Wilmar Sugar Australia Limited v Mackay Sugar Limited

Raw sugar supply agreements 23 Mill Owners acquire sugar cane from growers for milling. Under current arrangements, the Mill Owners then supply the milled sugar to QSL for export. This occurs pursuant to Raw Sugar Supply Agreements (RSSAs). The primary Judge noted, at [51], the parties' acceptance that the RSSAs which QSL had with each Mill Owner were substantially similar in material respects. His Honour gave the following summary of the RSSAs: [53] By clause 5, the Mill Owner agrees to supply 100% of that part of its "Total Raw Sugar" intended for Bulk Export, during any season while the agreement remains on foot, to QSL, for delivery to the Lucinda, Townsville or Mackay BSTs (or any other like facility nominated by QSL). "Total Raw Sugar" is the total "Raw Sugar" (as defined) for a Season (as defined) produced by the Supplier from a mill in Queensland, including any Raw Sugar sold to the domestic market. Clause 6.1(a) requires the Supplier to advise QSL by a relevant date (the "Marketing Declaration Date"), of the estimated quantity of "Nominated EI Sugar" for that season up to a maximum of the then estimated "Supplier Export Economic Interest Sugar" (called the "Initial EI Amount") in accordance with a particular formula. "Nominated EI Sugar" means the "Supplier Export Economic Interest Sugar" supplied to QSL which the Mill Owner Supplier "has elected to market" in accordance with clause 6.1. "Supplier Export Economic Interest Sugar" ("SEEIS") means "Supplier Economic Interest Sugar" ("SEIS") less two nominated components and SEIS means that part of the Total Raw Sugar for which, pursuant to cane supply or other agreements with Growers, the Supplier (or its related entities) has the "price exposure" which excludes any Raw Sugar for which a Grower (apart from a Grower which is a Related Body Corporate of the Supplier) has the price exposure. The Supplier must also advise QSL by the relevant date of the respective proportions of SEEIS and "Grower Export Economic Interest Sugar" ("GEEIS") for that season; whether the Supplier will market the Supplier EI Component of US Quota Tonnage; and whether its Nominated EI Sugar will be payment on Shipment Sugar or subject to the advances payment scheme: clause 6.1(iii). So GEEIS means "Grower Economic Interest Sugar ("GEIS") intended for Bulk Export and GEIS is defined to mean Raw Sugar for which Growers (excluding Growers who are Related Bodies Corporate of a Supplier) bear the price exposure under cane supply agreements (or other agreements) between the Supplier and the Grower. … [55] The estimates provided by the Supplier must be substantiated. By the Pricing Declaration Date, the Supplier must advise QSL of the estimated quantity of supply (specifying weekly deliveries to the BSTs) and the amounts and proportions of the Nominated EI Sugar (the SEIS the Supplier has elected to market) and the SEIS and GEIS components by amount and proportion: clause 6.3; clause 6.4. Title and risk for Raw Sugar supplied to QSL passes on completion of weighing at the receival station for any of the BSTs: clause 11. QSL stores the Raw Sugar and has the right to comingle deliveries: clause 10. The RSSA commences on the commencement date and continues for the Supplier's 2014, 2015 and 2016 season's production of Raw Sugar for export and ends on 30 June 2017 subject to a number of things including an automatic extension for 12 months on 30 June each year so as to bring about a "rolling three year term" unless either side gives notice that it no longer wants any further 12 month extensions: clause 3. [56] Schedule 2 to the RSSA provides that Raw Sugar supplied under the agreement is to be allocated to a number of Pools and the pricing received by the Supplier will be derived from the outcomes realised for those Pools. The categories are "QSL Marketed Pools" (category A of those Pools is made up of many Pools and category B is a "Harvest Pool"); and a Supplier EI Pool. If a Supplier has made a nomination of SEIS, Raw Sugar as delivered is allocated pro rata to the QSL Marketed Pools and the Supplier EI Pool according to the relevant proportions. The formula for total payments to a Supplier is set out at clause 1.3 of the Schedule. An important element of the formula is the "Net Price IPS for a Pool" which consists of two elements, a "Gross Price Element" and a "Shared Pool Element". The pricing methodology to be applied to determine the "Gross Price Element in AUD per Tonne IPS Supplied" for each Pool is set out in clause 3 of the Schedule. Clause 4 sets out the considerations for determining the "Shared Pool Element in AUD per Tonne IPS". These two elements determine the Net IPS Price for the relevant Pool. For the Supplier EI Pool, pricing is to be managed by the Supplier: clause 3.5(a). The Supplier must nominate one or more methods it intends to use: clause 3.5(b). As to the "Shared Pool Element", QSL operates a Shared Pool which includes certain QSL revenues and costs. Clause 4.1 identifies the categories of revenue and costs. The allocation from the Shared Pool to derive the generally applicable "Shared Element" of the "Net IPS Price" for a Pool depends upon whether the Pool is a QSL Marketed Pool or a Supplier EI Pool: clause 4.1(c). The marketing revenue share for a Supplier EI Pool is any agreed premium under the FOB Sales Contract: clause 4.2(b)(iv). The direct marketing costs for a Supplier EI Pool are the marketing costs for the FOB Sales Contract. Each Pool is to be allocated "a portion of the RSSA Shared Costs for a Season" and the "RSSA Shared Costs" means the aggregation of eight classes of costs set out at clause 4.5(a). Apart from "RSSA Shared Costs" there are "Pool Specific RSSA Costs" as defined at clause 4.6. However, since some of these costs relate solely to services provided by QSL to QSL Marketed Pools, some of these costs are not allocated to the Supplier EI Pool. 24 In summary, Mill Owners acquire sugar cane from growers and crush it. They then supply, pursuant to their RSSA, 100% of the manufactured sugar intended for export to QSL. QSL markets the majority of raw sugar manufactured by the mills to export markets. It does so under a pooling arrangement under which sales revenues and associated costs and risks are allocated on a shared basis between Mill Owners who have supply contracts with QSL. However, the Mill Owners may elect to market SEIS (Supplier Economic Interest Sugar). If they do so, QSL must supply the nominated amount of sugar back to the Mill Owner who is then entitled to sell that sugar for itself. The net proceeds of the sugar sold by QSL are returned to the Mill Owners for division between the Mill Owner and the growers. Typically, the supply agreements between Mill Owners and growers provide that, in exchange for milling, the Mill Owner will keep about one-third of all sales revenue and the grower the balance. 25 The Growers Choice Legislation changes the way in which sugar is marketed. The effect of the Growers Choice Legislation is that supply contracts between growers and Mill Owners must (subject to some qualifications which are not presently material) contain a term providing for the grower to bear the sale price exposure for a nominated proportion of the sugar produced by that grower (GEIS or Grower Economic Interest Sugar) and the proportion for which the Mill Owner will bear the sale price exposure. The grower can also nominate a trader to whom the Mill Owner must deliver the nominated quantity for sale. This trader could be QSL or any other trader or Mill Owner (or, for that matter, one of the large international trading houses). 26 The sugar which Wilmar supplies to QSL under its RSSA comprises between 54% and 60% of the overall raw sugar received by QSL for export each year. Wilmar had nominated approximately 700,000-800,000 tonnes of raw sugar as SEIS. Wilmar's SEIS sugar is marketed and sold internationally by Wilmar Sugar Pte Limited another subsidiary of Wilmar's parent company. Each of MSF, Tully, Isis and Mackay had also nominated an amount of SEIS under their respective RSSAs with QSL. Approximately one-third of the quantity of raw sugar supplied to QSL by each of Wilmar, MSF, Tully, Isis and Mackay is currently SEIS. 27 The RSSAs operate on rolling terms of three years. That is to say, the term of the agreement is extended automatically for a further 12 months on 30 June each year, unless either party gives written notice that it does not wish a further 12 month extension period to apply. Wilmar gave such a notice to QSL on 21 May 2014, with the effect that its RSSA with QSL will terminate following the 2016 season on 30 June 2017. 28 Two other Mill Owners, MSF and Tully, have also served notices of termination on QSL so that their RSSAs will also terminate on 30 June 2017. The BIM Mills have not issued notices of termination under their respective RSSAs, but have been granted an extension of time until 15 December 2016 to do so.

Directorships of QSL 29 At the time of the meeting on 5 July 2016, QSL's Constitution provided for it to have directors in three broad categories: Grower Directors, Mill Owner Directors and Independent Directors. The Chief Executive Officer of QSL is also a Director and its Managing Director. The Constitution provided that there may be up to four, but no less than three, independent directors (Art 29A(c)), four Grower Directors (Art 30) and four Mill Owner Directors (Art 31). In June 2008, Art 29 of the QSL Constitution had been amended so as to establish a Board Selection Committee with responsibility for selecting independent directors. That Committee consisted of four members - two elected by Mill Owner members and two elected by grower representative members. Article 29B was added to provide for Industry Director (Grower Directors and Mill Owner Directors) vacancies: 29B Industry Director Vacancies (a) When a vacancy in the company's Grower Directors exists a panel shall not be appointed to elect a Grower Director in relation to that vacancy unless a majority of Grower Representative Members vote in favour of doing so. On such a vote, each Grower Representative shall have 1 vote. (b) When a vacancy in the company's Mill Owner Directors exists a nomination shall not be made by any Mill Owner Member to fill that vacancy unless Mill Owner Members vote in favour of considering the nomination. On such a vote, each Mill Owner Member shall have that number of votes calculated in accordance with the formula contained in Article 31(b)(ii). 30 Thus, a nomination could not be made to fill a vacancy in the Mill Owner Directors unless a majority of the Mill Owners' votes (calculated in accordance with a formula) was in favour. 31 The formula referred to in Art 29B(b) turned on the tonnages of raw sugar supplied to QSL by each Mill Owner. Because Wilmar supplied more than half of the raw sugar received by QSL, it had more votes than all of the other Mill Owners combined. This meant that its views about the nomination of Mill Owner Directors could prevail. In the past, Wilmar has taken the view that the Board of QSL should be comprised entirely of independent directors and it has used the influence to which its voting power gave rise to achieve that result. 32 By 31 December 2008, the 12 existing directors of QSL had resigned and, in 2009, four independent directors were appointed. Thereafter, QSL operated with a Board of five directors, comprised of its CEO and the four independent directors. By 16 December 2015, the Board had four directors (its CEO and three independent directors). The primary Judge accepted evidence that as at August 2016, QSL had three directors (its CEO and two independent directors) (see [13] of [2016] FCA 1179). 33 An amendment to the QSL Constitution in November 2010 imposed limitations on the entitlement to vote of Mill Owners who had given notice of termination of their RSSA. Article 22(e) was amended and provided: A Mill Owner Member which has a current agreement to supply raw sugar to the company for sale to export markets in respect of which a Notice to Terminate has been given, is not entitled to vote (and will not be included within the calculations of 'A' or 'B' for the purposes of paragraph (b)) on any resolution except a resolution which, if passed, would result in the company: (i) materially contravening the agreement under which the Mill Owner Member supplies raw sugar to the company for sale to export markets; (ii) engaging in conduct which is not in accordance with the normal and efficient operation of the company and which will cause direct financial detriment to that Mill Owner Member; (iii) acting other than in accordance with this Constitution; or (iv) amending Article 6 or Schedule 1 of this Constitution. 34 Wilmar had been bound to vote in favour of this amendment as a condition of the Federal Treasurer's approval of the acquisition by Wilmar International Limited of its shares previously held by CSR. 35 As the same time, Art 29 dealing with the Board Selection Committee was amended by the addition of Art 29(h) as follows: Despite any other provision of this Article 29 (i) a Mill Owner Member to which Article 22(e) applies will not be entitled to vote in the election of the members of the Board Selection Committee to be elected by Mill Owner Members; and (ii) any members of the Board Selection Committee elected by Mill Owner Members must not be connected to a Mill Owner Member to which Article 22(e) applies. 36 The effect was to preclude a Mill Owner which had given notice of termination of its RSSA from participating in the selection of the Board Selection Committee. 37 At a meeting on 8 December 2015, a number of amendments to QSL's Constitution were passed on a single resolution. In the February judgment ([2016] FCA 20), Yates J found the amendment to Art 31 to be oppressive and, as indicated, an appeal against that decision was dismissed by the Full Court ([2016] FCAFC 133). The effect of the amendment to Art 31 had been that the BIM Mills could each nominate a Mill Owner Director and remove and replace the director it nominated. Any new Mill Owner Director had to be a person nominated by one of the BIM owners. Wilmar's power to approve nominations of directors was negated. Even if Wilmar, MSF or Tully resumed supplying sugar to QSL, their ability to nominate a Mill Owner Director would be subject to a vote by the BIM Mills. Yates J found that these amendments were oppressive of Wilmar given that it remained a Mill Owner member of QSL and, at least until 30 June 2017, had a continuing contractual obligation to supply, substantially, 100% of its raw sugar to QSL. This meant that it had a "real and significant continuing commercial interest" in the way in which QSL's affairs were conducted ([2016] FCA 20 at [120]). Yates J was also concerned about the significant entrenched dominant position given to the BIM Mills under the new Art 31. His Honour did not consider that the amendments to Art 31 were justified by the competition which QSL was now facing from Wilmar (and from MSF and Tully), especially given that it already faced competition of that kind in respect of SEIS. His Honour considered that such conflicts of interest as may have arisen in the past for competitive marketing in relation to the SEIS have been managed adequately through the existence of an independent Board of Directors. Yates J considered that it was not easy to see why such conflicts as may arise in the future could not be managed in a similar way ([2016] FCA 20 at [121], [122]). For these reasons Yates J set aside the amendments to QSL's Constitution passed by resolution on 8 December 2015. As noted, an appeal from the orders of Yates J was dismissed by the Full Court on 6 October 2016 ([2016] FCAFC 133), the primary judge's reasons for judgment in the present case having been published three days earlier on 3 October 2016 ([2016] FCA 1179). 38 It is common ground that the 5 July 2016 resolutions, challenged in the present case, had the following effect: (a) provided that they are still party to an RSSA with QSL and have not given notice to terminate the RSSA, each of the BIM Mills (defined as Original Continuing Mill Owner Members) has the power to appoint one Mill Owner Director to the QSL Board; (b) one additional Mill Owner Director may be appointed by the Continuing Mill Owner Members, being mill owner members who have a current RSSA with QSL and irrespective of whether a notice to terminate that RSSA has been given; (c) the BIM Mills cannot participate in the process of nominating and/or voting for the additional Mill Owner Director; (d) voting rights for the additional Mill Owner Director are calculated according to the proportion of the total raw sugar supplied by QSL by the Continuing Mill Owner Members (excluding the BIM Mills); (e) up to four Grower Directors may be appointed in accordance with the provisions of article 29B and 30 of the Amended Constitution. 39 To explain further, under QSL's Constitution as amended a distinction is drawn between Original Continuing Mill Owner Members and Continuing Mill Owner Members. Original Continuing Mill Owner Members are each of the BIM Mills who is a Continuing Mill Owner Member and who has not given a notice to terminate in respect of their current agreement to supply sugar to QSL for export to export markets. Continuing Mill Owner Members are all Mill Owners who have a current RSSA with QSL irrespective of whether a notice to terminate that RSSA has been given. 40 It is also common ground that the 5 July 2016 resolutions are discriminatory against Wilmar. The BIM Mills' case before the primary judge (and on appeal) was that the discrimination was not unfair given that Wilmar had terminated its RSSA with QSL, with effect from 30 June 2017, and therefore would compete with QSL for the supply of raw sugar into the international export market and was already competing with QSL for nominations of GEIS (which, as noted, is the sugar for which the grower will bear the price exposure). Wilmar's case was (and is) that the 5 July 2016 resolutions unfairly discriminate against Wilmar by reason of, first, disenfranchisement, in that Wilmar's rights have been diminished from having a right to vote in respect of all four Mill Owner Director positions to a right to vote in respect of one Mill Owner Director only and, second, entrenchment, in that the BIM Mills have obtained entrenched rights to appoint a director which, under QSL's Constitution, requires a special majority to unwind.

The primary judge's decision 41 It is accepted by the parties that the primary judge correctly identified the test to be applied at [96] of his reasons as follows: The test is whether, objectively viewed, the hypothetical reasonable commercial bystander having regard to all the relevant circumstances would regard the amendments as unfair. 42 At [98] the primary judge made another uncontentious observation in these terms: I accept that the question of whether the hypothetical reasonable bystander would regard the amendments as unfair within the statutory language engages an objective consideration by that hypothetical commercial bystander or hypothetical member of the circumstances which conditioned the amendments to the Constitution. 43 It is what follows which, according to Wilmar, involves error. The primary judge, also at [98], said: Those amendments did not come out of the ether. The Constitution contains an existing method or protocol for the appointment to the Board of QSL of Mill Owner Directors. Under that system, votes were allocated in proportion to the quantity of raw sugar supplied to QSL for export. That system no doubt had rationality about it as one method because it reflected a degree of influence over the appointment of Mill Owner Directors linked to the extent of the economic interest of a particular Mill Owner Member in QSL measured by the volume of sugar it supplied to QSL. The power of appointment was, understandably, placed in the hands of those who supplied the most export sugar over the relevant three year period. Smaller Mill Owners were left with no meaningful say in the appointment of Mill Owner Directors. That method itself operated to discriminate between and amongst Mill Owner Members based on what might rationally be regarded as the greater or lesser interest held between and amongst those Mill Owners according to the proportion of the raw sugar they supplied to the corporation for export sale. 44 The primary judge continued: 101 However, the future is not what it used to be, in this industry. Past commitment to QSL's future over three previous years or otherwise has no relevance to QSL's actual future. Once Wilmar, Tully and MSF gave a Notice to Terminate their respective RSSAs, the Mill Owner Members of QSL were confronted with two choices either of which or neither of which might have been best adapted to the changing circumstances. The first choice involved continuing with the existing system which would mean that a value judgement was being made that a Mill Owner Member which supplied more than 50% of the raw sugar to QSL for export in the preceding three years should continue to control 100% of the Mill Owner Director positions (or whether there would be any Mill Owner Directors) entirely regardless of, and detached from, its commitment to QSL in the future. The other choice involved selecting a new system which, objectively viewed, has the effect that each Mill Owner Member who remains committed to QSL for the future is entitled to appoint a director but only for so long as that commitment remains. 102 Mill Owner Members which remain committed to supporting QSL by seeking to make it capable (by restructure and other disciplines) of providing a competitive offering to the Growers with whom those continuing Mill Owner Members have relationships, and to the Mill Owner Members themselves, seek, on the evidence, to secure appointments to the Board of QSL to see whether QSL can endure in the new competitive environment. … 104 I accept that, for the purposes of oppression, the question is not whether one particular approach or choice is correct or incorrect or whether one particular choice confers advantages on one group as opposed to another. The question to be asked is whether it is unfair to Wilmar to select the choices inherent in the new system reflected in the 2016 amendments over the old system. Would an informed reasonable hypothetical member or bystander have thought it unfair, objectively viewed, to adopt amendments which conferred benefits upon those Mill Owner Members who continue to support QSL as compared with those Mill Owner Members who do not and who have chosen to leave their support behind (with their substantial volumes essentially lost to QSL from 1 July 2017). It may be that QSL will, by its contestable conduct, secure nominations from Growers but as Mr Basile said, it may not. Those who stay "aligned" to QSL have a direct interest in ensuring that QSL is capable of conducting the remnant business undertaking in a way which is disciplined and useful to continuing Mill Owner Members and the Growers with whom those Mill Owner Members have historically had a strong relationship. 105 I also accept that the hypothetical fully informed reasonable bystander would be fully informed about the change to circumstances both in relation to the election by Wilmar, Tully and MSF to no longer supply raw sugar for export to QSL (subject to Grower nominations that might be won by QSL) and the changes in the environment after 1 July 2017. The question the hypothetical reasonable bystander or hypothetical member will ask themselves is this: Having regard to the preferences or choices before informed industry participants seeking to deal with QSL and its position in a forward-looking way, is it unfair, objectively viewed, to implement a system, by amendments to QSL's Constitution, that will remove Wilmar's absolute control over the appointment of Mill Owner Directors (or whether there will be any Mill Owner Directors appointed) in circumstances where Wilmar has chosen to take the volume of its sales away from QSL as from 1 July 2017, with no prospect of that volume ever coming back (subject to any Grower nominations QSL might contestably win), and allow other Mill Owner Members who remain to appoint directors and implement their decision-making over the management of the company for the future. 106 I am satisfied that no reasonable bystander would, objectively viewed, regard the amendments as unfair. I accept that in order to be oppressive, the reasonable bystander must consider, objectively viewed, the amendments to be unfair. It is not enough that minds might differ about the choices or that there are advantages and disadvantages in the choices made by the amendments or that the amendments might operate in a way which could be regarded as "harsh", although I do not regard the amendments as operating in that way. The question is whether the amendments are unfair objectively viewed having regard to all the relevant circumstances, from the perspective of the hypothetical reasonable commercial bystander. 107 On what basis can it be said that Mill Owner Members who have chosen to no longer have a future supply relationship with QSL, should retain the right to control the appointments of Mill Owner Directors to the Board of QSL? Plainly enough, in the period up to 30 June 2017, the departing Mill Owner Members still have, in a limited temporal sense, a fully engaged relationship with QSL. Disregarding that aspect of the matter was the vice inherent in the 2015 amendments. … 110 I am satisfied that the degree and measure of the difference in the commitment to QSL as between the BIM Mills and Wilmar, Tully and MSF is critical. It informs the objective view the hypothetical reasonable bystander would reach. No doubt, the BIM Mills are considering their position. A decision has to be made by 15 December 2016. Evidence has been given by Bundaberg, ISIS and Mackay. Plainly, in some cases, portions of the SEIS are being marketed through alternative marketers. Equally plainly, the BIM Mills are profit maximising entities. However, it cannot seriously be doubted, on the evidence, that the BIM Mills are committed to seeking to make QSL an effective enduring export seller of raw sugar. Plainly, some Mill owners have engaged with Alvean and Itochu [GEI sugar marketing entities] partly because of an apprehension that QSL might not endure and partly because they need to obtain the services and experience of another exporter. However, fundamentally, the BIM Mills remain committed to QSL. In a contest between the degree of commitment as between Wilmar, Tully and MSF on the one hand and the BIM Mills on the other, it is perfectly plain that the BIM Mills have a commitment and the others do not, as to the future of QSL. 111 I am satisfied that all of these considerations and the emergence of the contestable environment for GEIS are matters which the reasonable bystander would take into account in determining whether the 2016 amendments are unfair in the statutory sense. I am not satisfied that that decision is informed by construction questions going to Article 6 of the Constitution.

Appellate review 45 Deciding whether the conduct of a company is oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member involves an objective evaluation (from the posited perspective of a hypothetical reasonable by-stander) of the effect of the conduct in all of the relevant circumstances. As such, appellate review of the decision is confined by the principles in House v The King (1936) 55 CLR 499 at 504-505 in respect of discretionary decisions, which withstands repetition: The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. 46 Although, strictly speaking, deciding whether conduct is oppressive does not involve the exercise of discretion, it is the character of the decision, involving as it does the weighing of potentially competing considerations and an overall contextual evaluation of the effect of the conduct, which requires the same approach to appeals as in House v The King (see, by analogy, Ghosh v NineMSN Pty Ltd [2015] NSWCA 334; (2015) 90 NSWLR 595 at [37]).

Asking the wrong question (appeal grounds 2(b), (c) and (f)) 47 Wilmar contends that the primary judge's reasons for judgment, in particular the paragraphs between [101] and [110], disclose that his Honour asked and answered the wrong question, namely, whether the position before the 5 July 2016 amendments was more unfair to the BIM Mill owners than the position after the 5 July 2016 amendments was unfair to Wilmar. As Wilmar put it, the relevant question (which the primary judge correctly identified at [96], being whether, objectively viewed, the hypothetical reasonable commercial bystander having regard to all the relevant circumstances would regard the amendments as unfair), does not require or permit an answer by reference to: (1) a "binary choice", being the position before and after the 5 July 2016 amendments; or (2) a "comparison of degrees of perceived unfairness"; or (3) a hypothesis whether the reasonable commercial bystander would have voted in favour of the 5 July 2016 amendments, having regard to these two considerations in (a) and (b) above. 48 Despite having identified the correct test at [96], according to Wilmar, the primary judge's process of reasoning miscarried thereafter in that his Honour re-framed the questions and answered them by reference to an impermissible conceptual framework founded on each of the three illegitimate considerations identified above. 49 We do not doubt the BIM Mills proposition that after correctly stating the test at [96] the primary judge moved to a consideration of "all the relevant circumstances" in which the objective assessment of the alleged unfairness of the effect of the 5 July 2016 amendments must be carried out. His Honour identified as a relevant circumstance the status of QSL as a substantial trading corporation (at [97]). He accepted also that the existing arrangements in which voting power was determined by reference to quantity of sugar supplied to QSL was relevant (at [98]-[100]). No complaint can be made about this; the difference between the existing arrangement and the position under the 5 July 2016 amendments is a matter relevant to the question of unfairness, objectively assessed. So much may be accepted. The problem, if it be a problem, commences at [101] where his Honour says that the Mil Owner members of QSL were "confronted with two choices either of which or neither of which might have been best adapted to the changing circumstances". The choice was to continue with the existing position or to select "a new system which, objectively viewed, has the effect that each Mill Owner Member who remains committed to QSL for the future is entitled to appoint a director but only for so long as that commitment remains". 50 We accept that this involves a false dichotomy. The hypothetical reasonable bystander is not confined to assessing the effects of the 5 July 2016 amendments within a framework defined by the possibility of these two choices. While the first choice, continuing the existing position certainly existed, the second choice was but one of an infinite variety of actions that could have been taken. In that potentially infinite class, moreover, the criterion of "commitment to QSL" was not the only relevant criterion to the assessment, nor necessarily a determinative criterion. Accordingly, the reasoning at [101] involves error, but whether that error is material is another question. 51 At [104], the primary judge correctly noted that "for the purposes of oppression, the question is not whether one particular approach or choice is correct or incorrect or whether one particular choice confers advantages on one group as opposed to another". Had the primary judge proceeded to answer the relevant question on this basis, whatever was said at [101] could not have been material. However, at [104], immediately after this correct statement, the primary judge said The question to be asked is whether it is unfair to Wilmar to select the choices inherent in the new system reflected in the 2016 amendments over the old system. Would an informed reasonable hypothetical member or bystander have thought it unfair, objectively viewed, to adopt amendments which conferred benefits upon those Mill Owner Members who continue to support QSL as compared with those Mill Owner Members who do not and who have chosen to leave their support behind (with their substantial volumes essentially lost to QSL from 1 July 2017). 52 These statements reflect the false dichotomy. The relevant question was whether, objectively, the effect of the 5 July 2016 amendments is unfair, in the statutory sense, to Wilmar. The relevant question was not "whether it is unfair to Wilmar to select the choices inherent in the new system reflected in the 5 July 2016 amendments over the old system". The old system could be considered as part of the context within which the 5 July 2016 amendments would apply, but could not govern the evaluation of whether the effect of the 5 July 2016 amendments was unfair in the requisite sense. 53 It is for this reason that the BIM Mills' submission that [104] is favourable to Wilmar because it involves a consideration of what Wilmar has lost misses the point. It is one thing to evaluate the objective unfairness (or otherwise) of a decision having regard to the circumstances that existed before the decision. It is another to evaluate the objective unfairness (or otherwise) of a decision on the basis that the question is to be answered by reference to whether the circumstances that existed before the decision are more or less fair than those existing after the decision. Nor, for that matter, is the relevant question to be answered within the confines of the concept of selecting the "new system…over the old system". It is the effect of the new system, in and of itself, and in all of the relevant circumstances, that must be determinative. Any possible unfairness in the "old system", while a relevant circumstance to the factual context of the decision to enact the "new system", cannot be relevant to the ultimate question whether the effect of the "new system" is or is not unfair in the sense required. 54 Further orthodox and impermissible aspects of the primary judge's reasoning are also disclosed in [105]. The primary judge was correct in the first sentence of that paragraph to ascribe to the hypothetical bystander knowledge of the termination of their RSSAs by Wilmar, Tully and MSF and of the changed legislative regime resulting from the Growers Choice Legislation. The problem is disclosed by the next part of [105] in which his Honour says: The question the hypothetical reasonable bystander or hypothetical member will ask themselves is this: Having regard to the preferences or choices before informed industry participants seeking to deal with QSL and its position in a forward-looking way, is it unfair, objectively viewed, to implement a system, by amendments to QSL's Constitution, that will remove Wilmar's absolute control over the appointment of Mill Owner Directors (or whether there will be any Mill Owner Directors appointed) in circumstances where Wilmar has chosen to take the volume of its sales away from QSL as from 1 July 2017, with no prospect of that volume ever coming back (subject to any Grower nominations QSL might contestably win), and allow other Mill Owner Members who remain to appoint directors and implement their decision-making over the management of the company for the future. 55 It will be apparent that, in our view, this is not the question that the hypothetical bystander may be understood to ask themselves. They may not do so because the question of unfairness is directed to the effect of the 5 July 2016 amendments on Wilmar. It is not concerned with whether continuation of the "old system" (Wilmar's control over voting) would have been inappropriate or itself unfair to the BIM Mills given that Wilmar had "chosen to take the volume of its sales away from QSL as from 1 July 2017". 56 This, however, is not the end of the issue of materiality because the primary judge repeated the correct question (as formulated at [96]) in [106] of his reasons, immediately after the (again) orthodox observation in that paragraph that it "is not enough that minds might differ about the choices or that there are advantages and disadvantages in the choices made by the amendments or that the amendments might operate in a way which could be regarded as 'harsh'". Yet again, however, the immediately succeeding observation in [107] re-frames the relevant question as involving only a comparison between the "old system" and the "new system". This is done by his Honour posing a rhetorical question in these terms: On what basis can it be said that Mill Owner Members who have chosen to no longer have a future supply relationship with QSL, should retain the right to control the appointments of Mill Owner Directors to the Board of QSL? 57 The primary judge answered this question at [110] by reference to what he characterised as the "degree of commitment" of the BIM Mills to QSL compared to that of Wilmar. Taken in isolation, and leaving aside Wilmar's other grounds of appeal about the notion of "commitment", nothing in [110] itself indicates that his Honour asked the wrong question or, indeed, answered it by reference to the three constraints we have identified above as impermissible. 58 Ultimately, it seems to us that the issue of materiality is best addressed by accepting that when the primary judge thereafter summed up his conclusions at [111], his Honour conveyed precisely what he intended. His Honour said: I am satisfied that all of these considerations and the emergence of the contestable environment for GEIS are matters which the reasonable bystander would take into account in determining whether the 2016 amendments are unfair in the statutory sense. 59 By this, it must be accepted that the primary judge determined the relevant question for the hypothetical bystander by reference to not only those parts of his reasoning process which are orthodox, but also those which we consider to be impermissible. Accordingly, it cannot be assumed that the primary judge would have reached the same conclusion had he not ascribed to the hypothetical bystander a perception that what was involved was a binary choice, being a choice between the position before and after the 5 July 2016 amendments, or a comparison of degrees of unfairness inherent in the "old system" continuing compared to the "new system", or that the task involved asking whether the reasonable commercial bystander would have voted in favour of the 5 July 2016 amendments having regard to these two considerations. 60 These conclusions are sufficient to accept that the primary judge erred in the sense required for appellate intervention in respect of an evaluative decision. 61 It follows that, on this basis, this Court is required to determine for itself the relevant question of oppression by reason of the 5 July 2016 amendments. Before doing so, however, it is appropriate to consider the other grounds of appeal.

Rejecting the objects of QSL (ground 2(a)) 62 QSL is a not-for-profit public company limited by guarantee. Its objects, as set out in Art 6 of the QSL Constitution, are: (a) The principal object of the company, without limiting its powers under the Law, is to promote the development of the sugar industry, assisted by the following objects: (i) to enhance the efficiency and competitiveness of the Queensland sugar industry; (ii) to provide access to markets for the Queensland sugar industry or the sugar industry elsewhere; (iii) to enhance the long term economy of the Queensland sugar industry and the benefits flowing from it to Growers and Mill Owners; (iv) to encourage initiative, innovation and value adding within the Queensland sugar industry or the sugar industry elsewhere and downstream processing of sugar; (v) to provide timely and relevant sugar market information to Growers and Mill Owners; (vi) to market raw sugar in the best interests of Growers and Mill Owners; and (vii) to act commercially in the discharge of its functions. (b) In carrying out its objects, without limiting its powers under the Law the company will seek to pursue the matters provided in Charter. 63 The Charter to which reference is made in Art 6 is Schedule 1 of the QSL Constitution, and is in the following terms: The company will seek to maximise the net returns in dollars per tonne of sugar to milling companies supplying it with sugar for export, and through such milling companies to their growers. To achieve this the company will seek to: • enter into rolling long term supply agreements to ensure continuing access to sugar for export; • minimise supply chain costs through economies of scale, operational efficiency and without duplicated management functions; • optimise the returns for export sugar to suppliers through the use of physical scales and derivative instruments; • optimise the net regional premium achieved for each season; • provide flexible, innovative, transparent and/or independent pricing mechanisms for suppliers based on effective close out mechanisms for derivative instruments; • ensure long term access (by lease or other arrangements), and manage and operate the bulk sugar terminals; • operate in the forward freight market with a view to providing certainty of shipping availability for annual export programs and achieve preferential logistics arrangements and costs; and • foster export market relationships with refinery buyers and international trade. The charter is intended to reflect the current view of the company's Members as to how the company's objects can best be achieved, and can be amended by an ordinary resolution of Members in general meeting under Article 19(a) if that view changes over time. 64 Before the primary judge, Wilmar contended that, given the terms of Art 6 of the QSL Constitution, "differential treatment between Members by reason of their competitive posture or the consequences of emergent contestability provides no basis, consistent with the objects of QSL, for adopting amendments going to the appointment of Mill Owner Directors which discriminates between Mill Owner Members of QSL" (at [89]). At [111], the primary judge rejected this contention. Having identified the relevant question for the hypothetical bystander the primary judge said "I am not satisfied that that decision is informed by construction questions going to Article 6 of the Constitution". Given that the hypothetical bystander test is a construct by which a judge answers the statutory question, this statement at [111] must be understood as the primary judge rejecting Wilmar's submission that QSL's objects were relevant to the assessment of the fairness or otherwise of the impugned resolution. 65 We accept Wilmar's submission that the objects of QSL were (and are) relevant to the question whether the 5 July 2016 amendments are oppressive to Wilmar. 66 First, as Wilmar submitted, the statutory question of oppression is to be answered by reference to "the particular context in which the conduct occurs" (Catalano at [9]). That context includes not only an understanding that QSL is a substantial trading corporation, to which the primary judge referred at [97], but also that QSL is a not-for-profit public company limited by guarantee, the objects of which are set out in Art 6 of its Constitution. 67 Second, and contrary to the submission for the BIM Mills, the objects in Art 6 are not irrelevant merely because QSL's Constitution, at least insofar as Art 6 is concerned, is in the same form that it was when QSL was the single-desk marketer of raw sugar. Article 6 remains part of the relevant context in which the effect of the 5 July 2016 amendments is to be assessed. Nor is Art 6 simply a neutral factor in the required assessment as the BIM Mills would have it. Wilmar is correct to say that the focus of Art 6 is the Queensland sugar industry as a whole, not any part or segment of the Queensland sugar industry or particular participant in it. 68 Third, the fact (if it be so) that any method for determining the voting rights of Mill Owners to elect Mill Owner Directors will inevitably prefer some Mill Owners over others does not mean that Art 6 is irrelevant to the assessment of the unfairness of the 5 July 2016 amendments. 69 Fourth, the directive in Art 6(b) for QSL to carry out its objects by pursuing the matters provided for in the Charter also does not render Art 6 irrelevant. The statement that QSL will seek to maximise the net return to milling companies supplying it with sugar for export is not inconsistent, as the BIM Mills submitted, with the object of promoting the development of the Queensland sugar industry as a whole. The Full Court made a similar point in [2016] FCAFC 133 at [71] noting that the new competition between Wilmar and QSL did not mean that Wilmar had no commercial interest in QSL given Wilmar's "interest in the growers who supply sugar cane to its mills being satisfied with the ultimate sale of the sugar they produce", "interest in the market in which it sells sugar being maintained", and "interest in QSL, at least for the foreseeable future, arising from the fact that it will be continuing to deliver sugar to the BSTs operated by QSL". 70 The assumption that appears to underlie the submissions of the BIM Mills is that the new element of competition introduced by the Growers Choice Legislation means that the Queensland sugar export market has been transformed into a "zero-sum" game, in that what is good for QSL is necessarily bad for Wilmar and vice versa. However, this is irreconcilable with the structure of an industry in which Mill Owners may nominate SEIS for export and, as a result of the Growers Choice Legislation can compete for GEIS nominations (as may QSL), and must include in their agreements with growers GEIS amounts in respect of which the grower will bear the sale price exposure. Given this, there is a multiplicity of competing and common interests between participants in the industry. Article 6 is relevant because it is an important part of the context within which an assessment of unfairness (or otherwise) is to be made. To set it to one side, as the primary judge did, is a material error.

Conflating the disenfranchising and entrenching effects (ground 2(d)) 71 Wilmar relied on two effects of the 5 July 2016 amendments to found its case of oppression, the so-called "disenfranchising" and "entrenching" effects described above. At [90] the primary judge referred to the two concepts together, saying that: Instead of being able to vote on the appointment of up to four directors (and control any vote on any of the directors), Wilmar is now reduced to being able to vote for only one director. Qualitatively (and quantitatively) this has the effect, it is said, of entrenching the BIM Mills with the result that although the amendments do not bring about a complete disenfranchisement of Wilmar… (emphasis removed). 72 The relevant entrenchment, however, was not related to the reduction of Wilmar's voting rights, but to the fact that the BIM Mills each obtained the right to appoint a director which, under QSL's Constitution, could only be unwound by a special majority (Art 19(b)(i)). His Honour appears to have overlooked the separate argument Wilmar put. If this were the only error demonstrated, a real question of its materiality would arise. As it is not the only error, Wilmar's submission thus warrants consideration in the context of our assessment of the relevant question of oppression.

Regard to the subjective intentions of proponents (ground 2(e)). 73 This ground cannot be sustained. While the test is objective, in the sense that the purpose or motive of the decision-maker cannot be determinative, purpose or motive may nevertheless be relevant. For example, if the decision-maker was motivated to make a decision to achieve some particular unfairness against a member, that fact might enable it to be concluded more readily that the effect of the decision is as the decision-maker intended (namely, unfair). The primary judge's statement at [94] that the BIM Mills "approached the exercise of the power to make amendments for entirely proper purposes" did not involve error. The primary judge did not apply an impermissibly subjective test or otherwise err in this regard.

The content of the BIM Mills' commitment (appeal ground 2(g)) 74 We accept Wilmar's submission that his Honour appears to have misunderstood the submission it made about this issue. Wilmar's point was not a question of construction of the definition of Continuing Mill Owner Member, as referred to by the primary judge at [91]. As his Honour said thereafter, Wilmar's point (as he understood it) was that "the only content of that agreement is that there must be an agreement to supply raw sugar to the company for sale for export markets and that no other content is identified". It is this point which his Honour did not consider saying only, at [112] that the "the amendments, as a matter of construction, are reasonably plain". We agree, but Wilmar's point was that the amendments left open the content of any agreement, so that there was no meaningful criterion by which to determine in the future Mill Owners who received privileged status under the amendments and those who did not. This is because the reference to "current agreement" in the definition of "Original Continuing Mill Owner Members" means the agreement as in force from time to time and not necessarily an agreement like the RSSAs under which the Mill Owner Members are bound to supply 100% of their raw sugar for export to QSL. 75 The response of the BIM Mills, that it is the current RSSA which is the relevant agreement for the purpose of the definition of "Original Continuing Mill Owner Members", is incorrect. The submission assumes that the QSL Constitution will speak only at and for the moment it was amended by the insertion of the definition of "Original Continuing Mill Owner Members". The relevant part of the definition, however, has an ambulatory operation. While the "Original Continuing Mill Owner Members" are certain "Continuing Mill Owner Members" as at 30 May 2016, being the BIM Mills, the conditions in (a) and (b) speak also to the future. To remain "Original Continuing Mill Owner Members" the BIM Mills must continue to be a "Continuing Mill Owner Member" and must not have given a notice to terminate their "current agreement" to supply raw sugar for sale to export markets. The "current agreement", in this definition, is not defined in the Constitution and is not confined to only the current RSSA or a rolled-over version of the current RSSA. It is whatever "agreement" may exist from time to time. 76 Wilmar is thus correct that the content of any such agreement, in the future, is unknown. Such an agreement may involve non-exclusive supply and thus the BIM Mills themselves may compete with QSL for a proportion of their raw sugar for export sale, yet remain in their privileged positon as "Original Continuing Mill Owner Members". Wilmar's point, not addressed by the primary judge, is that given this circumstance, and if "commitment" to QSL be a relevant factor at all, nothing can be said to arise from the contractual arrangements, other than that until 15 December 2016 (the date the BIM Mills must decide whether or not to give notice of termination of their RSSAs) the BIM Mills have agreements in place which they have not given notice to terminate whereas Wilmar (and Tully and MSF) have agreements in place which they given notice to terminate, which termination will take effect on 30 June 2017. 77 This fact, it seems to us, was undoubtedly relevant to the primary judge's approach to the question of oppression by reference to the concept of "degrees of commitment" (see at [110]) of Mill Owner members to QSL. While his Honour might have reached the same view at [110] that, "it cannot seriously be doubted, on the evidence, that the BIM Mills are committed to seeking to make QSL an effective enduring export seller of raw sugar" and that, in a "contest between the degree of commitment as between Wilmar, Tully and MSF on the one hand and the BIM Mills on the other, it is perfectly plain that the BIM Mills have a commitment and the others do not, as to the future of QSL", the extent to which the 5 July 2016 amendments "locked-in" the BIM Mills to continue the current arrangements with QSL was relevant to this assessment. Wilmar submitted that the terms of the 5 July 2016 amendments did not provide a rational foundation for the discrimination effected by the amendments, at least in part because the BIM Mills were not required to continue to supply such raw sugar as they controlled exclusively to QSL to continue to be "Original Continuing Mill Owner Members". His Honour did not deal with that submission. It is not possible to infer that his Honour necessarily would have reached the same conclusion had he done so. 78 It is not an answer to this problem to note, as the BIM Mills did in submissions on the appeal, that whatever the content of the "current agreement", it was one to which QSL must have agreed in order for there to be an agreement. The proposition is correct, but if anything, it makes good Wilmar's submission. By the 5 July 2016 amendments, QSL and the BIM Mill owners may enter into an agreement by reason of which the BIM Mill owners compete with QSL in respect of a material or even substantial proportion of their raw sugar for export and yet, nevertheless, the BIM Mill owners are provided with entrenched voting rights in respect of three of the possibly four Mill Owner Member directors of QSL. 79 Accordingly, ground 2(g) of the appeal is also made good.

"Competition" v "commitment" (ground 3) 80 Wilmar's complaint is that the BIM Mills pleaded case was confined to the allegation that the effect of the notices to terminate was that from 1 July 2017 Wilmar, Tully and MSF will be in direct competition with QSL to sell 100% of their raw sugar to the international market, subject to the requirements of the Growers Choice Legislation. This complaint is well-founded. It reflects precisely the only difference between the BIM Mills (on the one hand) and Wilmar, MSF and Tully (on the other hand) identified in the statement of claim as relevant (see para 30(b)). Accordingly, Wilmar's submission that the case for which it prepared and came to meet was that the relevant difference between it and the BIM Mills was confined to that of direct competition between Wilmar and QSL from 1 July 2017 must be accepted. 81 It is also correct that the basis of the decision of the primary judge was not competition as pleaded in para 30(b) of the statement of claim but the "commitment" of the BIM Mills to QSL. 82 Wilmar contends that it was not open to the primary judge to decide the case on the basis of "commitment" if, by "commitment", something other than competition is meant. Wilmar also contends that it is obvious that something other than competition was meant by the primary judge, because otherwise it would have been necessary for the primary judge to weigh all other aspects of competition that do and will exist (SEIS, GEIS, and possibly competition from the BIM Mills given that the content of any agreement they must have in place with QSL to be "Original Continuing Mill Owner Members" is not prescribed) in order to decide the relevant question of oppression. 83 First, we accept that the primary judge did not mean "competition" when he referred repeatedly in his reasons for judgment to "commitment". To the extent the BIM Mills said that "commitment", as used by the primary judge, meant "competition" and nothing more, we disagree. 84 Second, and as we have said, "competition" has a known and obvious meaning when used in the context of a market such as the market for the export of raw sugar. Wilmar will compete directly with QSL because both will be selling raw sugar from Queensland into the export market. This is what para 30(b) of the statement of claim must be understood to have meant. 85 Third, "commitment" is different from "competition". An entity, for example, may both compete with and yet be "committed" to another entity. "Commitment", in the context of an industry as complex as the heavily regulated sugar industry in Queensland, is by no means straightforward. The primary judge appears to have conceived of "commitment" as being "committed to seeking to make QSL an effective enduring export seller of raw sugar" (at [110]). For these reasons, we are unable to accept the submission of the BIM Mills that the issue of "commitment" as articulated in the primary judge's reasons was, or reflects, the pleaded case. 86 It follows that the issue is whether the circumstances of the hearing permitted the BIM Mills (and the primary judge) to depart from the pleaded case. For this to have been permissible, given the important function of pleadings in putting a party on notice of the case the party must meet, the parties must have proceeded to elect, by their conduct, "to fight the case on issues chosen at the trial" (Dare v Pulham (1982) 148 CLR 658 at 664). 87 The BIM Mills contend that the parties chose to fight the case on the basis of the concept of "commitment". To determine whether this is so or not, regard must be had to the course of the hearing. 88 The hearing was fixed for two days, 29 and 30 August 2016. Written submissions were filed and served before the hearing. The BIM Mills' written submissions in chief and reply accord with the pleaded case. So too do the submissions of Wilmar. Their focus is the competition between Wilmar and QSL. Accordingly, the written submissions did not disclose to Wilmar that the BIM Mills proposed to depart from their pleaded case in any way. 89 In their opening oral submissions, however, counsel for the BIM Mills said this (our emphasis): MR HODGE: … And in order to answer that question the issues that your Honour will need to resolve are first, how great is the difference in commitment between, on the one hand, my clients, and, on the other hand, Wilmar? Is it right to say, as we do, that the BIM mills, as they're referred to, remain aligned with QSL whereas Wilmar does not, and they have very different - necessarily from a commercial bystander's perspective very different views and very different alignments with respect to QSL. And, second, your Honour will need to resolve, having regard to that difference, in commitment, and paraphrasing the words of the Full Court in Catalano, is the amendment to the constitution so unfair that reasonable members who consider the matter would not have thought the passing of the amendment to be fair - which is effectively the words of the Full Court in Catalano. And we submit, of course, that the amendments weren't unfair at all, that they were entirely fair having regard to the change in the competitive landscape. Can we identify for your Honour three issues that are raised on the pleadings or the submissions that you no longer need to resolve. 90 The BIM Mills submitted that Wilmar made no objection to the references to "commitment" in the opening. This is true, but given the pleaded case and the summation of the case by the BIM Mills' counsel that the amendments were not unfair "having regard to the change in the competitive landscape", it is difficult to conclude that Wilmar was fairly on notice from the opening that by "commitment" any new point apart from competition was being raised. Had Wilmar appreciated this, then it seems to us that the submissions for Wilmar that it would have made different forensic decisions (particularly in respect of cross-examination of the witnesses called by the BIM Mills in respect of the decision they must make by 15 December 2016) cannot be rejected as mere speculation. Faced with an issue about the commitment of the BIM Mills to QSL compared to the commitment of Wilmar to QSL, an obvious area for cross-examination of witnesses for the BIM Mills would have been the decisions likely to be made by 15 December 2016 as to whether or not the BIM Mills were minded to terminate their RSSAs with QSL. The fact that there was no such cross-examination supports the inference that, by reason of the opening, Wilmar was not fairly put on notice of the BIM Mills now seeking to run a case that they were committed to "seeking to make QSL an effective enduring export seller of raw sugar", whereas Wilmar was not. Indeed, had that been the pleaded case, it is not difficult to imagine that Wilmar itself may have decided to adduce evidence about the reasons it might wish to ensure that QSL remains an effective enduring export seller of raw sugar. 91 It is true that Wilmar's counsel referred to the concept of "alignment" with QSL in closing submissions but it is apparent that this was done in the context of the pleaded case of competition between Wilmar and QSL. It was also done before the closing submissions for the BIM Mills which focused on the concept of "commitment" to QSL. Senior counsel for Wilmar said this in closing submissions before having heard the closing submissions for the BIM Mills (our emphasis): Could I then come to the second reason why competition doesn't justify discrimination in the way that has happened. And that is, as I have said, our learned friends can our [sic] point to competition for GEIS sugar in which the mill owners do not have the economic equivalents of ownership. It's a weird sort of competition to start off as justifying some different treatment, but our learned friends use that has a springboard to put the proposition, it was said a number of times in opening, that the BIM mills remain aligned with QSL. And that the BIM mills and QSL are in one camp. Now, that alignment, the evidence has demonstrated is an entirely artificial concept. First, the BI[M] mills, like Wilmar - I withdraw that. A greater degree of precision may be used than the BI[M] mills, because they are actually all different, and they are all relevantly different. Bundaberg, Mackay and Wilmar all compete with QSL and have differing interests to QSL with respect to where the cane goes. We all sell cane into the domestic market. Bundaberg, the evidence was, sells cane first into the domestic market. It puts it through its refinery up to capacity and it will then sell to QSL. It is not, in that sense, aligned. I've said "cane", when I meant "sugar". 92 In closing oral submissions, the BIM Mills for the first time referred extensively to the concept of relative "commitment" of the BIM Mills and Wilmar. By the time of closing submissions, of course, it was too late for Wilmar to alter its forensic decisions with respect to evidence and cross-examination. Wilmar, in its oral reply, objected in these terms: MR GILES: …Could I then move on to our learned friend's second point which he described as being the difference in the level of commitment? The first point we make about that, your Honour, is that that's not a pleaded case. To the extent it is no more than a linguistic technique to put the competition issues differently then, of course, I'm not prejudiced. But to the extent it is something to competition it is not our learned friend's pleaded case. One sees from paragraph 41, 42 and 43 of the statement of claim which is picked up in the defence to cross-claim that the competition case as was opened yesterday by our learned friend, and picked up by me, was the only case being pursued and we do take that point that that's what we've met and that's how I've made forensic decisions about calling, for instance, Mr Rutherford. Second, the idea of a difference in level of commitment is, as we understand it, a somewhat muddled concept. Ultimately it invites comparison between two rather intangibles. Person As level of commitment and Person Bs level of commitment. It is, however, flawed in exactly the same way as our learned friend's competition case and that is that it rises and falls on its own definition of competition or commitment. It points to one little area without pointing to the whole of the industry. I won't take your Honour back to article 6: your Honour knows. So that also is the third point in reply there and that is that the commitment to which our learned friend draws attention is of very narrow compass. 93 The primary judge did not rule on Wilmar's objection either at the time or in the reasons for judgment. 94 We agree with Wilmar that, given the clarity of the pleaded case and its confined nature, it was insufficient for the BIM Mills to change their case from one of competition to "commitment" by stray references, couched in the context of the pleaded case of competition being the relevant discrimen. The change of case was impermissible because Wilmar had made its forensic decisions based on the case as pleaded. For this reason, it was not open to the primary judge to decide the case on the basis of the concept of "commitment" meaning anything other than "competition". "Commitment" had never been pleaded, was not the subject of evidence, and was not the subject of cross-examination by Wilmar, all being decisions made on the proper basis that the case to which the BIM Mills would be confined is the case that was pleaded. 95 Accordingly, ground 3 of the appeal is also made good.

The amendments are oppressive 96 As noted, the BIM Mills sought a declaration that the 5 July 2016 amendments were not oppressive to Wilmar within the meaning of s 232 of the Corporations Act. For the reasons given above, in prosecuting that claim, the BIM Mills ought to have been confined to their pleading that the relevant difference between their position and that of Wilmar (as well as Tully and MSF) was that, by reason of their notices of termination, "from 1 July 2017, Wilmar, MSF and Tully will be in direct competition with QSL to sell 100% of their raw sugar production in the international market" subject to the requirements of the Growers Choice Legislation (para 30(b) of the statement of claim). 97 In submissions to the primary judge the BIM Mills contended that the 5 July 2016 amendments were materially different to those considered and declared oppressive to Wilmar by Yates J in reasons for judgment [2016] FCA 20 (a conclusion affirmed on appeal in [2016] FCAFC 133), and that the evidence of the commercial context was also different (it being more extensive before the primary judge than before Yates J), whereas Wilmar contended that the difference was not such as to warrant any different conclusion from that which Yates J reached. 98 It may be accepted that the effect of the 5 July 2016 amendments is different from the amendments Yates J considered. It is also true that the evidence of the commercial context before the primary judge was more extensive than the evidence before Yates J. The basic commercial context, however, remained (and remains, at least until 15 December 2016) the same because it is set by the legislation and the terms of the current RSSAs. 99 First, we agree with Wilmar that the effect of the 5 July 2016 amendments is that Wilmar now has materially inferior rights to the BIM Mills in respect of the appointment of Mill Owner directors to QSL. The relevant focus of the inquiry must be whether this effect is unfair in the requisite sense. This is not the same as the question which Wilmar sought to ask in its written submissions, namely, whether the effect is "justified by reference to the relationship of the parties", which departs from the applicable test in a number of respects. 100 Second, the notices of termination and the effect they will have from 1 July 2017 is undoubtedly a relevant consideration. From 1 July 2017 Wilmar, Tully and MSF will be directly competing with QSL for the sale of raw sugar into the export market. Also relevant is the effect of the Growers Choice Legislation and that, as a result, there is already competition in the market - including between Wilmar, Tully and MSF and QSL for nominations by growers of GEIS. These are not the only relevant facts, however. 101 Third, the 5 July 2016 amendments operate immediately. Until 1 July 2017 Wilmar, MSF and Tully are contractually bound to supply 100% of their raw sugar for export to QSL. This is in circumstances where it is not in dispute that Wilmar, by volume, is by far the largest of QSL's suppliers and will continue to be so for the six or so months until 1 July 2017. 102 Fourth, and as explained at [65] of the reasons for judgment of the primary judge, although 100% of the raw sugar is currently supplied by all Mill Owners to QSL, the existing RSSAs between the Mill Owners and QSL provide (as they must) a mechanism for the designation of SEIS. SEIS is the sugar nominated by the Mill Owner for re-supply from QSL to the Mill Owner (or its nominated entity) for sale into the export market in competition with QSL. As such, approximately one third of the raw sugar supplied by Mill Owners to QSL, other than Heck and Bundaberg, is re-supplied back for export sale. Two of the BIM Mill owners nominate SEIS and thus also compete with QSL in respect of SEIS sales into the international market. As the primary judge also accepted at [95], by accepting the evidence of QSL's Managing Director, QSL's position is that competition in respect of SEIS is not seen as raising any unmanageable conflicts of interest for QSL. 103 Fifth, and as explained at [65] and [66] of the reasons for judgment of the primary judge, growers who supply Wilmar may nominate QSL as the seller of their GEIS, being the raw sugar in respect of which the grower takes on the sale price exposure. The inevitable consequence of this is that, although Wilmar is competing with QSL for GEIS nominations, insofar as Wilmar growers nominate QSL for GEIS, Wilmar will have a commercial interest in ensuring that its growers remain effective participants in the industry. The way in which this complex dynamic will operate in practice, a dynamic which applies not only to Wilmar's relationship with QSL and Wilmar's growers, but also the BIM Mills relationship to QSL and the BIM Mills growers, as the primary judge said at [66] is uncertain as "any Grower irrespective of their relationship with a particular Mill Owner either by reason of circumstance, geography, the inherent features of cane production and crushing or otherwise, is free to select any one of a number of" marketers of their GEIS (referred to as GEISMEs by the primary judge, being a "GEI sugar marketing entity" as defined in the Growers Choice Legislation). 104 Sixth, as the primary judge identified at [76], [80], [85] and [110], the rollover date for the RSSAs between the BIM Mills and QSL is 15 December 2016. By that time (or whatever extended period for rollover might be agreed between them) the BIM Mills must decide whether to continue with their current RSSAs, by which they will supply 100% of their raw sugar to QSL, albeit subject to re-supply for sale of their SEIS in respect of Mackay and Isis. If they terminate their RSSAs, moreover, the terms of the 5 July 2016 amendments entrench the BIM Mills as "Original Continuing Mill Owner Members", with the associated privileges that status brings, provided they have a "current agreement" with QSL. While QSL will determine whether it agrees to the content of that agreement, nothing in the 5 July 2016 amendments requires the content to be a continuation of the obligation to supply 100% of raw sugar to QSL, subject only to SEIS. If an agreement on other terms is accepted by QSL, by which the BIM Mills do not exclusively supply QSL, the BIM Mills will nevertheless retain their privileged position under the 5 July 2016 amendments despite also being in direct competition with QSL in precisely the same manner as Wilmar. By Art 19(b) of the QSL Constitution, a special majority is required to change this entrenched position. Further, nothing prevents the BIM Mills themselves competing with QSL for GEIS nominations in the future. 105 In this commercial context, the submission for the BIM Mills that they will continue to supply 100% of their raw sugar to QSL and thus have an economic interest in the performance of QSL and for QSL to be as efficient as possible and attract as many grower nominations for GEIS to QSL as possible in the future, whereas Wilmar does not, cannot be accepted as a statement of certainty about the future. The reality is that the BIM Mills have not given any notice of termination and, unlike Wilmar, Tully and MSF, may continue to supply 100% of their raw sugar to QSL. In evidence on their behalf, Mackay's representative said it was Mackay's "wish" to continue to supply QSL. Bundaberg's representative said that it had to decide whether it should "remain in QSL" and this decision would "pose less of a problem" if Bundaberg could nominate a director to QSL's board. Isis's representative also said that in the near future Isis will need to decide whether to continue its RSSA with QSL. It is apparent from this evidence that continuation of the RSSAs for a new term by the BIM Mills, or any one of them, is by no means a certainty. Of course, if the BIM Mills decide to roll-over their current RSSAs with QSL then this will be subject to the fact that two of the BIM Mills will also continue to require about a third of the sugar they supply to be re-supplied for export sale in competition with QSL as SEIS. Further, it is possible that, by 15 December 2016 or such other extended date as may be agreed between them and QSL, the BIM Mills may terminate their RSSAs or negotiate some other arrangement with QSL. The BIM Mills may also decide to compete with QSL for GEIS nominations. In summary, there is no certainty because the BIM Mills have not yet decided whether to roll-over their current RSSAs with QSL. 106 As noted, insofar as growers who supply to Wilmar nominate QSL for their GEIS, Wilmar will have an interest in ensuring that those growers obtain a proper price for their sugar so that they can continue to participate effectively as a grower for Wilmar. This is the only rational inference open in the circumstances and it is one which the Full Court did not hesitate to draw at [63] and [71] of [2016] FCAFC 133. We cannot see anything in the additional evidence which was before the primary judge which would justify any departure from the conclusion which Yates J reached in ([2016] FCA 20) that both before and after 30 June 2017, Wilmar will have a continuing commercial interest in the efficient participation of QSL in the market. That is inevitable given the statutory requirements which affect the operation of the market, and the structure of the market as described involving growers, Mill Owners, QSL, and QSL's bulk terminals as described by the primary judge (descriptions which, we note, are consistent with those which informed the decision of Yates J). 107 We also cannot see anything in the evidence before the primary judge which would justify departure from Yates J's conclusion, as described when confirmed on appeal in [2016] FCAFC 133, that: [73]…the significance of the changed circumstances of competition should not be overstated. That is especially so given that Wilmar, MSF, Tully, Isis and Mackay are already in competition with QSL and with each other in relation to the marketing of SEIS. It is also open to Bundaberg to compete with QSL in the sale of SEIS. 108 Further, as the Full Court said at [74] of [2016] FCAFC 133, the position remains that "it is not easy to understand why such conflicts as may arise in the future may not be managed in the same way as they have in the past". 109 There is also an issue which arises in respect of the vacation of the office of Director appointed by an Original Continuing Mill Owner Member (that is, one of the BIM Mills). There is no automatic vacation of the office of director on one of the BIM Mill Owners ceasing to be an Original Continuing Mill Owner Member. For example, if one of the BIM Mill owners decides not to renew their RSSA with QSL on 15 December 2016 (or decides not to renew at any further renewal date), but has already appointed a director, two possibilities arise. The BIM Mill Owner may thereafter negotiate a different agreement with QSL on different terms. As noted, in that case, irrespective of its terms, there will be a "current agreement" between the BIM Mill and QSL, and the BIM Mill will remain an "Original Continuing Mill Owner Member" with entrenched preferential voting rights. The director nominated by that BIM Mill Owner is not required to vacate office because the BIM Mill Owner will remain an Original Continuing Mill Owner Member. Alternatively, there may be no agreement in place between the BIM Mill and QSL. The BIM Mill will no longer be an Original Continuing Mill Owner Member or a Continuing Mill Owner Member, once there is no longer an agreement in place. Under Art 36(f)(i) of the QSL Constitution, the director appointed by that BIM Mill will remain in office until the next annual general meeting unless the BIM Mill decides to remove that director under Art 36(f)(ii). Contrary to the submission for the BIM Mills, Art 36(f)(iii) applies to the director appointed by the Continuing Mill Owner Members collectively, not the BIM Mills separately. 110 As a result, the 5 July 2016 amendments enable a director appointed by a BIM Mill Owner to remain in place in perpetuity provided the BIM Mill has in place any agreement with QSL. Further, if (but only if) the BIM Mill Owner ceases to be a Continuing Mill Owner Member then its nominated director will vacate office, but only after the next annual general meeting. By way of contrast, Wilmar, Tully and MSF, between them, may appoint a single director while they remain Continuing Mill Owner Members. Moreover, even if they entered an agreement with QSL in the future, equivalent to any agreement the BIM Mills might negotiate with QSL, the 5 July 2016 amendments operate to ensure that Wilmar, Tully and MSF can never have the same voting rights as the BIM Mill Owners. 111 Against this background, the conclusion we reach is that the reasonable hypothetical bystander would conclude that the effect of the 5 July 2016 amendments is objectively unfair in the requisite sense. The basis for the discrimination against Wilmar, Tully and MSF, competition for GEIS now and in the export market of sugar from 1 July 2017, does not lead to a different conclusion. The 5 July 2016 amendments immediately and, but for a vote by a special majority, permanently, entrench the rights of the BIM Mills to appoint three of the four Mill Owner directors of QSL. They do so in circumstances where two of the BIM Mill Owners already compete with QSL, as does Wilmar, in respect of SEIS, which amounts to about a third of the volume of raw sugar supplied to QSL. They also do so in circumstances where none of the BIM Mills has yet, or had at the time of the 5 July 2016 amendments, agreed to roll-over their existing RSSAs with QSL. Moreover, under the 5 July 2016 amendments, provided an agreement is in place between a BIM Mill Owner and QSL for the BIM Mill Owner to supply any raw sugar to QSL, the entrenched preferment of the BIM Mill Owner in respect of the appointment of a director will remain. This is so even if the BIM Mill Owner's agreement does not involve exclusive supply to QSL, before the re-supply of SEIS, or the BIM Mill being able to compete, and in fact competing with QSL and Wilmar, for GEIS nominations. It is so, moreover, no matter what the position might be in the future including any possible agreement between Wilmar, Tully or MSF and QSL on terms equivalent to those which the BIM Mills might negotiate with QSL. 112 For these reasons we consider that the necessary conclusion is that the 5 July 2016 amendments are oppressive of Wilmar within the meaning of s 232 of the Corporations Act and orders reflecting this conclusion should be made. I certify that the preceding one hundred and twelve (112) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Dowsett, Jagot and White.

SCHEDULE OF PARTIES QUD 801 of 2016 Respondents Fourth Respondent: QUEENSLAND SUGAR LIMITED ACN 090 152 211