (‘Ceramics’), represented by M S White of senior counsel.
Weston relied on the affidavits of:
Garbis Simonian (‘Mr Simonian’), the director of Weston and father of James Aram Simonian, dated 10 August 2023 (‘GS-A’);
James Aram Simonian (‘James’), a director of Weston, dated 2 December 2022 (‘JS-A 1’) and 10 August 2023 (‘JS-A 2’);
Amin Gholami (‘Dr Gholami’), the Executive Manager of Customer Operations at Weston, dated 9 August 2023 (‘AG-A’).
Ceramics relied on the affidavits of Christopher Paul Schneider (‘Mr Schneider’), the managing director of Ceramics, dated 9 February 2023 (‘CPS-A 1’); 15 September 2023 (‘CPS-A 2’); and 26 August 2024 (‘CPS-A 3’). There was also an exhibit to these affidavits (‘CPS-A Ex’).
Ceramics also relied on two expert reports of Mr Arnold Shields (‘Mr Shields’), dated 10 February 2023 (‘the original report’) (CB536–785) and 30 September 2024 (‘the supplementary report’) (Exhibit 1, tab 2) which relate to the quantum of damages sought by Ceramics.
With the exception of Mr Shields, each of the above-named deponents were cross-examined.
Weston was a supplier of natural gas to commercial clients. Ceramics is a manufacturer of tiles and uses natural gas to fire its kilns.
In January 2018, the parties entered into a gas supply agreement for the 2018 and 2019 calendar years (JS-A 2 at [9]).
On 19 December 2019, the parties executed a new agreement for the 2020 and 2021 calendar years (JS-A 2 at [12]). In December 2020, this agreement was renegotiated, and was extended to cover the 2021 and 2022 calendar years (JS-A 2 at [14]). Under this arrangement, Weston would charge Ceramics the ‘wholesale market price’, that is, the ‘spot price’ of natural gas.
In early 2022, Mr Schneider had begun to search for new offers for gas supply contracts. It engaged NUS Consulting Group (‘NUS Consulting’) to assist (CPS-A 1 at [19]–[20]). In February 2022, Mr Schneider instructed Ralph Willy (‘Mr Willy’) of NUS Consulting to conduct a tender on behalf of Ceramics (CPS-A 1 at [21]–[23]).
Mr Willy conducted the tender, seeking offers on both ‘capped spot price’ contracts and fixed price contracts (CPS-A 1 at [24]).
On 15 February 2022, Mr Willy sent an email to Weston seeking both a fixed price offer and a capped spot price offer (JS-A 2 at [19]; CPS-A 1 at [24]). On 24 February, Mr Willy received a response from Dr Gholami with a fixed price quote (CPS-A 1 at [26]) (‘the first Weston offer’).
On 28 February 2022, Mr Willy informed Mr Schneider that of all offers received, Weston provided the best ‘capped spot price’ offer and Shell Energy (‘Shell’) the best fixed rate offer (CPS-A 1 at [24]–[28]).
On 1 March 2022, Dr Gholami provided a further offer to Mr Willy. This was a ‘capped spot price offer’. The ‘cap’ would apply for one month of the year (a month of Ceramics’ election) and would limit the rate that Ceramics would pay for natural gas in that month (CSP-A 1 at [32]) (‘the second Weston offer’).
On 2 March 2022, Dr Gholami phoned Mr Schneider to obtain feedback on the second Weston offer. Mr Willy seems to have expressed Ceramics’ desire for a 12-month price cap, as opposed to only a one-month price cap (AG-A at [14]). Following this conversation, Dr Gholami called James to discuss the possibility of such a term in a potential third offer (AG-A at [15]). During this conversation, Dr Gholami simultaneously called Mr Schneider and merged the calls; in this conversation James and Mr Schneider seem to have directly addressed a possible 12-month price cap (AG-A at [16]).
At 10:42am on 2 March 2022, after the three-way conversation, Dr Gholami emailed both Mr Willy and Mr Schneider with a revised contract (‘the third Weston offer’) (AG-A at [21]).
The covering email reads:
“Good morning Ralph and Chris,
Thank you very much for taking the time this morning to help us improve our offer such that we could meet your expectations.
Please see attached the updated contract with 12 months price cap of $15/GJ. We’re happy to start the capped retail margin from 1/Mar but let the insurance start 1/Apr so you’ll have one extra month coverage in 2023.
I hope this helps to get this deal over the line and continue our long-term relationship with you.
Please feel free to contact me on my mobile if you have any questions.”
[My emphasis]
Attached to that email was the new agreement that is at the heart of this dispute. The critical clauses are 1.5 and 1.8, which are found in the schedule to the contract. They are reproduced a little later in the judgment, under the sub-heading ‘Third Weston Offer’. A copy of the whole agreement can be found at CB43–71, Annexure A to JS-A 1.
On 3 March 2022 Mr Schneider signed the contract on behalf of Ceramics and sent it, by way of email, to Dr Gholami and James (CPS-A 1 at [42]). On 4 March 2022, James countersigned and returned the same to Ceramics (JS-A 2 at [29]).
The agreement was executed about 10 days before Russia had begun its 2022 invasion of Ukraine. The aggravation of this conflict caused the price of natural gas to become volatile and to soar. Mr Simonian referred to this as a ‘black swan event’ (T222 [50]).
As a result, on 24 May 2022, the Australian Energy Market Operator (‘AEMO’) suspended Weston’s trading licence for exceeding its trading limit (JS-A 2 at [37]–[50]).
Clause 15.1(c) of the contract reads:
“(c) Weston Energy may terminate this Agreement with immediate effect by giving written notice to the Customer if:
(i) Weston Energy’s registration in respect of the STTM hub to which the registration relates is suspended by AEMO for any reason; or if we are no longer permitted to sell Gas under a regulatory requirement for any reason.”
On 23 May 2022, in anticipation of the suspension, Weston terminated the contract with Ceramics under cl 15.1(c)(i) by way of email (JS-A 1 at [7]).
Having lost the benefit of the contract, Ceramics was compelled to source its natural gas from Origin Energy at a greatly increased price (CPS-A 1 at [64]–[68]).
The starting point is the pleading framework. On 1 September 2024, Weston filed a Statement of Claim (‘SOC’) seeking payment of an invoice for gas supplied in the billing period just preceding its suspension. It is alleged that Ceramics owes, excluding interest, a debt of $664,983.42 to Weston.
On 19 September 2024, Ceramics filed an Amended Defence (‘AD’) and an Amended Statement of Cross-Claim (‘AXC’) which raised the same matters as each other. Ceramics focused on the failure of Weston to obtain ‘price capping insurance’ and said that its losses flowed from this omission. Ceramics accepted that it had not paid for gas that it had used but plead that it was entitled to:
damages for breach of contract;
damages for misleading or deceptive conduct;
restitution; and
an equitable set-off on the claim for the unpaid invoice by virtue of the foregoing.
The quantum of damages sought by Ceramics’ cross-claim is in excess of $9 million.
On 19 July 2023, Weston filed a Further Amended Defence to Cross-Claim (‘FADXC’). It plead that Weston was never obliged to obtain any ‘price capping insurance’ and so could not be liable for any loss which flowed from the omission. It admitted that no such insurance was ever obtained. It denied that it was in breach of contract, that it had engaged in misleading or deceptive conduct, or that it was liable for restitution.
The dispositive questions in issue turn on the term ‘price capping insurance’, which, as Weston correctly submitted, is a term which ‘never [appears] in any primary document’.
In the third and final offer of Weston’s which Ceramics accepted, natural gas was charged on a ‘capped spot price’ model — that cap was set at $15/GJ. This means that Ceramics would pay for natural gas at the spot price up to and including $15/GJ. For example, if the price was $9/GJ, Ceramics would pay $9/GJ. However, if the price were to exceed $15/GJ (as it in fact did), for example, if the price were $20/GJ, Ceramics would nonetheless pay $15/GJ. A ‘premium’ of $0.15/GJ was paid by Ceramics to Weston for this ‘price cap’. An additional retail margin ranging around $1/GJ would also be paid. This is uncontested.
As I understand it, any ‘price capping insurance’ if Weston had in fact obtained it would operate to secure Weston against gas price fluctuations above $15/GJ. Were the wholesale gas price so to increase, the policy would be engaged to reimburse Weston. The increased stability of its gas supplier would thereby benefit Ceramics.
As mentioned above, no such policy was ever obtained. In fact, Dr Gholami said that to his and to Weston’s knowledge, no such policy was available at that time (T194–195, 211, 214).
In late 2017, Ceramics was first attracted to Weston because it provided gas at spot price, which was at that time more favourable to the more widely offered fixed price offerings (CB 325).
The original Weston 2020 contract (‘Weston 2020 contract’), is an example of that pricing model. The key contract details in cl 1.5 provided for the gas cost to be the spot price, that is the 'wholesale market price', and Weston's revenue was limited to the 'retail margin charge', which was a percentage of the cost of the gas purchased by Ceramics (CB 312).
The relevant part of the original agreement extracted is below:
The ‘Trade Credit Insurance Policy’ is separate from the ‘price cap’ insurance policy which sits at the heart of this dispute. During the hearing there was some evidence given by Mr Schneider as to the Trade Credit Insurance Policy. In previous agreements with Weston, Ceramics was required to provide a bank guarantee in favour of Weston. That arrangement changed after Weston secured the Trade Credit Insurance Policy that protected it from any losses due to unpaid invoices arising from a customer’s bankruptcy, default, or other agreed reasons. Subsequently, the need and cost of a bank guarantee from Ceramics became redundant. There is an express reference to trade credit insurance in cl 1.5 of the contract; Weston absorbed the cost associated with the policy and did not pass it on to Ceramics (T63 [5]–[15]).
The Weston 2020 contract was not due to expire until 31 December 2022. However, due to rising gas prices in February 2022, Ceramics decided to tender and explore the wholesale gas supply market for a replacement of its current contract, seeking either fixed price or capped price contracts. That is to say, it sought to manage its risk exposure through either:
a fixed price contract, under which the price it paid for gas would remain constant for the term of the contract, irrespective of the market price for gas; or
a capped price contract, under which the price it paid for gas would vary with the prevailing market price, but an upper limit would be set such that it would not pay above a certain maximum price, even where this price was surpassed by the market price.
In tendering for gas supply contracts, Ceramics acted through its broker, Mr Willy. Mr Willy primarily dealt with Mr Schneider, the general manager of Ceramics, and Dr Gholami, the executive manager of customer relations at Weston.
On 15 February 2022, on instructions from Ceramics, Mr Willy sought from Weston, among other gas retailers, proposals based on the two different types of gas contracts that were to commence on 1 January 2023 (CB319). These offers were to be based on either a fixed price model or on a spot pricing model.
On 24 February 2022 Weston provided a response that offered neither a fixed price proposal, nor a simple capped spot price proposal. Rather, Weston offered what Dr Gholami described in a covering email as an ‘offering based on the wholesale gas price supported by a fixed block hedge to improve the certainty of this pricing model’ (CB325). Mr Willy described it to Mr Schneider as 'a kind of a hybrid (mixture of fixed price and spot market)' (CPS-A 1 at [27]; CB326).
The 'key contract details' in cl 1.5 provided for the 'gas cost' to be an 'effective price based on the ex-ante price in Sydney STTM Hub adjusted against the CFD as per Schedule 2: “Fixed Price Gas blocks”’. Weston's revenue would include a 'retail margin charge' calculated on different terms to the Weston 2020 contract. That charge was now to be based on the volume of gas supplied, rather than its cost (CB350). The term of the contract was to start on 1 July 2022; that is, before the scheduled end of the Weston 2020 contract.
The ‘price cap’ was set out in cl 1.8. It was described as ‘price insurance’ which would ‘cap’ the price ‘at $15.00/GJ triggered on a monthly value of the effective price’. No ‘premium’ would be charged for the 12 month ‘term’ of the price insurance, but ‘renewal’ would be considered ‘on an annual basis’.
Mr Schneider accepted in his cross-examination that 'Dr Gholami was using the word "premium" to mean a charge that was [on the terms of the first Weston offer] not going to be levied for this price cap' (T56 [26]-[28]).
The relevant parts of the first Weston offer are extracted below:
This offer at cl 1.8 provides price insurance for the effective monthly price. One of the terms of cl 1.8 entitled ‘renewal stipulated that the price insurance is to be reviewed on an ‘annual basis’. Under the heading ‘Calculation’, it stipulated that price insurance will be triggered on a ‘monthly value of the effective price’.
On 28 February 2022 Mr Willy forwarded the first Weston offer by email to Mr Schneider. The covering email included the terms ‘Weston Energy spot market contract’ and ‘Weston Energy's $15/GJ cap offer’. Mr Willy included the first Weston offer in his comparison of the 'five spot market offers', all of which were said to 'have a cap/ceiling of $15/GJ' (CB326). Based on his analysis, Mr Willy considered Weston's to be the 'best' of those (CB326). Alternatively, the best 'fixed price offer' was that of Shell.
In this email, Mr Willy did not suggest that there was any difference between the first Weston offer and any of the other capped offers based on the terms of cl 1.8 and the description of the 'price cap' as 'price insurance'.
Under cross examination, Mr Schneider agreed that he was not familiar with a price cap when Mr Willy had first proposed it (T63 [34]-[36]). He also agreed that, firstly, it was important to him to understand how the new concept of a price cap operated and what it meant (T63 [46]-[49]), secondly, that in cl 1.8 the words ‘price cap’ are not used, thirdly, that the words, ‘price insurance’ were used in the third and fourth bullet points and finally that there was no mention of an insurance policy anywhere in cl 1.8 (T64 [1]-[37]).
On 1 March 2022, after Mr Willy had negotiated with Dr Gholami, Weston made a further offer being the second Weston offer.
In his covering email to Mr Willy, Dr Gholami highlighted three differences between the first Weston offer and the second Weston offer (CB353). They were:
the new offer was ‘based on the pure spot model’; that is, there was no longer a ‘fixed price gas blocks’ component;
the ‘$15/GJ cap’ to the gas cost would be ‘for an elected month of the year’, not for 12 months; and
the ‘retail margin’ would be a percentage of the cost of the gas purchased (rather than a charge based on volume), but it would be ‘capped’ at $1/GJ for the 2022 contract year, with a reduction to ‘the margin cap to $0.60/GJ’ for the 2023 contract year.
Those terms are seen in the ‘key contract details’ in cl 1.5. Another difference from the first Weston offer to the second Weston offer, was that its start date had been moved forward to 1 March 2022.
The terms of the ‘price cap’ under the second Weston offer are again in cl1.8 (CB355). Most relevantly, the description of the ‘price cap’ as ‘price insurance’ was unchanged from the first Weston offer, as was the ‘premium’ being $0.00/GJ and the basis for ‘renewal’ being annual. Weston submitted that, there appears to be an error in the fourth bullet point of the terms for the ‘price cap’ / ‘price insurance’, which retained a reference to ‘adjust[ment] by the fixed price’, despite the change in the way gas was to be charged.
The relevant parts of the second Weston offer are extracted below:
Clauses 1.5 and 1.8 of the third Weston offer (CB43–71, Annexure A to JS-A 1) which was ultimately accepted are reproduced below:
I will consider the third Weston offer in detail later.
Weston has referred to authorities urging that caution should be exercised regarding witness evidence generally and also in the context of proving ‘reliance’ in a claim for misleading or deceptive conduct. They are as follows.
In Dedakis v Deligiannis [2024] NSWSC 1018 at [15] (‘Dedakis’), Leeming JA sitting at first instance stated:
“[15] All of the events occurred more than a decade ago, and many occurred more than three decades ago. Memory is fallible and malleable, especially memory concerning past beliefs. One of Lord Leggatt's first judgments contains an extensive and influential consideration of the frailties of memory, including (relevantly for present purposes) that memories of past beliefs are revised to make them more consistent with present beliefs: Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) at [18]. It is usually desirable to start with reliable contemporaneous documents and uncontroversial facts. “Usually, the rational resolution of an issue involving the credibility of witnesses will require reference to, and analysis of, any evidence independent of the parties which is apt to cast light on the probabilities of the situation”: Camden v McKenzie [2008] 1 Qd R 39; [2007] QCA 136 at [34] (Keane JA). That is not to deprecate the potential significance of testimonial evidence. In particular, as was said by Bell P in ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; 388 ALR 128 at [27]-[29], testimonial evidence may provide valuable assistance in explaining the context of, and omissions from, the contemporaneous documents. …”
“[227] Often a reliance finding will be established by inference from the objective facts. On occasions - as occurred in the present case - a witness will give direct evidence to the effect that he or she took particular steps (or refrained from taking particular steps) on the faith of or induced by an understanding or belief brought about by a representation or other conduct on the part of another. Any such evidence is inherently self-serving. It will usually be treated with caution and scrutinised carefully by a trial judge in much the same way, and for much the same reasons, as a trial judge will carefully consider the veracity and reliability of hypothetical evidence (where such evidence may be lead). Such hypothetical evidence is normally assessed in light of the surrounding objective facts and circumstances. Unless objective evidence confirms its reliability such evidence often has little probative value. Demeanour can play little part in accepting the evidence; it may, however, be ground for rejecting the evidence. The last observation demonstrates that rejection of a party witness' direct evidence of reliance may result in him or her failing to establish reliance.”
(a) the witness was not an impartial witness in the sense that it is ‘ordinary human conduct to justify something that has not gone well by saying that one relied on things said by others’ (at [221]); (b) there was ‘an absence of contemporaneous documentation about his state of mind’ which produced ‘risks’ of the oral evidence ‘being pure reconstruction’ (at [222]); (c) the evidence was found to ‘lack plausibility’ (at [224]; see also [227]); and (d) his evidence was ‘clouded by hindsight about’ the adverse impact on his company ‘and so [was] more likely to be reconstruction than an accurate account of the state of mind that he had at the time’ (at [240]).
As noted above Mr Schneider provided three affidavits (CPS-A 1; CPS-A 2; and CPS-A 3) as well as an Exhibit (CPS-A Ex). He also appeared before me where he gave evidence and was cross-examined (T40–150).
In July 2009, Mr Schneider began employment with Ceramics. Mr Schneider has over 15 years’ experience in the tiling and ceramic industry. He has held a position on the Australian Tile Council. In 2012, he was appointed managing director of Ceramics (CPS-A 1 at [5]–[6]).
In CPS-A 1, Mr Schneider deposed (my emphasis):
“[15] In late 2017 Weston’s business model of providing gas at a ‘spot price’ was becoming attractive for [Ceramics] as fixed price gas contracts were being priced at $20/GJ whereas the spot price was closer to $10/GJ. …
[16] [Ceramics] has been a customer of Weston since 1 January 2018.
[17] On 15 December 2020, [Ceramics] entered into a spot price contract with Weston (2020 Weston Contract). This contract commenced on 1 November 2020 and was due to expire on 31 December 2022. The price of gas was charged at the wholesale market price and included a retail margin charge of 10% of the gas commodity charge.
[18] In late December 2021, the wholesale price of gas began to increase and in January and February 2022 it continued rising. …
[19] As a result of these changes in the price of gas, I decided to go back to the market to obtain offers from vendors for a fixed price contract to commence in late 2022. I thought that by entering into a fixed price contract, [Ceramics] may be able to limit its exposure to paying high rates of gas driven up by the impact of COVID-19, as well as concerns about the Russian military build-up on the border with Ukraine and a potential conflict between those countries.
[21] On 4 February 2022, I contacted Ralph Willy of NUS (Ralph) about obtaining a longer-term fixed contract for gas supply. A copy of this email is at page 5.
[22] On 7 February 2022 I received an email from Ralph advising that [Ceramics] should start a gas tender for the supply of gas to [Ceramics] because the term of the 2020 Weston Contract was due to expire on 31 December 2022. …
[23] I replied to this email on 9 February 2022 instructing Ralph to proceed with the gas tender. I also indicated that if he was able to find better options than the terms of the 2020 Weston Contract he should let me know as [Ceramics] was able to give 2 months’ notice to Weston to terminate the 2020 Weston Contract. …
[24] Ralph advised me that he intended to approach a number of retailers in the market to ask them for both capped spot price contract quotes and fixed price contracts quotes. Some retailers offer either capped price or fixed price contracts, whereas some retailers offer both. On 15 February 2022, Ralph sent an email to Weston requesting that it provide him with a fixed price and spot price gas quote for [Ceramics]. …
[25] On 16 February 2022, I sent a further email to Ralph confirming that [Ceramics’] preference was to obtain quotes for fixed price contracts to commence prior to 1 January 2023 and that if a compelling fixed price arrangement was available from 1 July 2022, then [Ceramics] would be interested in taking up that contract. …
[26] On 24 February 2022, Ralph received a response from Amin Gholami (Amin) of Weston with a fixed price quote. …
[27] On 28 February 2022, Ralph sent me an email with a cost calculation for [Ceramics] in relation to the gas tender. Ralph explained that he had obtained five spot market offers and only four fixed price offers, as Weston couldn’t provide a fixed price offer and instead had given ‘a kind of a hybrid (mixture of fixed price and spot market)’. Ralph never presented the terms of the hybrid offer to me so it was never under my consideration. Based on Ralph’s advice, the best fixed price offer was received from Shell Energy (Shell) and the best capped spot price offer was received from Weston. …
[28] The offer from Weston had a capped price of $15 per GJ whereas the offer from Shell provided for gas to be charged at a fixed rate of:
a. $10.254 per GJ for the period of 1 July 2022 to 30 June 2023;
b. $10.494 per GJ for the period of 1 July 2023 to 30 June 2024; and
c. $11.060 per GJ for the period of 1 July 2022 to 30 June 2023, (First Shell Offer).
[29] I recall having a telephone discussion with Ralph on or around 28 February 2022 to talk through the various offers that he had received. During that call Ralph said words to the following effect:
“I think I can get Weston to move on a few more points so I will contact them again to see what they can do”.
[30] Although in their gas market report NUS had advised that it was prudent to move to a fixed price agreement because of price volatility (see page 23), I also recall when speaking to Ralph that he said words to the following effect:
“With the protection of the price cap on the Weston offer, both the Weston and Shell offers are reasonable options and the decision is up to you."
[31] The capped price arrangement had the benefit of protecting [Ceramics] from price increases, without depriving it of the benefit of lower spot prices when they eventually came back down. My view was that there was more upside than downside to entering into a spot price capped contract rather than a fixed price contract for a term of three years. Ralph told me he agreed with this.
[32] Following Ralph’s further attempts to negotiate with Weston, on 1 March 2022, Ralph received a further email from Amin providing an amended offer based purely on the spot price. This offer provided a capped price quote of $15 per GJ, but only for one selected month of the year, and a capped retail margin of $1 per GJ. A copy of this email is at page 43. I did not receive this email until 2 March and even then, without the attachment, by which time the offers had moved on (as I explain below).
[33] I received a call from Ralph on 1 March 2022 during which he said words to the following effect:
“I’m finding it frustrating negotiating with Weston. They are not giving me what I’m asking for. They have offered a $15/GJ cap but for one selected month only which is not suitable*. Shell remains the best option. I will go back to Weston.”*
[34] I received a call from Ralph which I believe was on the morning of 2 March 2022. During the call he said words to the effect of:
“Weston have revised their offer from a price cap for one selected month to a cap of 12 months. So, we got our 12 months cap but it’s subject to an insurance premium.**”
[35] At this time my attitude towards the offers from Weston and Shell were as follows:
a. based on the advice I received from Ralph, who I was relying on as an expert energy broker, I found the First Shell Offer attractive, not only because it was substantially cheaper per GJ than the capped price offer from Weston, but also because it provided greater certainty to [Ceramics]. Shell is a substantial multinational company and I had no serious concerns about its ability to honour the three year contract, regardless of wholesale gas price fluctuations;
b. however, accepting the First Shell Offer meant that [Ceramics] would have to commit for three years and would lose the opportunity to purchase gas at lower prices if the spot price were to come back down (below the fixed price) over the course of the three-year contract;
c. on the other hand, the Weston capped price offer had the benefit that if the spot price did come back down, it would allow [Ceramics] to take advantage of the lower prices. Also, if [Ceramics] had entered into the First Shell Offer, that would have been the highest price of gas it had ever subscribed to; and
d. if [Ceramics] had accepted the First Shell Offer, [Ceramics] would have remained with Weston until 30 June 2022 and terminated the 2020 Weston Contract early which required a 2 months’ notice period.
[36] On 2 March 2022, I received a call from Amin regarding the terms of Weston’s spot price offer. I remember thinking at the time that it was strange Amin was calling me directly, and without notice, as I had only been dealing with Ralph in relation to this. This was my only direct communication with Amin about the spot price offer as all other communications had been through Ralph.
[37] During this call Amin outlined their current offer and discussed the gas market generally. He expressed the view that gas prices would go down. In relation the current offer he said words to the following effect:
Amin: “Weston will bring forward the start date of the contract and provide price cap insurance from April instead of July."
Me: “Okay, let me speak to Ralph and we will come back to you"
[38] Shortly after my call with Amin, he sent an email to me and Ralph with a revised contract relating to the spot price offer (Spot Price Offer). James was also copied to this email.
[39] As part of Spot Price Offer, Weston now also:
a. agreed to bring forward the start date from 1 July 2022 to 1 March 2022;
b. agreed to cap the retail margin to $1 per GJ for 2022 and $0.60 per GJ for 2023. This was a variation to the 2020 Weston Contract which charged a retail margin of 10% of the Gas Commodity Charge;
c. agreed to provide price cap insurance; and
d. included a price cap insurance premium of $0.15 per GJ.
…
[40] Before agreeing to sign the contract (which was only Schedule 1 to the 2022 Weston Contract), I reviewed the terms of the Schedule. At this time, I noticed the terms relating to insurance including the premium charge. When I read the contract and when I signed it on 3 March 2022, I understood the price capping insurance, and the $0.15 per GJ insurance premium charged by Weston, to be in relation to an insurance policy purchased by Weston in the insurance market. I now know that there was no such insurance policy in place and that the premium [Ceramics] was paying per GJ was not connected to any third-party insurance product.
[41] Later on 2 March 2022, I instructed Ralph to confirm with Weston that [Ceramics] will accept this offer based on the revised terms. … Amin responded by email to Ralph shortly after acknowledging his email and confirming that it would be fine for [Ceramics] to return the signed contract on 3 March 2022. A copy of this email is at page 49.
[42] On 3 March 2022 I signed Schedule 1 to the Weston Energy gas wholesale price contract on behalf of [Ceramics] and sent a copy to Amin and James at Weston and to Ralph. …
[46] My recollection of my contact with Amin on 2 March 2022, is that he called me and we had a casual 5-10-minute discussion, and that he followed up by sending me a revised contract. The only email I received which mentioned insurance is the one referred at paragraph 38 above. My understanding of this email was that we had an insured price cap of $15 per GJ. All negotiations with Weston were handled by NUS. My only involvement was limited to the 5-10-minute discussion I had with Amin referred to in paragraphs 36 and 37 above.
[47] My understanding at this time was that Weston had obtained an insurance policy, from a conventional insurer, in relation to the price cap it was offering. I understood this because when I was provided with the contract and read it on 2 March 2022, I saw references to words such as ‘insurance’, ‘premium’ and ‘renewal’. I understood from the Schedule that Weston was charging [Ceramics] a premium for the insurance and referred to it being renewed annually.
[48] If I had been made aware by NUS or Weston, prior to entering into the 2022 Weston Contract, that:
a. there was no such insurance available; or
b. Weston was unable to obtain such a policy; or
c. Weston did not intend to obtain such a policy;
then I would not have entered into the 2022 Weston Contract.
[49] In other words, if Ralph had advised me of the fact that the price insurance referred to in the 2022 Weston Contract was not a conventional policy of insurance issued by a third party insurer and had either recommended to [Ceramics] not to enter into the 2022 Weston Contract or advised me of the risk of Weston not being able to honour the price cap without insurance, then I would have accepted the First Shell Offer instead. Based on information I received from Weston (see paragraphs 37 and 38 above) as well as subsequent emails and attachments I received with the draft schedule to the 2022 Weston Contract at pages 44 to 47, my understanding was that the 2022 Weston Contract was backed by a conventional insurance product.
[51] On 10 May 2022, I received a call from Garbis Simonian (Garbis) who said words to the following effect:
Garbis: “Chris, I think [Ceramics] should start looking for a fixed price contract. I am just giving you a heads up...”
Me: “Why, what’s happening? We have a contract with you guys”
Garbis: “You should just start looking for a new fixed price contract...”.
[54] On 12 May 2022, I received an email from Ralph forwarding on an email from Weston providing notice of its intention to vary charges which increased the Gas Commodity Charge from $1 per GJ to $10 per GJ. …
[55] Ralph also advised in his email of 12 May 2022 that:
‘... Weston couldn’t get an [sic] insurance in place for all the “cap” customers and is getting hit now extremely [sic] as spot prices are up to $30 to $40.
They are not increasing the spot rates but increasing the Gas Commodity Charge from capped by $1/GJ by another $9/GJ to $10GJ…’”
As noted above Dr Gholami provided an affidavit (AG-A) and gave evidence and was cross-examined (T155–214).
From March 2018 to July 2022, Dr Gholami was the executive manager of customer operations at Weston. Dr Gholami has PhD in Petroleum Engineering and an MBA. Before working for Weston, he was a researcher. At the material time, he had over four years' experience buying and selling natural gas on wholesale markets (AG-A at [1]-[6]).
Dr Gholami’s affidavit is uncontroversial. Much of it addresses the fact that Weston never intended to take out ‘price capping insurance’ and affirms that ‘price insurance’ or ‘price cap insurance’ simply meant a price cap. Dr Gholami was cross-examined on his understanding of the contract, particularly cl 1.8 (the ‘price cap’ clause) and what it was intended to convey (T164–180).
As to Weston’s understanding of the terms ‘price insurance’ or ‘price cap insurance’ Dr Gholami deposed:
“[12] My email dated 24 February 2022 also referred to a “price cap of $15/GJ”. Weston offered the price cap feature to attract risk-averse clients who were concerned about the volatility of the wholesale market. In accordance with this offer, if the wholesale price went above $15 per GJ, Weston would not pass on that part of its cost above that price, and would write off the loss against its own profit book. That is, the client would enjoy a benefit of a lower price for gas if the spot price was lower than the cap and also have the benefit of the price cap if the spot price increased above the cap. I and others at Weston sometimes referred to this feature as “price insurance” or “price cap insurance” since it provided a maximum exposure for clients which was effectively underwritten by Weston.”
“Q. The question I was putting to you was that by including an offer to provide price insurance for the effectively monthly price, as it’s termed in this document, you were intending to communicate to Mr Willy or Ceramics that the risk of the spot price going over the $15 cap was provided for by an insurance arrangement. That’s what you were saying, wasn’t it?
A. The intent and the truth of that was that we were communicating that you won't pay more than that price cap for that elected month in this contract, and the price insurance was the similar terminology, our price cap that we used interchangeably saying that we have this feature embedded or inbuilt(as said) this contract to cover you for the circumstances when price exceeds $15 per gigajoule and you will be paying $15 per gigajoule. That was the clear message that we were trying to communicate.
Q. Can I suggest to you that if you wanted to communicate that message clearly all you had to say was that if the price goes over the $15 cap you won't be charged for it? That’s all you had to say, wasn’t it?
A. That’s another way that it could have been said. But this clause was, you know, it was sitting there in our documentation and we, we just used it wherever we were going to introduce this feature to customers, and no-one at any point, you know, came and asked about the specific terms or questioned about the meaning of the words or other additional enquiries. So we assumed that it’s a clear messaging to the customers telling them what we were telling them.
Q. You made an assumption that the customer would understand that all this meant was that they wouldn’t be charged if the price went over the $15 cap, is that what you’re saying? You just assumed that they’d read it that way, is that right?
A. We were making this promise to them and we wanted them to, to read it this way.
Q. You wanted them to read it that way, but in fact what it reads as as an offer to provide insurance, doesn’t it?
A. Insurance as in like a price cap, yes.
Q. No, insurance as in an insurance policy, I suggest to you is what you were intending to convey?
A. I don't agree with you, with respect.
Q. Are you saying that you had standard form documents into which someone had inserted the word “Insurance” and it never occurred to you that a business customer reading that would think that you were offering them an insurance policy to cover the risk? You never thought about that?
A. No, I didn’t ever thought(as said).
Q. But would you agree with me there was a risk that if you used that term a business customer would read it that way?
A. We tried to minimise any risk of miscommunication or misunderstanding, because it was a bespoke contract and a bit of an(as said) unconventional compared to the vanilla contract and in the gas markets, and we tried to keep a very clear and continuous conversation with whoever wanted to clarify anything to, to avoid any misunderstanding.
Q. You’re saying you wanted your contracts to sound different from the standard form contracts that other people offered?
A. We did not try - intend or try to do that. We had a contract that we offered to customers and we, we explained it to them and we had meetings with them and we had discussions and conversations and clarifications to tell them what they are signing up to.
…
Q. I think you said a minute ago that you wanted Weston’s contract to use different language from the language of other contracts in the market?
A. I did not say that about the wording. I said that the model and the concept of the business offering was different than vanilla traditional gas contracts.
…
Q. What you were doing, I suggest to you, is using the words “price insurance” and the words "premium” and the words "term” and the words "renewal” all to suggest that your contracts had an extra feature for risk averse customers which was insurance? That’s what you were doing, wasn’t it?
A. We were providing them insurance under price spikes by Weston Energy as per those terms of - term and, and the cost which we called it “premium” an additional charge, and we ensured them that were - you are not going to pay more than X dollar per gigajoule as per this clause.
Q. But that’s not what the clause says, I suggest to you? What you’re intending to convey by the use of these terms was that it wasn’t just that they wouldn’t be charged if the price went over the cap, but that there was a policy in place to protect Weston and the customer from the risk of the price going over the cap? That’s what you were intending to convey?
A. No, that’s not true.
Q. Didn’t you see it as a risk--
A. Can - may I ask where, where--
Q. --that the customer would read it as an insurance policy being offered?
A. I don't know where we implied it’s a policy or an insurance policy.
Q. Can't you see it in the words there “price insurance”?
A. It doesn’t imply that there is a external or supportive or a third party policy as a commercial package or product involved. It just—"
To the extent that Dr Gholami suggested that it was incumbent on Weston’s clients (for example, at T169 [43]–[49]) to seek clarification on the contractual terms that Weston proffered, that suggestion should be rejected. It was incumbent on Weston to ensure that the terms it proffered were clear.
Dr Gholami was further cross-examined as to its interaction with another client, Baxter Health, whose contracts with Weston included the ‘price cap’/’price insurance’ clause and who also were complaining to Weston for their failure to obtain an insurance policy (T208–212).
Dr Gholami’s evidence as to the objective factual matters is consistent with Mr Schneider’s. However, it diverges in one critical respect, in that it details the three-way conversation had between Mr Schneider, Dr Gholami, and James. This conversation was absent from Mr Schneider’s initial affidavit (CPS-A 1), Mr Schneider does not remember it (CPS-A 2 at [8]; T99 [31]–[34]; T100). Mr Schneider accepted phone records proving that the conversation occurred (T90 [12]–[15]) and at no point denied that the conversation occurred.
Regarding the two phone conversations had between the parties on the morning of 2 March 2022, Dr Gholami deposed (AG-A):
“[14] On 2 March 2022, I called [Mr Schneider] to obtain feedback on the 1 March Offer. During the call, words to the following effect were said:
Me*:* ‘Chris, this offer includes a complimentary 1 month price cap. It is a valuable offer.’
Chris*:* ‘We would prefer a 12 month price cap at $15 per GJ. I’m not sure [Ceramics] will go with a 1 month price cap.’
Me*:* ‘I will have to get approval from my superiors before making any other offers.’
[15] After speaking with [Mr Schneider], I immediately called James to discuss options for a new offer for [Ceramics], considering they did not accept the 1 March Offer with the complimentary one month price cap. In that call, words to following effect were said:
James: ‘We cannot offer a long term, 12-month price cap at $15 per GJ without charging extra.’
[16] During my telephone discussion with James, I called [Mr Schneider] back and merged the calls, and they discussed the options further. In the course of that conversation, words to the following effect were said:
Chris*:* ‘[Ceramics] is considering another competitive offer for a fixed price contract. Unless Weston can offer a 12 month price cap, I don’t think [Ceramics] can c**hose Weston.’
James: ‘It is difficult for Weston to offer such a long price cap. When we offer a price cap, we are writing off any losses against out own profit book. A 12 month price cap is a risk for Weston and we would require a fee of $0.15c per GJ.’
Chris*:* ‘I think [Ceramics] could agree to paying $0.15c per GJ.’
James*:* ‘I will need to get the approval of the board. I will come back to you on that offer.’**”
“Q. Do you have a recall of the conversation with you, [James] and Mr Schneider--
A. I definitely do.
Q. --being patched in?
A. Yes.
Q. Just to go back, just leaving aside for the moment the issue of whether it was you and [James] or just you, okay? Just park that to one side? In the conversation either your or [James] conveyed to Mr Schneider that if the price insurance was to be extended for 12 months, you would have to charge a premium of 15 cents a gigajoule?
…
A. … How I recall the call was that it was discussed that they expect a 12 month price cap and, and James, James said that it cannot come with a - as a free or complimentary thing anymore, because it’s a different kind of risk for the business and he needs to get - whether he, on the call, he, he mentioned the number of 15 cents or not I’m not hundred percent sure. It’s likely. But he definitely said that we need to get an approval from, from our management on that. So, yes, the 12 month cap was discussed between [Mr Schneider] and James. The likelihood of adding a, a premium additional charge was also discussed, whether the particular number of 15 cents was discussed or not, I’m not hundred percent sure.
Q. You can't recall whether you or [James] said words to the effect “Could you pay an additional 15 cents premium on top of the existing margin”?
…
Q. Dr Gholami, just to take you back to the subject matter of what I was asking you about. In the conversation with Mr Schneider on 2 March before the 10.42 email was sent, okay, I'm suggesting to you that somebody said to Mr Schneider that for a 12 month price cap there would have to be a 15 cent per gigajoule premium paid. All right?
A. Yes.
Q. Do you remember that?
A. I remember that this conversation was held. Yes. That, as I said, the specific number I, I don't have a clear memory of that, but I have a good memory of the - most of the rest of the conversation.
…
Q. Just to be clear about this, it's probably evident, but you certainly didn't, you personally, on your evidence, didn't say anything to Mr Schneider about there not being an insurance policy, did you?
A. Whether I personally said those words?
Q. Yes. Yes.
A. I cannot remember if I said that.
Q. No, well, your affidavit doesn't record you saying anything about it, does it?
A. We were talking about the price cap. We don't, didn't discuss any insurance or anything.
Q. No, no, that's what I'm saying to you. If you look at paragraph 16 of your affidavit
A. Yes?
Q. --you don't record you saying anything to Mr Schneider about price insurance or whether or not what the contract meant was an insurance policy or not. You personally didn't say anything about that, did you?
A. I did that. I did say that in a previous one to one call with [Mr Schneider], myself and Chris. But, that merged call was between James and [Mr Schneider]. I didn't actively participate in that conversation.
…
Q. Do you agree with this, that neither you or Mr Simonian said to Mr Schneider explicitly, "There is no insurance policy involved in the contract"?
A. That is something I want to share a comment on, because I didn't put it here because I don't have a clear memory that it, this thing, was said in either of those phone calls. But, we had an understanding, to the best of our knowledge at the time, that such insurance policy does not exist in the market from a provider or anyone else, that could be obtained or anything like that. So, whoever asked for it, and different customers asked for a price cap or some, some sort of, you know, coverage against price spikes, and we had this commentary that, "This product doesn't exist in the market so we cannot help you with that", and whoever we offered them a price cap it was against Weston's book. So, whether we said this to Mr Schneider or not I'm not sure.
Q. So, you're relying on - you said that you had an understanding. Who did you have that understanding with?
A. It was from the market knowledge and intel that we had about the--
Q. But, you had no idea whether Mr Schneider knew about that, did you?
A. To that, to that effect, I guess, given that you are trying to operate on an honest and, you know, a good faith basis this is the reason I think that I - whether me or, or James might have mentioned that. Because, they were pushing for this and pushing hard for this, and it was difficult for us to do it. But, we didn't have an option, basically, in the market to go and, and obtain such policies. That's the reason I'm thinking that this should have been said in one of the conversations.
Q. It should have been said?
A. It might have been said.
Q. It might have been said, but it might not have been said?
A. Yes. I, I don't have a clear memory of that, that it was particularly said.
Q. It's not the case, is it, that Mr Willy or Mr Schneider were pushing you to get an insurance policy. They were pushing you to get a 12 month price cap, weren't they?
A. Yes. Correct.
Q. You were the ones putting forward terms about a price cap that involved what you called price insurance?
A. Yes.
…
Q. So, after these conversations you say you had with Mr Schneider--
A. Yes.
Q. --the clause in clause 1.8 says, "Weston Energy will provide price insurance", and you see the word "for" "the gas commodity price"?
A. Yes.
Q. So, there's a distinction, isn't there, between the insurance and the price that's going to be charged?
A. Sorry, I'm not following you.
Q. The price insurance is - the effect of this is that, and what it says in plain English terms is that "Weston Energy will provide price insurance". That insurance is for the price that's going to be charged. So, they're two different things, aren't they?
…
Q. So, the point I was wanting to make in my question to you was that what you were intending to indicate by putting forward that sentence in clause 1.8 is that the price insurance was a separate matter, a separate service or feature that was being provided for the gas price that was going to be charged, and they are two separate things. That's what you were intending to convey, wasn't it?
A. No, that was not. Definitely not.
Q. This email, having been sent after the conversations that we were talking about before, still contained in clause 1.8 all that language I've taken you to before, "price insurance", "premium", "term", "renewal" and so on.
…
Q. And "price insurance will be triggered on a monthly weighted average" and so on. So, the language of insurance, you would agree, is still in the clause?
A. I agree that we always used this clause as a standard wording for this price cap feature, and it is similar to the previous one.
Q. Then if you go back to 136. You say in the third paragraph, "We're happy to start the capped retail margin from 1 March"?
[I have mentioned the previous email above but I interpose it here for clarity:
“Good morning Ralph and Chris,
Thank you very much for taking the time this morning to help us improve out offer such that we could meet your expectations.
Please see attached the updated contract with 12 months price cap of $15/GJ. We’re happy to start the capped retail margin from 1/Mar but let the insurance start 1/Apr so you’ll have one extra month coverage in 2023.
I hope this helps to get this deal over the line and continue our long-term relationship with you.
Please feel free to contact me on my mobile if you have any questions.”]
A. Yes.
Q. "But let the insurance start from 1 April"?
A. Yes.
Q. Even after the conversations that you say you had with Mr Schneider you are still using the language of insurance to describe what was being offered in the contract, correct?
A. Which was interchangeably used as a, instead of the price cap.
Q. In your mind? That's in your mind isn't it? You though that it was interchangeable?
A. And we thought that we spoke our mind loud and clear in, in a couple of phone conversations and several emails.
Q. Let's assume for the moment that [James] said that the best he could do against his book was a 12 month price cap. Those words say nothing about whether or not there's an insurance policy involved do they?
A. They do.
Q. You'd agree, wouldn’t you, that even if there had been insurance, an insurance policy, there was still a risk for Weston if the price went up over the $15 cap, wasn't there?
A. What was the condition there this time?
Q. Just assume for a moment Weston had got an insurance policy.
A. Yeah.
Q. And the insurance policy covered it for the cost it would incur, or the exposure it had, in relation to this contract, if the price went above the $15 cap. There would still be a risk, would there not, for Weston if the price went above the $15 cap?
A. Sorry, I cannot imagine that because we never did anything like that, or I never had any experience with such a product.”
As noted above Mr Simonian provided an affidavit (GS-A) and gave evidence and was briefly cross-examined (T216-229).
Mr Simonian is the managing director of Weston and the father of James. He was not personally involved with the relevant negotiations with Ceramics, however he recalls a conversation he had with James and Dr Gholami on 2 March 2022 where his approval for the final agreement was sought (GS-A at [1]–[9]). He deposed (GS-A at [10]):
“ [10] On 2 March 2022, I had a discussion with James on the telephone, with [Dr Gholami] in my office with me. In the course of that conversation words to following effect were said:
James*:* ‘I have just been on the phone with [Mr Schneider]**, and he won’t accept a short term price cap. They’ve asked for a 12 month price cap. I’ve told them that we may be able to offer that, but that they would have to pay extra. I told them an additional premium of $0.15c per gigajoule and the price can be capped at $15 per gigajoule.’
Me*:‘I’m fine with that. Go ahead and offer it to them.’**”*
“Q. You had been offering contracts to customers with a price insurance--
A. No, cap. I've never used the word insurance. It's always been a cap.
…
Q. You know don't you that you were offering contracts to customers which contained a schedule which provided a price cap--
A. Yes.
Q. --which was described as providing price insurance, you know that don't you?
A. Yes.
Q. And you knew that in March 2022?
A. Yes.
Q. You yourself I think you just said did not personally bandy around the office the term price insurance, is that right?
A. No, I always, we've always talked about caps.
Q. No one ever talked about price insurance, is that what you say?
A. Well when they did, like when [Dr Gholami] said to me - to him it was like, a cap was like price insurance. It's not--
Q. That's not what I asked you.
A. Yeah.
Q. Are you saying that in your conversations with, say, Dr Gholami and [James], no one ever talked about price insurance?
A. I didn't talk to them about price insurance. I always talked caps.
Q. But you did talk about premiums didn't you?
A. Well they had to pay something for it, because we were carrying risk, yes.
Q. So you used the term premium didn't you?
A. Yeah, yes.”
James relied upon two affidavits (JS-A 1 and JS-A 2). He gave evidence and was cross-examined (T233–252).
James is a company director of Weston (JS-2 at [1]). As to most of the objective matters, James’ evidence is consistent with that of Mr Schneider’s and Dr Gholami’s.
Importantly, James gave evidence as to the telephone conversations had on the morning of 2 March 2022 before execution of the third Weston offer, that is, the agreement. He explained the conversation between himself and Dr Gholami, which eventually turned into the critical three-way conversation between himself, Dr Gholami, and Mr Schneider.
James deposed (JS-A 2 at [21]–[22]):
“[21] On 2 March 2022, [Dr Gholami] called me to discuss a conversation he had with [Mr Schneider] about the One Month Cap Offer. During that call, words to the following effect were said:
Amin: ‘I have just discussed yesterday’s offer (the One Month Cap Offer) with Chris. [Ceramics] are not going to accept it and they want a 12 month price cap at $15 per GJ.’
Me: ‘We can’t offer a 12-month price cap at $15 per GJ without charging them for it.’
[22] During this call with Amin, I told him to add [Mr Schneider] into the call so that the three of us could discuss the matter. [Dr Gholami] did so, and in the course of that conversation words to the following effect were said:
Me: *‘*I’ve received your feedback that [Ceramics] want a price cap for 12 months. It’s difficult for us to offer a cap for so long. Our most recent offer includes a complimentary month of a price cap. It is a valuable offer.
Chris: ‘We are considering another competitive offer for a fixed price contract. It is above the current spot price but is below your offered cap of $15 per GJ. For us to go with Weston we will need a longer term offer on the price cap, maybe for 24 months.
Me: ‘We definitely can’t offer a cap for 24 month retail contract. The best I can do against my book is for a 12 month price cap. The only way that we could offer a 12 month price cap of the commodity costs would be if we charged extra. Could you pay an additional $0.15c premium on top of the existing margin per GJ in exchange for the price cap?’**”
“Q. But the price insurance, you're saying where the term says "renewal", the price insurance is to be renewed on an annual basis, was an opportunity for review?
A. It's like a best endeavours commitment.
Q. Best endeavours commitment, rather like when you renew an insurance policy?
A. I'm not familiar with how insurance policies are renewed but -
Q. Are you not?
A. No.
Q. Don't you have housing insurance or something?
A. I mean I'm not familiar with the details of all of the ways that insurance policies are--
…
Q. Do you have car insurance?
A. Yeah, I have car insurance.
Q. You know it's renewed every year?
A. My knowledge is the same as any consumer. Like I know that I can have it renewed, but I don't know what the -
Q. You know insurers call that process "renewal" don't you?
A. Yes.
Q. You know that insurers say that the money you pay for the benefit of the insurance policy is called a premium?
A. That is one person who uses that term, yes.
Q. The words that you have proffered, that is you Weston have proffered, in this clause 1.8 refer to price insurance, premiums and renewals?
A. Yes, in the, in the price cap section, yes.
Q. Yes, and you would agree with me, wouldn't you, that that is the language commonly used to refer to insurance policies?
A. That is language that is used, yes I would agree with that.”
“Q. So, by using the language of "price insurance" in these contract terms that you offered to Ceramics you weren't intending to convey, were you, that Weston itself was providing an insurance policy?
A. We were, we were saying clearly that Weston Energy is capping the price and providing this price insurance.
Q. That's not my question. My question was, because you knew Weston had no authority to itself issue an insurance policy, when you used the words "price insurance" in these terms you weren't seeking to convey that Weston was going to issue an insurance policy?
A. The intent was not to saying that we are issuing an, an insurance. Basically, we were just documenting the, the idea, which is a price cap, and the wording that we used is as appear on the contract. We never understood that we are issuing an insurance as a supportive extra product or anything like that.
Q. No, no, my question to you was you understood that Weston itself had no authority to issue an insurance policy as an insurer?
A. Yes.
Q. Right?
A. That's right.
Q. So, if "price insurance" in these terms was taken to refer to an insurance policy it could only have been someone other than Weston. Isn't that right?
A. This concept never occurred to me at the time of doing this.
Q. We now know, don't we, because it's something that Weston and you have accepted in this case, that in March 2022, when you were negotiating with Ceramics, you had no intention of arranging an insurance policy with a third party to cover the risk involved in the cap feature, did you?
A. That's correct, we didn't.”
“Q. Now that we know that that clause was in the Baxter contract, what I was putting to you about this document at page 100 in the email was that this email represents another example of another consultant who acted for another customer, putting to you that Weston had put its customer in this difficult financial position because Weston had failed to take out insurance for the cap, that's right isn't it?
A. That's what's written here.
…
Q. Once again, in response to a consultant or broker putting to you that Weston had failed to do what it had represented it would do through the contract, and that is take out an insurance policy to cover the risk of the price going over the cap, you didn't respond by saying "Those provisions in the contact were never intended to refer to an insurance policy", did you?
A. I did not respond to this email according to this email thread, if that's the end of it.
Q. Yes, but what my question was, all you said is "It's not about the cap insurance", you didn't go on to explain that you never intended to get insurance?
A. The insurance that you're referring to does not exist, did not exist, and does not exist.
Q. Yes, and you didn't explain that to Mr Shippen(?), did you?
A. We expected that at the time of contracting with all those conversation[s], they would have a clear understanding of what they are getting offered--
Q. You--
A. --and I did no[t] explain that in my email.”
“Q. Well, wouldn't you agree with me that it would be clearer to convey that to customers to simply say in clause 1.8 there would be a price cap of $15 a gigajoule and if the spot price went above that you wouldn't be charged for it?
A. And we clearly and exactly did that in our email conversations, in our phone conversations.
Q. No, I'm not asking you about email conversations or other conversations. I'm asking you about this document.
HER HONOUR
Q. And, in particular, clause 1.8.
WHITE
Q. And, in particular, clause 1.8.
A. It could have been written in many different ways. I agree with you in that sense. Yes.”
“Q. Do you agree with this, that neither you or Mr Simonian said to Mr Schneider explicitly, "There is no insurance policy involved in the contract"?
A. That is something I want to share a comment on, because I didn't put it here because I don't have a clear memory that it, this thing, was said in either of those phone calls. But, we had an understanding, to the best of our knowledge at the time, that such insurance policy does not exist in the market from a provider or anyone else, that could be obtained or anything like that. So, whoever asked for it, and different customers asked for a price cap or some, some sort of, you know, coverage against price spikes, and we had this commentary that, "This product doesn't exist in the market so we cannot help you with that", and whoever we offered them a price cap it was against Weston's book. So, whether we said this to Mr Schneider or not I'm not sure.”
Dr Gholami admitted that he did not have a clear memory of either of the phone calls that took place on 2 March 2022. While his evidence was that they had an understanding, I take that to be an understanding on Weston’s camp only, but it was never mentioned to Mr Schneider.
At this time, both James' and Dr Gholami's evidence show that they were keen to secure a contract with Ceramics.
I accept that James said the words, "The best I can do against my book is for a 12-month price cap" during the three-way telephone conversation; and that Dr Gholami recalled James saying, "[W]e are writing off any losses against our own profit book". While their recollections are slightly different, I accept that either of those statements were said but whichever it was, the most that was said to Mr Schneider was that the best Weston could do was a 12-month price cap and that Weston was writing any losses off against its own profit book.
Neither James nor Dr Gholami mentioned that there was no third-party insurance.
I accept that on 2 March 2022, the three-way phone call took place between Mr Schneider, Dr Gholami and James. I accept that the following was said "We definitely can't offer a cap for [a] 24-month retail contract. The best I can do against my book is for a 12-month price cap". However, I accept that neither James nor Dr Gholami explained to Mr Schneider that there was no third-party policy insurance. Both James and Dr Gholami wanted to secure the contract, so Mr Schneider was asked to pay a premium and the reason given to him was that it was difficult to offer such a long price cap because Weston was writing off any losses against its own profit book; and given the risk with a 12-month price cap, Weston would require a fee of $0.15/GJ. The natural and ordinary meaning of this statement is that for Weston to provide such a long price cap, it would have to charge an extra fee of $0.15/GJ. There was no reference to cl 1.8 of the proposed offer that refers to a price cap insurance.
As mentioned above, Mr Willy of NUS Consulting was the broker engaged by Ceramics to conduct the tender. He was primarily responsible for the negotiations with Weston on Ceramics’ behalf. Mr Willy did not proffer an affidavit nor did he appear before this Court to give evidence. In this circumstance, Weston asks this Court to draw an inference that any evidence that Mr Willy would have given would have not been of assistance to Ceramics — such an inference is known as a ‘Jones v Dunkel inference’ from the eponymous Jones v Dunkel (1959) 101 CLR 298.
Weston put many authorities on the rule in Jones v Dunkel before the Court which I have summarised and reproduced here:
A Jones v Dunkel inference can be used for two purposes, namely, (a) in assisting to decide whether to accept evidence that has been given which relates to a matter of which that witness could have given evidence; and (b) in assisting to decide whether to draw inferences of fact which are open on the evidence that has been given, in relation to matters of which that witness could have spoken (Winneke P in Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 at 131, quoting from O’Donnell v Reichard [1975] VR 916 at 929).
The rule in Jones v Dunkel is a particular application of Lord Mansfield CJ's maxim in Blatch v Archer (1774) 1 Cowp 63 at 65 (98 ER 969 at 970) that: ‘[a]ll evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.’ That maxim goes to the problem that, in deciding issues of fact, the court is concerned not just with the question ‘what are the probabilities on the limited material which the court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision’ (Ho v Powell (2001) 51 NSWLR 572 at [14]-[16] per Hodgson JA, Beazley JA agreeing).
Where the evidence not adduced relates to a positive allegation or matter of which the party in question bears the evidentiary onus, then the rule in Jones v Dunkel assists the Court in deciding whether the party bearing that onus has discharged it (Australian Securities & Investments Commission v Rich (2009) 75 ACSR 1 at [438]-[440]).
In closing oral submissions counsel for Ceramics submitted that a Jones v Dunkel inference should not be drawn for the failure for Mr Willy to be called to give evidence. The following matters were raised:
The rule in Jones v Dunkel permits a court to infer that the omitted evidence would not have assisted the party who failed to adduce it; not that that evidence would have contradicted or harmed that party's case.
“Q. … You’ve got the heading “Price Cap” and then there is one full sentence under that which explains what a price cap is, that’s how you would have understood it at the time?’”
“A. --at the time, I would’ve clarified it with my broker. But I don’t believe I read this at the time.”
The parties agree on the general principles of interpretation of commercial contracts. They rely on two relatively recent decisions of the High Court that emphasise that written contracts, and commercial contracts, are to be objectively construed.
First, in Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640 (‘Woodside’), at [35], French CJ, Hayne, Crennan and Kiefel JJ stated (citations omitted; my emphasis):
“[35] …The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties … intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.
Second, in Mount Bruce Mining Pty Ltd v Wr**ight Prospecting Pty Ltd (2015) 256 CLR 104 (‘Wright Prospecting’) at [47]–[51], French CJ, Nettle and Gordon JJ stated (citations omitted; my emphasis);
“[47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
[48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
[49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
[50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.
[51] Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, 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”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience.””
Ceramics’ submissions focus on cl 1.8 and it urges that the collocation of the characteristically insurance-related terms ‘price insurance’, ‘premium’, ‘term’, ‘renewal’, ‘trigger’ would lead a reasonable businessperson to understand that ‘price insurance for the gas commodity charge’ referred to ‘an insurance policy to cover the risk of including a $15/GJ price cap in the contract terms for which Ceramics would pay the premium’.
Ceramics also draws attention to the fact that the parties were looking to negotiate a contract which would address the rising prices of wholesale natural gas. It is said that both parties understood that Weston was taking on a larger risk with this ‘capped spot price’ model as opposed to the parties’ previous arrangement. In this context, noting that insurance is a product which defrays risk, a reasonable businessperson would understand that ‘price insurance’ was a reference to a price insurance policy that would be obtained by Weston.
As a matter of textual analysis, Weston points to the ‘credit support’ section of cl 1.5. It says that in that clause, a ‘Trade Credit Insurance Policy’ is expressly referred to. The clause clearly states what is ‘covered’ and clearly states that Weston will pay the premium (‘Premium is paid by Weston Energy’). The presence of this clearly worded clause would operate to displace a like reading of cl 1.8, where it is not clearly expressed as an insurance policy.
Weston says that ‘price insurance’ is a synonym for ‘price cap’ and raises these further points of textual construction:
“(a) The other words of the first sentence of the chapeau say that the ‘price insurance’ is ‘for the gas commodity price’. ‘Price insurance’ is not for the ‘price cap’ referred to in the heading.
(b) The second sentence of the chapeau, after the reference to ‘price insurance’ in the first sentence, says that ‘[t]he ‘terms’ are ‘outlined below’. That is, the terms of the ‘price Cap’ / ‘price insurance’ are stated in the following bullet points.
(c) The first sentence of the chapeau states that Weston is providing ‘price insurance’, not a third party. Weston is insuring the gas commodity price in the sense of capping the price that Ceramics will pay, not obtaining insurance to stand behind the ‘price cap’.
(d) In the first bullet point, the way that ‘premium’ is calculated (an amount charged per GJ, like the ‘Retail Marking Charge’ in clause 1.5) indicates that ‘premium’ is there used in the sense of an additional charge by Weston, not consideration for a third party insurance policy for Weston.”
“The traditional approach to the interpretation of a written contract in common law nations turned, in large measure, on the application of the parol evidence rule. The rule has been stated in different ways, but the core principle is that, when parties have reduced their contract to writing, a court should only look to the writing to determine any issue of interpretation. (JJ Spigelman, ‘Contractual Interpretation: A Comparative Perspective’ (2011) 85 ALJ 412, 414).”
The rule was unanimously reaffirmed by the High Court in Equuscorp Pty Ltd v Glengallen Investments Pty Ltd (2004) 218 CLR 471: ‘a party executing a written agreement is bound by it’ (at [33]); ‘the exceptions must be proved according to established categories. The obligations of written agreements between parties cannot simply be ignored or brushed aside’ (at [35]).
This rule was expressed by the High Court in the passage from Wright Prospecting quoted above:
“[48] Ordinarily, [the] process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.”
In commercial contracts, this process of textual construction is conducted in the light of ‘the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract’ (Wright Prospecting at [47]).
It is common ground between the parties that, there is no need to go outside the agreement nor have recourse to the events, circumstances and externalities of the contract.
Counsel for Ceramics argued that when interpreting the Court must look to the language of the contract that was unambiguous and clear when referring to terms that are commonly used in the insurance industry. I agree that the language of ‘premium’, ‘price insurance’, ‘term’, ‘renewal’ and ‘triggered’ are all terms conventionally used to describe elements of insurance policies provided by third-party insurers to cover particular risks. Ceramics further submitted that these terms would be familiar to a reasonable businessperson such as Mr Schneider who would naturally associate them and comprehend them to be terms consistently used to describe insurance policies. I also agree with this submission.
Ceramics also addressed the fact that the ‘objective purpose’ of the discussions and subsequent agreement was to appease Ceramics' concerns with the sudden global volatility in gas prices. Therefore, the overarching purpose of renegotiating a new contract was to acquire pricing stability and the mitigation of risk from a volatile market. Weston could offer Ceramics stability by introducing the ‘price cap’ feature, however, this would shift the risk exposure to Weston, which was, as Ceramics submitted, intended to be mitigated with the use of ‘price insurance’. Objectively, what the parties intended to achieve when drafting the contract was for Ceramics to receive a contract that capped gas at $15/GJ and for Weston to retain a substantial account while simultaneously mitigating its risk of sustaining a loss if the price went over the $15/GJ threshold.
Weston's counsel raised several additional matters in its closing submissions on the interpretation of cl 1.8 and its meaning. It was argued that cl 1.5 of the contract explicitly refers, under the subtitle ‘credit support’, to an ‘insurance policy’ specifically using the terms ‘insurance’ and ‘policy’, in contrast to cl1.8 which does not use these terms. Instead, it refers to ‘price insurance’ and ‘price cap’. This difference does not necessarily exclude the possibility that cl 1.8 describes a distinct or novel form of insurance. It is my view that the language used in the clause largely aligns with common terminology typically found in insurance policies.
Weston’s submission regarding the express mention of an insurance policy in cl 1.5 has force. In S A Christensen and W D Ducan, The Construction and Performance of Commercial Contracts (Federation Press, 3rd ed, 2023) the learned authors stated at 48:
“A court will have regard to all the words used 'so as to render them all harmonious with one another' (Australian Broadcasting Commission v Australiasian Performing Right Association Ltd (1973) 129 CLR 99, 109) and in constructing the contract will prefer a construction that is 'congruent' (Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522, 529) with the various components of the whole.”
When interpreting a contract, a court considers not only the text of the impugned provision but also its context, that is, the words and provisions surrounding the impugned provision. The court strives to make sense of a contract as a whole. The fact that a third-party insurance policy is clearly contemplated by cl 1.5 weighs against the conclusion that the same is contemplated by cl 1.8.
It was further argued that cl 1.8 indicated that Weston was ‘providing’ price insurance, rather than ‘obtaining’ it from a third party. I do not find the difference in this terminology is significant. According to this argument, Weston is ‘insuring’ the gas price by capping it at $15/GJ, rather than securing an external policy to hedge against the risk. Dr Gholami agreed that simpler and clearer language could have been used, simply stating that the price for gas would be capped at $15/GJ for a period of one year would have more effectively communicated the intent of the clause, but it was not.
Counsel for Weston also submitted that ‘nowhere does [cl 1.8] say it was for the benefit of Weston’. However, even if the policy was not intended for Weston's benefit, the ability of ‘insuring’ price fluctuations of the gas price and providing a cap for its customers would present a competitive advantage for Weston in acquiring new business, ultimately benefiting Weston. The logic behind ‘providing’ insurance for Ceramics' benefit would still work to provide a price cap, therefore, if the price fluctuated above the cap of $15/GJ the policy would be triggered and the insurance would step in to pay for the difference in price, benefiting both Ceramics, who maintain their payment of $15/GJ and Weston, who would presumably receive the balance of the difference as payment from the policy. Counsel for Weston then addressed the term ‘premium’, suggesting that it only referred to an additional charge imposed for assuming the risk of capping the price, rather than a form of payment for a third-party insurance policy.
The terms ‘price cap’ and ‘price insurance’ are interchangeable in the contract and essentially have the same meaning. The wording in cl 1.8, ‘price insurance will be triggered…’ is to suggest that the term ‘triggered’ would not be associated with a traditional insurance policy which is always in place and not there periodically. By adopting this view, the phrase ‘price insurance will be triggered…’ could be changed to, ‘price cap will be triggered…’ much like how a standard insurance policy is activated or ‘triggered’ by an event. For example, an accident triggers payment of an automotive insurance policy, or an illness triggers payment of a health insurance policy. Similarly, if the price of natural gas exceeds $15/GJ, the clause would ‘trigger’ the price cap policy. Therefore, the expression price insurance is ‘triggered’ if the price of natural gas exceeds $15/ GJ is consist with the terms of an insurance policy.
Weston sought to dismiss the concept of ‘price capping insurance’ as it ‘permeates Ceramics' pleadings’ by establishing that there is no documentation (including the contract authored by Weston) that includes that phrase. I accept that in the final contract the specific words ‘price capping insurance’ do not appear in the written agreement.
“‘[represented] in precontractual negotiations that it would, and presently intended, as a term of the proposed Agreement, to obtain Price Capping Insurance to enable [Weston] to maintain the Capped Price as a means of ensuring the Capped Price could be maintained under the then proposed Agreement, with such insurance commencing from 1 April 2022.’”
(a) the term of the price capping insurance was from 1 April 2022 to 30 March 2023;
(b) a premium of $0.15/GJ was payable by the Ceramics for the price capping insurance obtained by Weston;
(c) the price capping insurance would operate by being triggered according to price movements so as to maintain the capped price; and
(d) the price capping insurance was to be renewed on an annual basis.
(a) that there existed and was available in March 2022 a price capping insurance product in the terms stated in the third offer (the First Representation); (b) that Weston had the ability and capacity to obtain the price capping insurance on the terms stated in the third offer (the Second Representation); (c) that Weston intended as at about 2 March 2022 to obtain the price capping insurance in performance of the third offer (the Third Representation); and (d) that Weston would comply with the third offer and obtain price capping insurance for the benefit of itself and Ceramics (the Fourth Representation).
Ceramics also pleads that, having entered into the agreement, by purporting to pass on the insurance premium for ‘price capping insurance’, Weston represented ‘that it had taken out price capping insurance to protect itself against gas commodity price rises on the spot market and was charging the cross-claimant the agreed premium (the Fifth Representation) (AXC at [21]).
Section 4 of the ACL relevantly reads:
4 Misleading representations with respect to future matters
(1) If:
(a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and
(b) the person does not have reasonable grounds for making the representation;
the representation is taken, for the purposes of this Schedule, to be misleading.
…
(4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to:
(a) a misleading representation; or
(b) a representation that is misleading in a material particular; or
(c) conduct that is misleading or is likely or liable to mislead;
and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.
18 Misleading or deceptive conduct
(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
…
It is in near identical terms to the now repealed s 52(1) of the Trade Practices Act 1974 (Cth) (‘TPA).
It has been said that the words ‘misleading or deceptive’ in the statutory context share the common meaning ‘to lead into error’: Parkdale Custom Built Furniture Pty Ltd v Puxu (1982) 149 CLR 191 at 198 per Gibbs CJ (‘Puxu’) and also that the secondary basis of liability ‘likely to mislead or deceive’ adds little to the section, ‘at most [it makes] it clear that it is unnecessary to prove that the conduct in question actually deceived or mislead anyone’: Puxu at 198.
In Self-Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd (2023) 277 CLR 186 at [80]–[83] (‘Self-Care*’*), the High Court recently addressed the process to be followed when determining whether conduct is misleading or deceptive (citations omitted):
“[80] The principles are well established. Determining whether a person has breached s 18 of the ACL involves four steps: first, identifying with precision the “conduct” said to contravene s 18; second, considering whether the identified conduct was conduct “in trade or commerce”; third, considering what meaning that conduct conveyed; and fourth, determining whether that conduct in light of that meaning was “misleading or deceptive or … likely to mislead or deceive”.
[81] The first step requires asking: “what is the alleged conduct?” and “does the evidence establish that the person engaged in the conduct?”. The third step considers what meaning that conduct conveyed to its intended audience. As in this case, where the pleaded conduct is said to amount to a representation, it is necessary to determine whether the alleged representation is established by the evidence. The fourth step is to ask whether the conduct in light of that meaning meets the statutory description of “misleading or deceptive or … likely to mislead or deceive”; that is, whether it has the tendency to lead into error. Each of those steps involves “quintessential question[s] of fact”.
[82] The third and fourth steps require the court to characterise, as an objective matter, the conduct viewed as a whole and its notional effects, judged by reference to its context, on the state of mind of the relevant person or class of persons. That context includes the immediate context – relevantly, all the words in the document or other communication and the manner in which those words are conveyed, not just a word or phrase in isolation – and the broader context of the relevant surrounding facts and circumstances. It has been said that “[m]uch more often than not, the simpler the description of the conduct that is said to be misleading or deceptive or likely to be so, the easier it will be to focus upon whether that conduct has the requisite character”. That said, the description of the conduct alleged and identified at the first step should be sufficiently comprehensive to expose the complaint, because it is that conduct that will ultimately, as a whole, be determined to be or not to be misleading or deceptive.
[83] Where the conduct was directed to the public or part of the public, the third and fourth steps must be undertaken by reference to the effect or likely effect of the conduct on the ordinary and reasonable members of the relevant class of persons. The relevant class of persons may be defined according to the nature of the conduct, by geographical distribution, age or some other common attribute, habit or interest201. It is necessary to isolate an ordinary and reasonable “representative member” (or members) of that class, to objectively attribute characteristics and knowledge to that hypothetical person (or persons), and to consider the effect or likely effect of the conduct on their state of mind. This hypothetical construct “avoids using the very ignorant or the very knowledgeable to assess effect or likely effect; it also avoids using those credited with habitual caution or exceptional carelessness; it also avoids considering the assumptions of persons which are extreme or fanciful”. The construct allows for a range of reasonable reactions to the conduct by the ordinary and reasonable member (or members) of the class.”
So, the four steps to be carried out in determining whether a person has breached s 18 of the ACL are:
clearly identify what is the conduct which is said to form the foundation of the claim and then make a finding as to whether that conduct, or what conduct, occurred;
determine whether the conduct was in 'trade or commerce' (here, this is uncontentious);
determine what meaning the conduct conveyed to the intended audience; and
determine whether the conduct in the light of that meaning meets the description of misleading or deceptive or likely to mislead or deceive.
However, this is only the preliminary analysis, if the execution of all those steps turns up favourably for the defendant, a plaintiff may only recover if they suffer loss or damage ‘because of’ the misleading or deceptive conduct: ACL s 236(1).
Proof of intention is not required to prove a breach of s 18: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216. Liability may be founded even where the contravener (at least where they are a corporation, as they are here) has acted honestly and exercised reasonable care: Puxu.
However, there are cases where the contravener’s intention may in fact be relevant, for example where the misleading or deceptive conduct relates to promises or opinions; see C Lockhart, The Law of Misleading or Deceptive Conduct (6th ed, 2023, LexisNexis) at 97–98 (citations omitted):
“While the general principle that an intention to mislead need not be proved in order to establish a contravention of ACL s 18 and its analogues is well established, it is also apparent that the impugned actor’s knowledge or belief may not be irrelevant in the breach inquiry. In Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd [(1984) 2 FCR 82], the Full Federal Court noted that the essential characteristic of misleading or deceptive conduct is that it ‘contains or conveys a meaning which is false’ and that where the impugned conduct consists of a ‘statement of past or present fact’, the speaker’s ‘state of mind is immaterial’ to whether the conduct embodied such a meaning. Nevertheless, ‘[m]any statements, for example, promises, predictions and opinions, do involve the state of mind of the maker of the statement at the time [it] was made’. Determining whether such conduct conveyed a false meaning will, therefore, necessarily involve consideration of whether ‘the maker of the statement had a particular state of mind when the statement was made.
In Bridge Stockbrokers Ltd v Bridges [(1984) 4 FCR 460), Lockhart J suggested that some further ‘refinement’ may be necessary, concerning ‘the intent of the alleged offender … in determining whether conduct is misleading or deceptive’. While acknowledging that intent was ‘not an essential element in the notion of misleading or deceptive conduct’, his Honour remarked that ‘deceptive’ in s 52 could bear the meaning of ‘cheating, ensnaring or deliberately misleading’, and envisaged circumstances ‘where there will be deceptive conduct only where the intention of the [defendant] is established’, such as conduct intentionally designed to create mere confusion to avoid breach of the prohibition.”
As stated in Self-Care, the first step is to identify with precision the conduct said to be misleading or deceptive. Here, the pleadings referred broadly to ‘pre-contractual negotiations’ (AXC at [19]) and the particulars draw attention to the covering email accompanying the third offer sent by Dr Gholami to Mr Willy and Mr Schneider (produced above) and also the wording of cll 1.5 and 1.8 themselves. The pleadings also identified the post-contractual conduct of invoicing for the premium (at $0.15/GJ) (AXC at [21]). In the course of proceedings, the conduct has also been identified to include the three-way telephone conversation between Dr Gholami, James, and Mr Schneider. Summarily, the conduct said to be misleading or deceptive is the following:
clauses 1.5 and 1.8 of the final offer themselves;
the covering email to the final offer which contained cll 1.5 and 1.8;
the phone conversations preceding the final offer; and
invoicing for a ‘premium’.
The five representations which are said to arise from this conduct are noted above under ‘Ceramics’ submissions’. They relate to the availability of a ‘price capping insurance’, to Weston’s capacity and intention to obtain it, and to Weston’s having obtained it.
As mentioned above in Self-Care, where the conduct is directed to the world at large or to a class of people, the assessment is to take place by reference to a hypothetical ordinary and reasonable member of the people to whom the conduct was directed.
Here, although we are dealing with the conduct of one corporation specifically directed to one other corporation, Weston proffered the same ‘price insurance’ product to different companies (T208–212).
On 16 May 2022, for example, another employee of NUS sent the following email to Dr Gholami regarding Baxter Health’s dissatisfaction with Weston’s failure to honour their apparent obligations (Exhibit 3):
“Hi Amin,
I just had a meeting with Baxter who have been discussing this matter internally.
They are not happy and are currently getting a legal opinion.
We are still getting fixed price offers but they are around $18 per gj plus monthly charge. This is a huge increase over what they would have paid with your cap. It is Weston that has put them in this position by not taking out insurance for the cap.
Could you advise me who the notification has been sent to at Baxter as my contacts had not seen an email from you.
…”
“[24] The question whether conduct is misleading or deceptive or likely to mislead or deceive within the meaning of s 42 of the Fair Trading Act is logically anterior to the question whether a person has suffered loss or damage thereby for the purposes of s 68. The distinction between characterisation of the conduct and determination of the causation of the claimed loss said to result from it must be maintained. In so saying, it is necessary to acknowledge that there may be practical overlaps in the resolution of these logically distinct questions. The characterisation of conduct may involve assessment of its notional effects, judged by reference to its context. The same contextual factors may play a role in determining causation.
[25] Characterisation is a task that generally requires consideration of whether the impugned conduct viewed as a whole has a tendency to lead a person into error. It may be undertaken by reference to the public or a relevant section of the public. In cases of misleading or deceptive conduct analogous to passing off and involving reputational issues, the relevant section of the public may be defined, according to the nature of the conduct, by geographical distribution, age or some other common attribute or interest. On the other hand, characterisation may be undertaken in the context of commercial negotiations between individuals. In either case it involves consideration of a notional cause and effect relationship between the conduct and the state of mind of the relevant person or class of persons. The test is necessarily objective.
[26] This Court has drawn a practical distinction between the approach to characterisation of conduct as misleading or deceptive when the public is involved, on the one hand, and where the conduct occurs in dealings between individuals on the other. In the former case, the sufficiency of the connection between the conduct and the misleading or deception of prospective purchasers “is to be approached at a level of abstraction not present where the case is one involving an express untrue representation allegedly made only to identified individuals”. Where the conduct is directed to members of a class in a general sense, then the characterisation inquiry is to be made with respect to a hypothetical individual “isolate[d] by some criterion” as a “representative member of that class”. In the case of an individual it is not necessary that he or she be reconstructed into a hypothetical, “ordinary” person. Characterisation may proceed by reference to the circumstances and context of the questioned conduct. The state of knowledge of the person to whom the conduct is directed may be relevant, at least in so far as it relates to the content and circumstances of the conduct.”
Therefore, the question of whether a person has been misled or deceived is irrelevant to the question of whether conduct is misleading or deceptive or likely to mislead or deceived. That question, however, is relevant and must be asked when assessing whether the impugned conduct caused the claimant’s loss.
When assessing conduct directed to a class of persons, characterisation proceeds by reference to a ‘representative member of that class’ (Backoffice Investments at [26]). Here, the relevant class of persons is purchasers of wholesale gas under a price cap contract.
The characterisation of Weston’s conduct proceeds by reference to a representative member of that class of people who buy wholesale gas, of which Mr Schneider was part (at the time of the negotiations he had approximately 14 years’ experience ‘in the tiling and ceramic related industry in Australia’ (CPS-A 1 at [6])).
The concept of a ‘price cap’ in wholesale gas agreements was a relatively new one. However, in reality, there was no price cap insurance available in the marketplace, as Weston was well aware. Mr Schneider was not aware of this, and Weston took no steps to explain this shortcoming.
Weston’s suggestions of the import and meaning of cl 1.8 are key to any finding of misleading or deceptive conduct. On the morning of 2 March 2022, there were two important phone calls.
The first phone call was between Dr Gholami and Mr Schneider and was only 7 minutes in duration; the second phone call was between Dr Gholami, Mr Schneider, and James and was 17 minutes in duration.
The content of the first conversation on 2 March 2022 is uncontroversial. Mr Schneider told Dr Gholami that a one-month price cap was insufficient and pushed Dr Gholami to offer a 12-month price cap. Dr Gholami said that he would seek guidance from his superiors. This phone call was of 7 minutes’ duration. In cross-examination, Dr Gholami said that in such negotiations it was his practice to inform clients that gas prices might fall (T186 [45] – 187 [3]):
“Q. In that conversation do you recall you were going through the 1 March offer with Mr Schneider and you discussed that with him?
A. The intention of the call was to just clarify the, the latest offer that we made, and the one month for - price cap for an elected month and the value that it adds to our offering, and see if what - you know, getting his input and feedback on that directly firsthand from Mr Schneider.
Q. During that conversation, do you recall you expressed to him a view that gas prices would be likely to go down?
A. I cannot recall those exact words, but to that effect we always said that it’s a variable price and there is a chance that prices go down.”
“Please see attached the updated contract with 12 months price cap of $15/GJ. We’re happy to start the capped retail margin from 1/March but let the insurance start 1/Apr so you’ll have one extra month coverage in 2023.”
I accept that on 2 March 2022, the three-way phone call took place between Mr Schneider, Dr Gholami and James. I accept that during the three-way telephone conversation that James said something to the effect of '[w]e definitely can't offer a cap for a 24-month retail contract. The best I can do against my book is for a 12-month price cap.' It is common ground that neither James nor Dr Gholami explained to Mr Schneider that there was no third-party insurance policy.
An important consideration in evaluation of the three-way phone conversation is that Weston was eager to secure the contract. Dr Gholami during cross-examination conceded the fact that he did not have clear recollection of what was specifically said during the three-way telephone conversation, especially regarding information that may have been conveyed to Mr Schneider about ‘price cap insurance’ and the lack of any such third-party policy. Dr Gholami admitted to having a poor recollection.
I find Dr Gholami’s and James’ evidence as to the three-way phone conversation unreliable. It is difficult to determine exactly what was said in this phone conversation, but it is my view that, after carefully observing them giving evidence and being cross-examined, they had tailored their evidence to bolster Weston’s case. Starting with the email, it is my view that Dr Gholami and James exploited the loose and imprecise language of cl 1.8 to secure Ceramics’ business. Regarding the text of their email, it appears that “insurance” was discussed.
Weston’s position has always been that the ‘price cap’ and ‘price insurance’ are synonymous and refer to the same thing, the price cap. However, the email extracted above contemplates that they are separate things. In the first sentence of quotation the email refers to the ‘price cap’ whereas in the second sentence it refers to the ‘insurance’ and the ‘coverage’ it provides (the ‘capped retail margin’ refers to another feature of the agreement).
The policy of the prohibition on misleading or deceptive conduct in trade or commerce is relatively clear: people engaged in trade or commerce must actively ensure that what they do is not misleading or deceptive. Liability is absolute. It matters not how reasonably or honestly the party has behaved. Where conduct is misleading or deceptive, and because of it another person suffers loss, the policy is that the loss should fall with the person responsible for the misleading or deceptive conduct.
Weston’s repeated use of terms intimately connected with insurance policies, such as ‘insurance’, ‘premium’, ‘term’, ‘renewal’, ‘trigger’, and ‘coverage’ to refer to something other than an insurance policy in my view was misleading or deceptive. This conclusion is put beyond any doubt in circumstances where Weston failed to disabuse Ceramics of the existence of any sort of third-party insurance policy. The use of the term ‘price insurance’ as a synonym for ‘price cap’ is misleading or deceptive.
Causation is a question of fact which ‘must be determined by applying common sense to the facts of each particular case’ (March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 (‘March v Stramare’) at 516 per Mason CJ quoting Lord Reid in Stapley v Gypsum Mines Ltd [1953] AC 663, 681).
Under s 236 of the ACL, a claimant may only recover loss or damage suffered because of the misleading or deceptive conduct:
236 Actions for damages
(1) If:
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3; the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
(2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.
Ceramics alleges that because of misleading representations made to it by Weston regarding ‘price capping insurance’, it chose Weston’s gas supply offer over Shell’s gas supply offer, and thereby is entitled to be put in the position it would have been in had it contracted with Shell (see Westpac Banking Corporation v Jamieson [2015] QCA 50 at [143]–[144]).
At common law, ‘acts done by the representee in reliance on the misrepresentation constitute a sufficient connexion to satisfy the concept of causation’ (Wardley Aust Ltd v W**estern Australia (1992) 175 CLR 514 at 525) (‘Wardley’). Although ‘reliance is not a substitute’ in the context of the ACL (Back Office Investments [143] per Gummow, Hayne, Heydon and Kiefel JJ; emphasis in original), reliance may be ‘a link … in the chain of causation’ (Sellars v Adelaide Petrol**eum NL (1994) 179 CLR 332 at 356 per Brennan J).
Here, the loss or damage argued for is that which was eventually occasioned by the decision to accept the Weston offer over the Shell offer. That act was allegedly done on reliance on Weston’s representations. It was that act of election which caused the loss claimed.
If Ceramics is able to prove that at the time of its of election of contracts, it looked to and relied on any misrepresentation as to ‘price capping insurance’ made by Weston, and that additional factor settled any indecision or prevarication and caused it to elect Weston, the misleading or deceptive conduct can properly be said to have caused the loss claimed. Similarly, if Ceramics is able to show that Weston’s misleading or deceptive conduct ‘materially contributed to’ its election of Weston over Ceramics, that misleading or deceptive conduct can be properly said to have caused the loss claimed (March v Stramare at 515 per Mason CJ).
Although this formula of ‘material contribution’ is generally used in negligence actions where there appears to be more than one cause of the damage, in Wardley at 525, the Court discussing s 82(1) of the TPA said that that section ‘should be understood as taking up the common law practical or common-sense concept of causation [discussed in March v Stramere]’. Section 82(1) of the TPA was in slightly different terms to the current s 236 of the ACL. The former provided that loss or damage which occurred ‘by an act of another person’ was recoverable, whereas the latter provides that loss or damage which occurs ‘because of the conduct of another person’ is recoverable. This analysis, still with reference to s 82(1) of the TPA, was approved by Gaudron J in Henville v Walker (2001) 206 CLR 459 at [61] where her Honour said, ‘that common-sense approach requires no more than that the act or event in question should have materially contributed to the loss or injury suffered.’ For these purposes, the difference in wording between the two provisions is not significant and a satisfactory causal nexus can be established if it can be shown that Weston’s misleading or deceptive conduct materially contributed to Ceramics’ loss, which is said to ultimately arise from the act of electing Weston over Shell.
(a) uncorroborated by any contemporaneous record of Mr Schneider’s thinking in the period up to and including 3 March 2022; (b) uncorroborated by any other witness evidence as to what was important to Ceramics in entering into contract at that time; (c) contrary to Mr Schneider’s own evidence about what featured in his decision-making in late February and early March 2022; and (d) not supported by anything Mr Schneider said in his subsequent dealings with Weston, Mr Willy and his boss, Mr Lance Foxcroft.
Mr Schneider was cross-examined in line with the contention taken in sub-paragraph (a) above, that is, he was criticised because he did not keep a written diary recording internal thoughts. This argument is unpersuasive. While it may be that a person in Mr Schneider’s position may have kept a diary of appointments and brief file notes, it would not have been expected that such a person would record their internal thoughts.
As to sub-paragraph (b), it is somewhat inaccurate. There are two emails from Mr Willy revealing something approximating the matters addressed in sub-paragraph (b). On 12 May 2022, Mr Willy sent an email to Mr Schneider which read so:
“Hi Chris,
Please see Weston’s email and find attached the contract documents.
As I mentioned yesterday already Weston couldn’t get an insurance in place for all the “cap” customers and is getting hit now extremely as spot prices are up to $30 to $40.
They are not increase the spot rates but increasing the Gas Commodity Charge from capped by $1/GJ by another $9/GJ to $10/GJ.”
“Hi Chris,
…
As you can see the cost increase of the spot price contract is only related to the increase of the retail margin. There could also be an opportunity that Weston energy will continue to increase this retail margin whenever they want. At the moment they [are] begging customers to leave them as they cannot afford to lose more money. All of this could be avoided if they would have an insurance in place which would cover this.
…”
These emails suggest that Mr Willy himself was actually misled by the representations relating to the supposed ‘price cap’ insurance policy and that he relied on them in some way.
As to sub-paragraph (c), it is true that Mr Schneider deposed that a chief reason for selecting Weston was the opportunity it presented for Ceramics to simultaneously capitalise on low spot prices while being protected from increases above $15/GJ (CPS-A 1 at [27], [30]–[31], [35]). However, that does not exclude the finding that Weston’s misleading or deceptive conduct amounting to representations about a ‘price cap’ insurance policy caused Ceramics to enter into the contract with Weston (that is, caused the loss). It is not farfetched that the guarantee of security provided by a third-party insurance policy would materially contribute to one’s decision to enter into a contract, notwithstanding that there are other considerations.
Sub-paragraph (d) is unpersuasive. This is because Mr Schneider had sole responsibility for making the decision of which offer to accept. Those others would not have had any specific knowledge as to price cap agreements. It would have not been in his interest to ask his seniors because it was part of his job to make this decision.
Weston refers again to Dig It, where the Federal Court rejected the evidence of a witness that Weston says was in the same shoes as Mr Schneider. Weston says that the same matters which caused the Federal Court to reject that witness’s evidence arise here:
(a) as the managing director of Ceramics’ Australian operations, Mr Schneider was not an impartial witness – it is ordinary human behaviour to seek to blame others for something that has gone wrong; (b) Mr Schneider’s evidence is not supported by contemporaneous documentation (or even other witnesses or the balance of his own affidavit evidence) about his state of mind such that risk of pure reconstruction is clear; (c) Mr Schneider’s evidence lacks plausibility where the supposed importance of insurance was not raised in his interactions with Weston, Mr Willy or Mr Foxcroft in May 2022, and he accepted in cross-examination that he was not familiar with all the detail of Weston’s business so as to have understood how an insurance policy would have assisted it (T119 [29]–[39]); and (d) the cloud of hindsight and reconstruction is apparent (as was put to Mr Schneider in cross-examination (T117 [27]; T123 [4]–[19]; T138 [16]–[19]; T139 [36]–[39])), in particular where the adverse impact on Ceramics has been quantified at in excess of $8 million.
So far as sub-paragraph (a) is concerned, it is true that Mr Schneider was not an impartial witness. However, this point is somewhat trite. Witnesses in commercial cases are rarely impartial. It does not mean that they are disabled from telling the truth. As I said earlier when he was shown to be in error, he freely accepted that. To my mind, after carefully observing him when he was giving evidence and being cross-examined, I formed the view that he was an honest witness.
I have dealt with the substance of sub-paragraph (b) above.
While I understand there is always the risk of reconstruction. On balance, I do not accept that it occurred here. Therefore, I accept Mr Schneider’s evidence.
Again, in response to sub-paragraph (c), Mr Schneider had sole responsibility for making the decision of which offer to accept. The two emails from Mr Willy to Mr Schneider above weigh against and perhaps even disprove the notion that the importance of the price cap insurance was never discussed.
In line with sub-paragraph (d) above, Mr Schneider was also criticised on some factual matters on which he was mistaken. However, I do not think he was untruthful as I have already set out.
I am satisfied that Weston’s misleading or deceptive conduct gave rise to the pleaded representations. That conduct was comprised of:
a contractual clause of calculated ambiguity;
a covering email which had the objective effect of reinforcing or exploiting that ambiguity;
the three-way phone conversation which seemed to have the same effect of reinforcing or exploiting that ambiguity;
failure to disabuse Ceramics of that ambiguity in the email or in three-way phone call before provision of the final offer; and
invoicing for a ‘premium’.
I am reasonably satisfied that this misleading or deceptive conduct materially contributed to Mr Schneider’s decision to choose Weston’s contract over Shell’s, which is the key act causing loss. In other words, I am actually persuaded that Weston’s misleading or deceptive conduct materially contributed to Ceramics’ decision to choose Weston over Shell. In the event, Weston became unable to fulfil its contractual obligations and Ceramics lost the benefit of its contract. This would not have happened if Ceramics chose Shell — Ceramics chose Weston and not Shell because of Weston’s misleading or deceptive conduct.
Under s 236 of the ACL, loss or damage which is suffered ‘because of’ the misleading or deceptive conduct is recoverable.
In tort, an award of damages is fashioned by reference to the principle that, so far as is possible by way of money, a party is to be put in the position that they would have been in had the wrong not occurred. The same principle is ‘appropriate in most, if not all [cases involving] misleading or deceptive conduct’ (Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 15 per Gibbs CJ).
Here, the loss or damage claimed is the funds expended in surplus of that which would have been expended had Ceramics, in March 2022, accepted the Shell offer as opposed to the Weston offer. Since Ceramics accepted Weston’s offer and failed to accept Shell’s offer because of Weston’s misleading or deceptive conduct, it is entitled to be put in the position it would have been in had it accepted Shell’s offer, which was a two-year fixed price offer.
This requires an analysis of what Ceramics paid in fact during the period of the Shell offer and what it would have paid over the same period had it accepted the Shell offer.
Ceramics relied upon the original report and supplementary report on damages prepared by Mr Shields of Doleman Bateman & Co Pty Ltd. Mr Shields is a chartered accountant who specialises in forensic accounting. While Weston never admitted that Ceramics suffered loss or damage, the reports of Mr Shields were not challenged. Mr Shields was not cross-examined.
The supplementary report calculated that between 4 March 2022 and 30 June 2024 (the end date of the Shell offer), Ceramics expended $26,775,918.65 including GST on its natural gas supply. It arrived at this figure by the addition of the following invoices:
the invoices from Weston for the period from 1 March 2022 to 23 May 2022 (amounting to $1,930,589.94, excluding GST);
the invoices from AGL Energy for the period from 24 May 2022 to 30 June 2022 (amounting to $2,381,857.04 excluding GST); and
the invoices from Origin Energy for the period from 1 July 2022 to 30 June 2024 ($20,038,333.36 excluding GST).
Below is a table charting those costs:
The supplementary report (dated 30 September 2024) differs from the original report (dated 10 February 2023) because it is able to calculate Ceramics’ expenditure based on the actual invoices as issued, rather than predictions. The original report had predicted total costs to be $23,270,882.55 excluding GST, that is $25,587,970.8 including GST (if I calculate correctly). The value in the supplementary report of $26,775,918.65 including GST will be adopted.
As to the counterfactual analysis relevant to quantification of damages, the original report considered the costs that Ceramics would have incurred if it had accepted the Shell offer at a fixed rate of $10.25/GJ for the period of 1 July 2022 to 30 June 2023 and $10.49/GJ for the period of 1 July 2023 to 30 June 2024. It assumed that the contract that Ceramics had entered into with Weston would have remained on foot and that Ceramics would have been subject to the terms of that contract until the commencement of the Shell contract on 1 July 2022— under the 2020 Weston contract, Ceramics would have continued to be charged gas at the spot price plus 10% of the ‘Gas Commodity Charge’. The report assumed that Weston continued to provide gas to its customers and was not suspended from trading on 23 May 2022. By the addition of the theoretical costs from 1 March 2022 to 30 June 2024 on the Weston contract ($5,115,728.01 excluding GST) and the theoretical costs of two years under the Shell contract ($11,865,956.88 excluding GST), Mr Shields arrived at a figure of $16,981,684.89 excluding GST, that is, $18,679,853.38 including GST (if I calculate correctly).
Ceramics claims that is entitled to an equitable set-off in relation to Weston’s claim for non-payment of the invoice. Ceramics has admitted non-payment of this invoice. Because of the liabilities established in this judgment, such a set-off would have the effect of extinguishing Weston’s claim entirely and reducing Ceramics’ entitlement by the commensurate quantum.
It is necessary to say something about the character of an equitable set-off. In R Meagher, D Heydon, M Leeming, and P Turner, Meagher Gummow & Lehane’s Equity Doctrines & Remedies (LexisNexis, 5th ed, 2015) (‘Lehane’) the learned authors state at 1098 (citations omitted; my emphasis):
“A set-off is said to exist when, in answer to a plaintiff’s claim, a defendant is able successfully to plead a countervailing claim against the plaintiff which absolves the defendant, wholly or partially, of liability to satisfy the plaintiff’s claim. It is to be distinguished from a mere counterclaim, in that a mere counterclaim is never a defence to a plaintiff’s claim but an entirely independent action brought by a defendant against a plaintiff although in the same proceedings. A counterclaim must be used offensively; it cannot be used defensively. But a set-off, like an estoppel, and in the same limited sense, is a shield, not a sword. That it is also capable of being used offensively, as a sword, is not to the point. What is meant by the aphorism is that whether or not it can be used offensively it is capable of being pleaded as a ground for absolution, as a shield: a mere counterclaim cannot be used in that way. Where P brings an action against D for $1000 and D pleads a cross-action against P for $900, the result — assuming both action and cross-action should be successful — is not a verdict in favour of P for $100, but a verdict for P for $1000 and a verdict for D for $900, with judgment for P for $100; whereas, if D’s plea were by way of set-off, the result would be a verdict and judgment in favour of P for $100. Hence the outcomes of cases may differ significantly depending on whether a case gives rise to a true set-off — and, if so, whether the set-off is legal or equitable — or some other, related but distinct type of claim. The nature of set-offs makes them, and the distinctions between them and related doctrines, a topic of major practical importance.”
“Equitable set-off is a substantive defence: see S R Derham, Set-Off, 2nd ed (1996) at 56-65. As Goff LJ said in Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1978] QB 927 at 982, a defence of equitable set-off may be set up ‘not merely as a means of preventing … judgment, or, at any rate, execution, but also as an immediate answer to … liability to pay’. This must be correct because an equitable set-off impeaches the title of the other party to the legal demand against which it is asserted. When ‘the circumstances which support an equitable set-off exist, it is unconscionable for the creditor to regard the debtor as being indebted’: Derham (at 60). The debtor can therefore claim that the payment demanded was never due: see Tomlinson v Cut Price Deli Pty Ltd (1992) 38 FCR 490 at 494-495, per Drummond J and the cases there cited. Roadshow was therefore entitled in equity to withhold the payments otherwise due on 31 October and 30 November and for that additional reason its conduct did not prevent it from rescinding the contract for fundamental breach.”
Roadshow was approved in Concrete Constructions v Dalma Formwork [1999] NSWCA 16 at [21]–[22] and in Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 at [54] per Campbell JA.
There are four types of equitable set-off (Lehane at 1102). The purely equitable set-off is the one where ‘the party seeking the benefit of it can show some equitable ground for being protected against his adversary’s demand’ (Lehane at 1042 quoting Rawson v Samuel (1841) Cr & Ph 161 at 178; 41 ER 451 at 485 per Lord Cottenham LC). Since the claim and the counter-claim arise from precisely the same transaction, a transaction which Ceramics entered into because of Weston’s illegality (misleading or deceptive conduct), Ceramics is entitled to an equitable set-off as it would be inequitable to allow Weston to satisfy its debt without first clearing its conscience by compensating Ceramics for the loss which it has suffered at Weston’s hands.
A question arises as to when the equitable set-off should be applied. The timing of the application is of critical importance as it will affect the quantum which will be off-set. If the set-off is applied sooner, it will be of a lesser quantum as the accrual of interest will be arrested. If the set-off is applied at the time of this judgment, the quantum will be larger as more interest will have accrued.
Clause 7.3(b) of the parties’ agreement (CB55) relevantly determined interest payable on an unpaid invoice. It is in the following terms:
7.3 Payment delay or failure
…
b) If the Customer fails to pay an invoice by the date specified on the invoice, Weston Energy may charge interest on the amount that has not been paid at a rate equal to three (3) per cent per annum over and above the interest rate charged from time to time by Westpac Banking Corporation on overdrafts of $100,000. Interest is capitalised (if not paid every 28 days;
…
“… the equitable set-off is to be applied by the Court at the time when circumstances subsist which support the equitable set-off regardless of whether proceedings are brought at the time (Miwa v Siantan Properties [2011] NSWCA 297 at [53]; Mao v Bao [2021] NSWSC 1096 at [54]-[55]; Mao v Bao [2023] NSWCA 278 at [63], [232], [244]). In a case where the set-off is based on a claim for damages for contravention of section 18 of the ACL, that time is when the cause of action first arises, and that occurs when Ceramics agreed to enter into the contract on 2 March 2022 because even though the damages were not then quantifiable, it is at that time that Ceramics lost the benefit of the Shell fixed price contact and it is at that time that equity binds the conscience of the representor (AMP v Specialist Funding Consultants (1991) 24 NSWLR 326 at 331A; Miwa at [53]). In other words, it is at the time of the misleading or deceptive conduct and reliance upon it by Ceramics on 2 March 2022 when it entered into the contract.”
“Section 52 is in Pt V of the Act and accordingly an action for damages for breach of it is within s 82. Damage is an essential element of any action based on s 52. The cause of action accrues when damage is first suffered: Jobbins v Capel Court Corporation Ltd (1989) 91 ALR 314 at 317 [1990] ATPR 41-005, at 51,090. Where the claim is that damage was suffered as a result of the person having been induced, by misleading or deceptive conduct, to enter into a contract time runs from the date the contract was entered into: cf Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1988) ATPR 40-853. At the time the contract is entered into, damage is suffered if the person induced by the misleading and deceptive conduct does not receive the advantages and benefits promised. The loss may not be quantifiable at that time but a loss has been sustained nonetheless so the cause of action is complete.”
“Although there may be several distinct losses and several distinct claims flowing from breaches of the Trade Practices Act 1974 (Cth), s 52, in the ordinary case where the applicant claiming relief on the basis of misleading conduct inducing him to enter into obligations under a contract points to a series of losses of various kinds flowing from the transaction, there are not as many causes of action as distinct losses. A cause of action accrues by the time the applicant enters into the relevant transaction. Where the applicant has taken a lease, that time will not be later than the execution of the lease.”
“[A]n equitable set-off can be asserted as soon as circumstances subsist which support the equitable set-off, and regardless of whether proceedings have been brought at that time. This can occur because equitable set-off operates to bind the conscience of the primary claimant, preventing the primary claimant from insisting on satisfaction for the primary claim without giving credit for the claim made against the primary claimant by the other party. Thus, if the other party had an equitable set-off which completely extinguished the claim of the primary claimant, the existence of the equitable set-off could give the other party a right to prevent the primary claimant from exercising any self-help remedy based upon its supposed entitlement under the primary claim.”
However, it is not clear, as submitted by Ceramics, that Ceramics’ cause of action arose at the time it entered into the contract with Weston or, even if that was the case, circumstances at that time subsisted so as to support an equitable set-off.
No cause of action arises simply because a person engages in misleading or deceptive conduct. The cause of action is created by s 236 itself and arises when a person suffers loss or damage because of that misleading or deceptive conduct. Damage is the gist of the statutory claim. In Wardley at 529–532, the High Court rejected the decision in Jobbins v Capel Court Corporation Ltd (1989) 91 ALR 314 (which was relied on by Rogers CJ in AMP v Specialist Funding Consultants); the Court in Wardley held that where a person granted an indemnity as a result of misleading or deceptive conduct, the loss did not occur when the indemnity was granted, but when ‘the contingency is fulfilled and the loss becomes actual’ (at 532).
It seems that same rule applies to Ceramics’ contract with Weston. The cause of action under s 236 arose when, on account of Weston’s misleading or deceptive conduct, Ceramics begun to suffer loss. The counterfactual scenario from which loss has been gauged in this case is Ceramics’ contracting with Shell. At the point that it became clear and the Court could be reasonably satisfied that Ceramics would be paying more (would suffer loss) having contracted with Weston than if it had contracted with Shell, at that point can the cause of action be said to have arisen. Here, that time is 23–24 May 2022, when Weston was suspended from trading, when Weston terminated its contract with Ceramics, and when Ceramics was forced to obtain natural gas from elsewhere at heightened prices. The quantum that could be yielded by the cause of action at that time would have been similar to the quantum yielded during these current proceedings (calculations of damages would have proceeded by prediction of prices and consumption, as opposed to actual prices and consumption). For that reason, circumstances subsisted on 24 May 2024 which could support an equitable set-off of the entirety of Weston’s claim.
The invoice was issued 23 May 2022 and was due for payment 3 June 2022 (that date was specified on the invoice and was also the date on which Weston would be entitled, under cl 7.3(b) to begin charging interest on the unpaid invoice).
At the time the invoice fell due, circumstances subsisted to support an equitable set-off. The result is that no interest is able to accrue on the invoice. Correspondingly, however, Ceramics’ primary entitlement on which interest accrues is also commensurately reduced. Ceramics entitlement is reduced by the quantum of the unpaid invoice, being $664,983.42.
So, finally, Ceramics’ entitlement can be quantified by the subtraction of $664,983.42 from $8,475,613.72 which yields $7,810,630.30. Weston’s cause of action is extinguished by the set-off.
Ceramics’ cross-claim under s 18 of the ACL is upheld; its cross-claim for restitution for unjust enrichment fails.
Weston’s claim for its unpaid invoice is made out but is extinguished by the equitable set-off claimed and established by Ceramics.
100 Interest up to judgment
(1) In proceedings for the recovery of money (including any debt or damages or the value of any goods), the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit—
(a) on the whole or any part of the money, and
(b) for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect.
…
“[7] The effect of the statutory provision is that pre-judgment interest can be awarded on a claim for damages, whereas at common law interest could not be claimed on damages since there was no entitlement to the sum until judgment. But apart from the statutory provision, interest is recoverable as damages for late payment of a debt [Hungerfords v Walker (1989) 171 CLR 125]. …
[8] … the basis for an award of statutory pre-judgment interest is the defendant has had the benefit of not paying the money and the plaintiff the detriment of not having it, in a case of a debt which was quantified and which the defendant ought to have paid, as distinct from an unascertained liability for unliquidated damages [Bennett v Jones [1977] 2 NSWLR 355, 368—70; General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd [1975] 1 WLR 819, 836 (Lord Wilberforce), 841 (Lord Salmon)], as the defendant, rather than the plaintiff, obtains the time value of the money, unless an award of interest is made, and to fail to make an award of interest would confer an unwarranted enrichment on the defendant, by permitting it to retain the benefit of its having failed to pay when it ought to have done so.”
It has been said that ‘the award of interest should always be approached in a broad and practical way [and] should not be allowed to assume disproportionate importance’ (Cullen v Trappell (1980) 146 CLR 1 at 22 per Gibbs J).
Taking into account the equitable set-off, Ceramics would have had the totality of $7,810,630.30, being the loss occasioned by misleading or deceptive conduct, in its hands on 30 June 2024 (the end date of the Shell contract). So, accepting the statement of Gibbs J, interest should accrue from that date, 30 June 2024, to the date of judgment.
The parties have agreed to calculate interest once this judgment is handed down.
The Court orders that:
costs are reserved;
the parties are to file short submissions as to costs (a maximum of three pages each) by 5pm 21 July 2025; and
the parties are to file short minutes of order: reviewing my calculations regarding the quantum of damages (for example, calculation of GST) by 5pm 21 July 2025.
The proposed order that I will make subject to receipt of the short minutes of order is:
judgment for the defendant on the cross-claim in the sum of $7,810,630.30 with interest to accrue from 30 June 2024 to the time of judgment.
*********
Minor structural adjustments.
Minor structural adjustments.
No amends
Weston Energy Pty Ltd
National Ceramic Industries Pty Ltd [2025] NSWSC 747
(1991) 24 NSWLR 326
(1938) 60 CLR 336
(2009) 238 CLR 304
(1980) 146 CLR 1
(2014) 251 CLR 640
(2004) 218 CLR 471
(1986) 160 CLR 1
(2001) 206 CLR 459
(2001) 51 NSWLR 572
(1978) 140 CLR 216
(1989) 91 ALR 314
(1959) 101 CLR 298
(1991) 171 CLR 506
(2015) 256 CLR 105
(1982) 149 CLR 191
(1997) 42 NSWLR 462
(2023) 277 CLR 186
(1994) 179 CLR 332
(1992) 175 CLR 514
(2011) 297 ALR 56
(1995) 49 NSWLR 315
(2015) 256 CLR 104
(1973) 129 CLR 99
(2005) 221 CLR 522
(1984) 2 FCR 82
(1992) 38 FCR 490
(1989) 171 CLR 125
The question of the meaning of ‘price capping insurance’ is critical in two respects.
Firstly, as a matter of contractual interpretation, Ceramics pleads that cll 1.5 and 1.8 of the contract obliged Weston to obtain ‘price capping insurance’. Initially, Ceramics’ position was that Weston’s failure to obtain ‘price capping insurance’ caused Weston’s trading suspension. The suspension meant that Ceramics lost the benefit of its contract with Weston and was forced to obtain natural gas at a much higher rate. However, Ceramics accepts that the failure to obtain insurance was not the cause of Weston’s suspension and no longer presses its claim for breach of contract (Ceramics Closing Submissions [48]). Having accepted this, Ceramics seeks restitution for unjust enrichment. Ceramics says that it is entitled to restitution because it was paying a ‘premium’ (at $0.15/GJ) for an insurance policy that was never obtained, with the result that there was unjust enrichment on the basis of total failure of consideration.
Secondly, leaving the issue of contractual interpretation, Ceramics pleads that both in pre-contractual negotiations and in post-contractual dealings, Weston by its conduct represented that ‘price capping insurance’ existed, that it was available to Weston, that Weston was intending to obtain it, and that Weston had in fact obtained it. Weston accepts that all these representations, if they were made, were false. If these representations were made, and if they caused Ceramics loss, Weston is liable for misleading or deceptive conduct under s 18 of the Australian Consumer Law (‘ACL’) which is found in Sch 2 of the Competition and Consumer Act 2010 (Cth).
I will deal with the matters in the following order: firstly, the parties’ earlier negotiations and offers leading to the final agreement which is the subject of this dispute; secondly, the witnesses’ evidence; thirdly, the issue of contractual interpretation, that will dispose of the question restitution for unjust enrichment; fourthly, the claim for misleading or deceptive conduct, causation of loss and calculation of loss under the ACL.
The drawing of an inference in such an instance lies in the court's discretion, it is not mandatory; the discretion is only enlivened where the court is satisfied that the uncalled witness was in a position to provide relevant evidence on a matter in dispute: Australian Securities & Investments Commission v Fortescue Metals Group Ltd [No 5] [2009] FCA 1586; Manly Council v Byrne and Anor [2004] NSWCA 123.
One of the significant factual findings to be made in Ceramics’ claim for misleading or deceptive conduct was as to Mr Schneider’s state of mind at the time that he elected the Weston contract rather than the Shell contract. Mr Willy’s evidence could not be relevant to this factual determination.
Mr Willy was not party to the critical phone conversation on the morning of 2 March 2022; accordingly, Mr Willy could not give direct evidence of what was said or understood during that conversation, diminishing any potential probative value of his evidence.
There was evidence before the Court which indicated that Mr Willy likely would have supported Mr Schneider’s position. Emails sent by Mr Willy in May 2022, including one to Mr Schneider stating that Weston could not obtain insurance, and another to a third party expressing confusion as to why Weston had accepted the contracts without insurance in place, indicated that Mr Willy shared Mr Schneider’s understanding regarding insurance arrangements. Far from justifying an adverse inference, this material suggested that Mr Willy would have corroborated Mr Schneider’s evidence in turn rendering a Jones v Dunkel inference not only inappropriate but counterproductive to the truth-seeking function of the trial.
I accept Ceramics’ submissions. It was Mr Schneider’s state of mind, not Mr Willy’s, that is relevant. There has been no suggestion that Mr Schneider conveyed verbally to Mr Willy his understanding of any ‘price cap insurance’ nor vice versa. When Mr Schneider was asked the hypothetical question (T69 [24]–[26])
However, when ultimately interpreting this agreement, cl 1.8 is headed by the words ‘price cap’ and not ‘price cap insurance’ therefore, by taking the ordinary and natural meaning of the words, the Court must infer, that this section will address how the ‘price cap’ is to operate, and not how the ‘price cap insurance’ is proposed to operate. In the second line of cl 1.8 the contract stipulates ‘Weston Energy will provide price insurance for the effective…’ alluding to the fact that, a price cap will be achieved by the mechanism of Weston providing a ‘price insurance’ and not by Weston ‘obtaining’ a price cap insurance policy. The mechanism ‘price insurance’ operates with respect to the terms listed in cl 1.8, being the ‘premium’ charged for the service, the ‘term’ for which it will operate, ‘the renewal process’ and finally how the mechanism will be triggered. Alternatively, the calculation needed to give effect to the ‘price insurance mechanism’ which, in turn, works to cap the price at $15/GJ.
Although under the heading ‘price cap’ the words ‘price insurance’ appear three times where it stipulated, ‘Weston Energy will provide price insurance for the gas commodity price’, ‘[t]he price insurance is to be renewed on an annual basis’, ‘[p]rice insurance will be triggered on a monthly weighted average…’, there is no reference to the actual term ‘price insurance policy’ nor to the term 'price cap insurance policy'. After examining the ordinary and natural meaning of the words in the agreement, paying particular attention to the construction of cl 1.8 (although it is not entirely clear per se), it is my view that a reasonable businessperson would not have understood cl 1.8 to mean that Weston had an insurance policy in place with a third-party insurer.
The next issue to be determined is Ceramics’ cross-claim for misleading or deceptive conduct.
As a result of s 18 of the ACL (and of other analogous torts) people have a right, in trade or commerce, to expect that others are conducting themselves honestly, candidly, and straightforwardly; not only that, but that others are also conveying the truth by their conduct. In trade or commerce, people must be honest, candid, and straightforward with their words. To use the words ‘insurance’, ‘premium’, ‘term’, ‘renewal’, ‘trigger’, and ‘coverage’ to refer to something other than an insurance policy is slippery, definitely misleading, perhaps deceptive, and in any case illegal under the law of Australia.
I am satisfied that the conduct was misleading or deceptive and that it gave rise to the five pleaded representations. Namely, that:
there existed and was available in March 2022 a price capping insurance product in the terms stated in third offer;
Weston had the ability and capacity to obtain the price capping insurance on the terms stated in the third offer;
Weston intended as at about 2 March 2022 to obtain the price capping insurance in performance of the third offer;
Weston would comply with the third offer and obtain price capping insurance for the benefit of itself and Ceramics; and
Weston had taken out price capping insurance to protect itself against gas commodity price rises on the spot market.
These representations are the natural and ordinary ones to arise where a person repeatedly and in different settings uses the words ‘insurance’, ‘premium’, ‘term’, ‘renewal’, ‘trigger’, and ‘coverage’ to refer to a product, even when directed to a wholesale natural gas purchaser. This is notwithstanding that I have found that, as a matter of contractual interpretation, there was no contractual obligation to obtain a third-party insurance policy. Here, there was conduct (pre- and post-contractual conduct) which urged upon Ceramics a certain interpretation of the contract which was contrary to both the meaning of the contract and to Weston’s intentions.
On the other hand, if it is proved that Ceramics would have entered the Weston contract even if the misleading or deceptive conduct had not occurred (that is, if there were no representations as to ‘price capping insurance’ made), the misleading or deceptive conduct cannot be said to have caused the loss, and Ceramics’ case will fail: Backoffice Investments.
If the Court finds that Ceramics would have entered into the contract with Weston even if the misleading or deceptive conduct had not been engaged in, that misleading or deceptive conduct will not be the cause of the loss occasioned by entering into the contract with Weston and Ceramics' claim under the ACL will fail.
Ceramics is only able to recover loss which occurs because of the misleading or deceptive conduct. Mr Schneider’s evidence is that he relied on Weston’s representations as to ‘price capping insurance’ and that, otherwise, he would not have entered into the contract with Weston but would have entered into a contract with Shell (CPS-A 1 at [48]–[49]). This evidence was not challenged in cross-examination. Nonetheless, this Court must feel an actual persuasion before determining this issue of causation.
There is evidence suggesting that Mr Willy (and perhaps, by close association, Mr Schneider) was actually misled by Weston’s conduct into believing that a third-party insurance policy was involved in the ultimate agreement. Weston put many reasons before the Court as to why it should reject Mr Schneider’s (that is, Ceramics’) evidence on his reliance on Weston’s representations and his submissions on causation.
I have carefully examined Weston’s submissions. Weston says that Mr Schneider’s evidence is:
Below is a table charting those costs:
The supplementary report however, assessed the counterfactual scenario of Ceramics accepting the Shell offer taking into account the fact that Weston was in fact suspended and that Ceramics had to rush to reinstate its gas supply. Therefore, from the period of 1 March 2022 to 30 June 2022 it considered Ceramics’ actual costs in obtaining gas, taking into account the suspension. The period from 1 July 2022 to 30 June 2024 is assessed in accordance with the Shell offer, as in the original report. As above, the supplementary report had the benefit of hindsight and could consider actual gas consumption as opposed to predicted gas consumption. Mr Shields concluded that Ceramics’ expenditure from 1 March 2020 to 30 June 2024 would have been $17,517,741.17 including GST. The supplementary report considers the correct factual scenario. Even if Ceramics had chosen Shell, it still would have been in a contract with Weston until 30 June 2022, and Weston would have still been suspended on 23 May 2022.
Below is a table charting those costs:
Ceramics in fact spent $26,775,918.65 on natural gas from 1 March 2022 to 30 June 2024. If it had entered into the contract with Shell, it would have spent $17,517,741.17. The difference between these two figures is $9,258,177.48. Ceramics entered into the contract with Weston and did not enter into the contract with Shell because of Weston’s misleading or deceptive conduct. In order for Ceramics to be put into the position had the misleading or deceptive conduct not occurred, provisionally, subject to what is said below, it is entitled to damages of $9,258,177.48.
On 25 May 2023, Ceramics received a refund of $782,563.76 including GST from AGL Energy (one of the retailers Ceramics used following Weston's suspension) (CPS-A 3). Mr Schneider's affidavit confirming this refund was sworn on 26 August 2024 and so the refund, it seems to me, was omitted from Mr Shields' reports. This refund will be taken into account to reduce Ceramics' entitlement. So, provisionally, subject to what is said below, Ceramics’ entitlement stands at $8,475,613.72.
As is noted in the orders below, the parties are to check my calculations here. There may be errors as the figures in Mr Shields’ reports oscillate between including GST and excluding GST. Where GST has been excluded, 10% has simply been added to arrive at a figure ‘including GST’. Some of the costs which make up the ‘excluding GST’ figures in Mr Shields’ reports are themselves exempt from GST, and so, therefore, it is not possible to calculate the exact figure by the simple addition of 10%, although it seems to be close, and I have done so to arrive at an estimate of the quantum of final judgment.