Adani Abbot Point Terminal Pty Limited v Lake Vermont Resources Pty Limited & Ors [2021] QCA 187 [2021] 36 QLR

SUPREME COURT OF QUEENSLAND CITATION: Adani Abbot Point Terminal Pty Ltd v Lake Vermont Resources Pty Ltd & Ors [2021] QCA 187 PARTIES: ADANI ABBOT POINT TERMINAL PTY LTD ACN 149 298 206 (appellant) v LAKE VERMONT RESOURCES PTY LTD ACN 114 286 841 (first respondent) QCOAL PTY LTD ACN 010 911 234 (second respondent) BYERWEN COAL PTY LTD ACN 133 357 632 (third respondent) SONOMA MINE MANAGEMENT PTY LTD ACN 124 677 443 (fourth respondent) FILE NO/S: Appeal No 10300 of 2020 SC No 9440 of 2017 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane – [2020] QSC 260 (Dalton J) DELIVERED ON: 31 August 2021 DELIVERED AT: Brisbane HEARING DATE: 24 March 2021; 25 March 2021; 26 March 2021 JUDGES: Fraser and McMurdo and Mullins JJA ORDERS: 1. Allow the appeal against the judgments given and the orders made on 26 August 2020 and 1 September 2020, save for the declarations numbered 5 and 7 made on 26 August 2020, and the orders numbered 8 and 9 made on 26 August 2020. 2. Set aside the judgments and orders made on those dates, save for those two declarations, and the orders numbered 8 and 9 made on 26 August 2020. 3. Give judgment for the appellant against the first respondent on the first respondent’s counterclaim, save for its claim for the declaration numbered 5 made on 26 August 2020. -- 1 of 59 -- 2 4. Give judgment for the appellant against the second and third respondents on their counterclaims, save for the declaration numbered 5 made on 26 August 2020. 5. Give judgment for the appellant against the fourth respondent on its counterclaim, save for the declarations numbered 5 and 7 made on 26 August 2020. 6. Declare that the appellant has demonstrated that the OFC and OVC agreed between it and the operator for the financial years commencing 1 July 2017 and 1 July 2018 represent reasonable charges having regard to the efficient operation of the Terminal in accordance with cl 7.6(b) of the user agreements between the appellant and the respondents. 7. Give the appellant liberty to apply for such further order, of the nature of that specified in paragraph 4 of the orders sought in the notice of appeal, within 21 days of the date of this judgment. 8. Direct the parties to provide, within 21 days of this judgment, written submissions, not exceeding six pages in length, as to the orders which are to be made about the costs of the proceeding in the Trial Division and in this Court. CATCHWORDS: TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – UNCONSCIONABLE CONDUCT – WHAT CONSTITUTES – where the respondents are the users of a coal terminal – where the appellant is the effective owner of the coal terminal – where the respondents have separate user agreements with the appellant concerning their use of the terminal – where a previous user paid the respondent to be relieved of its obligations – where charges payable by the existing users increased to account for the previous user’s exit – where the trial judge found that, in all the circumstances, the appellant had engaged in unconscionable conduct – whether the appellant’s conduct was unconscionable under s 21(1) of the Australian Consumer Law CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where user agreements exist between the appellant, as the owner, and the respondents, as users, of a coal terminal – where the contract provides that the appellant must demonstrate that its charges are reasonable having regard to the efficient operation of the Terminal – where the trial judge found that the appellant had not made such a demonstration as the appellant had not demonstrated that the way the Terminal -- 2 of 59 -- 3 was operated was, itself, efficient – whether the appellant had made the relevant demonstration CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where user agreements exist between the appellant, as the owner, and the respondents, as users, of a coal terminal – where the fourth respondent’s user agreement contains a clause which provides “… No other Access Holder Presenting Coal for Handling at the Terminal will be charged less than the User is charged at that time for a substantially similar commercial arrangement” – where the appellant charges another user less to handle its coal than it charges the fourth respondent – where the trial judge found that the appellants conduct was in breach of its contract with the fourth respondent – whether the trial judge’s interpretation was in error Competition and Consumer Act 2010 (Cth), The Australian Consumer Law s 21, s 22 Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 388 ALR 577; [2021] FCAFC 40, cited Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18, cited Ipstar Australia Pty Ltd v APS Satellite Pty Ltd (2018) 356 ALR 440; [2018] NSWCA 15, cited Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50, cited Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525; [2016] HCA 28, cited COUNSEL: B W Walker SC, L F Kelly QC, S Cooper QC with M F Johnston for the appellant S S W Couper QC, with A C Stumer and D L Tay for the first respondent J D McKenna QC, with N J Derrington, for the second, third and fourth respondents SOLICITORS: Clayton Utz for the appellant DLA Piper for the first respondent Arnold Bloch Leibler for the second, third and fourth respondents [1] FRASER JA: I agree with the reasons for judgment of McMurdo JA and the orders proposed by his Honour. [2] McMURDO JA: The Abbot Point coal terminal (the Terminal) has been in operation since 1984, at first serving the needs of one coal mine operated by Mt Isa Mines Limited (now called Glencore Coal Queensland Pty Ltd) and since 2005, a number of coal mines in central Queensland. The users of the Terminal have no alternative facility for loading their coal into ships. -- 3 of 59 -- 4 [3] Until 2011 the Terminal was owned by the Ports Corporation of Queensland Limited, a Government-Owned Corporation. In 2011 the appellant became the sub-lessee and, effectively, the owner of the Terminal. From 2000-2016, the Terminal was operated by Abbot Point Bulkcoal Pty Ltd (APB). In October 2016 Abbot Point Operations Pty Ltd (APO), a related company of the appellant, became the operator. [4] The respondents to this appeal are some of the users of the Terminal. Each user has a contract with the appellant (a user agreement), under which it may use the Terminal to load a specified maximum quantity of coal each year, for which it must pay certain charges. Each of the users entered into their user agreements with the Ports Corporation. By a Transfer Notice and Project Direction made under the Infrastructure Investment (Asset Restructuring and Disposal) Act 2009 (Qld), on 25 May 2011, the right, title and interest in, and obligations and liabilities were transferred to the appellant. [5] The user agreements are in largely identical terms. There are charges which are to be paid by the users in order to provide the owner with an agreed rate of return on the capital value of the facility. The primary charges in relation to the infrastructure are the Terminal Infrastructure Charge (TIC), and the “take or pay” charge (TPC). The TIC is paid at a certain dollar rate for each metric tonne of a user’s coal which is shipped through the Terminal. To the extent that there is an unused portion of the user’s annual maximum tonnage (AMT), the user pays the TPC, calculated at the same dollar rate per metric tonne. [6] The other category of charges paid by a user are handling charges. There is a Fixed Handling Charge (HCF), which is a reimbursement to the owner of what the owner pays to the operator under certain provisions of the operation and management agreement between them. The HCF is comprised of a certain proportion of the operator’s costs and the operator’s profit margin. There is also a Variable Handling Charge (HCV), which is to reimburse the owner for the payments it makes to the operator under other provisions of the operation and management agreement, again for certain costs of the operator and its margin. [7] The relevant user agreements provide a formula for the calculation of the TIC and TPC, and another formula for the calculation of the HCF. In each case, the amount of the charge is a function of the total number of the contracted tonnes of all users. The TIC and the TPC are calculated by dividing an agreed present value of the annual revenue which is required for the owner to derive a certain rate of return on its capital investment, by a denominator which is the “Annual Maximum Tonnage for All Access Holders”.1 As a result, the greater is the total, across all users, of their agreed maximum annual tonnages, the higher is the denominator, and the lower is the amount per tonne charged as a TIC or TPC. [8] Similarly, the formula used for the calculation of the HCF2 provides for the fixed operating costs (including the operator’s margin) to be divided by the “Annual Relevant Tonnage”, which is the greater of either the total of all annual maximum tonnages, or the annual tonnages which users have notified the operator that they expect to present at the Terminal in a financial year. [9] It is evident that it is in the interests of each user that the Terminal be operated as close as practicable to its capacity. The user agreements differ in their 1 Schedule 7 of the standard user agreement. 2 Clause 7.2 of the standard user agreement. -- 4 of 59 -- 5 commencement dates and duration. However, the agreements are subject to the same process of review of the TIC, the TPC and the HCF. There are agreed reviews, at intervals of five years for the TIC/TPC, and annual reviews of the HCF. Under each user agreement, there is a “Review Date” for the TIC/TPC of 1 July 2017, with a further five yearly review to occur on 1 July 2022. The annual review date for the HCF is 1 July.3 [10] In 2016, there were nine users of the Terminal, consisting of the four respondents to this appeal and five others, of which one was Queensland Coal Pty Ltd (QCPL), a subsidiary of Rio Tinto. QCPL had ceased to use the facility and wished to be relieved of the burden of its user agreement, which was not to expire until 30 June 2028. After some months of negotiations, two agreements were made on 31 October 2016, having the effect of ending the QCPL User Agreement, and requiring QCPL to pay amounts totalling $255 million.4 [11] By one of those agreements for the departure of QCPL, Adani Mining Pty Ltd (AMPL), a related company of the appellant, became a user, under the same terms as had applied to QCPL, for a period from 1 July 20225 to 30 June 2028. However, no agreement was made with any existing or other potential user to use the capacity created by QCPL’s departure ahead of the arrival of AMPL. [12] The departure of QCPL had the effect of increasing the amounts to be paid (as TICs, TPCs and HCFs) by other users, including the respondents, because the annual maximum tonnages of users, in aggregate, were reduced. There was an increase in the TIC/TPC from 1 July 2017 (the next Review Date), until 1 July 2022, and there was an increase in the HCF from a date before 1 July 2017. [13] The principal claim in this case was that in making, or causing to be made, the agreements with QCPL, and by requiring users to pay higher charges according to their user agreements, to the detriment of other users, the appellant engaged in unconscionable conduct, as proscribed by s 21(1) of Schedule 2 of the Competition and Consumer Act 2010 (Cth), The Australian Consumer Law (ACL). The trial judge upheld that claim, and gave judgments in favour of the present respondents in varying amounts totalling $106.8 million. The trial judge determined that the total of the amounts received by the appellant ($255 million) was a fair measure of the damage caused in aggregate to the remaining eight users, and that the four respondents should be awarded damages for their proportions of that sum.6 [14] The trial judge held that it was unconscionable for the appellant to agree with QCPL, for its departure as a user, in a way which cast an additional burden for these charges upon the remaining users, whilst yielding $255 million, to the appellant. Her Honour found that the appellant thereby would be “paid two sums of money” for the five years from 1 July 2017 to 30 June 2022, “both [referable] to QCPL’s contractual obligation to [the appellant]. Whereas, had the QCPL [User Agreement] remained on foot, [the appellant] would only have received one such sum”.7 [15] The Notice of Appeal challenges the unconscionability awards on three grounds. It is said that the finding of unconscionable conduct was erroneous, that the appellant 3 Being calculated for each relevant Financial Year: cl 7 of the standard user agreement. 4 These agreements were a ‘Deed of Novation ’ and a ‘Termination Agreement’. 5 Novation Agreement Schedule Item 5. 6 Adani Abbot Point Terminal Pty Ltd v Lake Vermont Resources Pty Ltd & Ors [2020] QSC 260 (the Judgment). 7 Judgment [191]. -- 5 of 59 -- 6 was denied procedural fairness in the making of that finding and that there were errors in the determination of the damages. [16] The respondents were given further relief, by two declarations. [17] It was declared that the appellant had not demonstrated, as it was obliged to do, that certain costs incurred by its operator (APO) were reasonably incurred, having regard to the efficient operation of the Terminal.8 This order is challenged on the ground that there was an error by the trial judge in the construction and application of the relevant provision of the user agreements, namely cl 7.6(b).9 It was further declared that from 1 July 2017, the appellant had been in breach of cl 25.1(a)(v) of the user agreement between the appellant and the fourth respondent (Sonoma), which precludes the appellant from charging another user less than Sonoma is charged to handle coal through the Terminal under its user agreement.10 That order is challenged on the ground that there was an error in the construction and application of that clause. [18] By Notices of Contention, the respondents say that their awards should be affirmed, in part, on another ground, namely that the amounts payable by the respondents, as their shares of the costs payable by the appellant to the operator, should exclude such of those costs for which, it is said, the appellant has been indemnified by the payments made by QCPL under the agreements for its departure. The user agreements [19] Further terms of the user agreements must be discussed. [20] The user agreements are for long terms, with limited opportunities for a user to withdraw. Neither party may terminate the agreement, without the concurrence of the other, except for the other’s breach.11 A user may only adjust its AMT in certain circumstances.12 The user may request a reduction of that AMT, which the owner “in its absolute discretion” may accept or reject. If a user wishes to increase its AMT, it must make a request to the owner, which the owner may accept if it determines that there is an available unallocated capacity of the Terminal to meet the requested increase. [21] By cl 10.2, if a user has not presented for handling at least 90 per cent of its AMT over a period of 18 months, and there are other users whose needs cannot be satisfied from the available Terminal capacity, the owner may reduce the user’s AMT. Clause 10.3 provides: “Capacity to be taken into account only once If [the appellant] reduces the User’s Annual Maximum Tonnage under Clauses 4.6 or 10.2 of this Agreement and subsequently provides that capacity to another Access Holder, it will not charge the User any TPC or HCF in relation to that reduced tonnage from the time that it is provided to the other Access Holder.” [22] A user may assign all or part of its rights or entitlements under its agreement, including all or part of its AMT, either “permanently or in respect of a period of time”, 8 Judgment [302]-[303]. 9 Appellant’s Outline of Submission [101]. 10 Judgment [346]. 11 Clauses 3.2 and 3.3 of the standard user agreement. 12 Clause 10.1 of the standard user agreement. -- 6 of 59 -- 7 with the prior consent of the owner, which consent is not to be unreasonably withheld.13 An effective assignment discharges the user from obligations under the user agreement in respect of the rights and entitlements assigned.14 With the consent of the owner, again not to be unreasonably withheld, a user may permit a third party to present coal to the terminal.15 [23] The owner is obliged to operate the Terminal to enable a user’s AMT to be handled each year,16 and it warrants that it will cause its operator to ensure that the Terminal is maintained so that as far as practicable the Terminal operates at its design capacity.17 By cl 25.1(a)(iv), the owner warrants that “to the extent that there is demand, it will seek to contract all uncontracted Terminal Capacity from time to time in accordance with [the owner’s] procedures for allocation of Terminal Capacity …”. [24] Clause 24 contains provisions which are intended to protect the owner against an impecunious user. Prior to the execution date of its user agreement, the user must have provided to the owner “Credit Support”, in order to secure the user’s performance of its obligations. The support must be from an entity which, in the reasonable opinion of the owner, is reputable and of good financial standing, and with the capability to satisfy or cause the satisfaction of the obligations of the user, or is from an Australian Bank (as defined in the Corporations Act 2001 (Cth)).18 [25] After the execution date, if a user applies to increase its AMT or, in the reasonable opinion of the owner, there is a likelihood that the user (or a provider of its Credit Support) may have ceased or will cease to reputable or of good financial standing, and with the capability to satisfy in full the user’s obligations, the user must provide further information to the owner to establish its credit worthiness. In those circumstances, the user may be required, by notice from the owner, to provide information to establish its creditworthiness.19 There is another term by which further information may be required in the event that the owner has agreed to increase the user’s AMT conditionally on the provision of Credit Support.20 [26] A failure to provide Credit Support, after a notice given under one of these provisions, constitutes a material breach of the user agreement, entitling the owner to call on any existing Credit Support or to suspend the user’s rights to have its coal handled at the Terminal.21 [27] The HCF is calculated according to cl 7.2 which is as follows: “7.2 [The appellant] to Advise HCF (a) As soon as practicable after consulting with the Operator, [the appellant] must advise the User in writing of the HCF payable by the User during the next Financial Year (and the current Financial Year, in the case of the first Utilisation Advice). 13 Clause 14.2 of the standard user agreement. 14 Clause 14.2(d) of the standard user agreement. 15 Clause 14.3 of the standard user agreement. 16 Clause 4.2(a)(i) of the standard user agreement. 17 Clause 25.1(a)(ii), of the standard user agreement. 18 Clause 24.1 of the standard user agreement. 19 Clause 24.2(a) of the standard user agreement. 20 Clause 24.2(b), of the standard user agreement. 21 Clause 24.3 of the standard user agreement. -- 7 of 59 -- 8 (b) HCF per tonne of the User’s Coal for each Financial Year is calculated as follows: HCF = OFC ART Where: - Subject to Clause 7.6(b), OFC comprises: (i) (A) the total costs payable by [the appellant] to the Operator in respect of the total fixed operating costs incurred by the Operator for the Financial Year (excluding costs of Miscellaneous Services referred to in Clause 7.4 of this Agreement); plus (B) the Operator’s Margin on that amount. ART is the Annual Relevant Tonnage, being the aggregate for each Access Holder of the Terminal (including the User) of the greater of: (i) their respective Annual Maximum Tonnages; or (ii) the annual tonnage which the User has notified the Operator in good faith that the User expects to Present at the Terminal in a Financial Year. (c) The HCF is payable on each tonne of the User’s Annual Maximum Tonnage or, if higher, the annual tonnage for the relevant Financial Year which has been Handled for the User.” [28] The HCV is calculated according to cl 7.3 as follows: “7.3 [The appellant] to Advise HCV (a) As soon as practicable after consulting with the Operator, [the appellant] must advise the User in writing of the rate of HCV payable by the User during the next Financial Year (and the current Financial Year, in the case of the first Utilisation Advice). (b) HCV per tonne of the User’s Coal Handled is calculated as follows: HCV = OVC FT Where:- Subject to Clause 7.6(b), OVC comprises: (i) (A) the total costs payable by [the appellant] to the Operator in respect of the Operator’s total variable operating costs (excluding costs of Miscellaneous -- 8 of 59 -- 9 Services referred to in Clause 7.4 of this Agreement) incurred by the Operator for the Handling of all Coal through the Terminal for a Financial Year; plus (B) the Operator’s Margin. FT (or “Forecast Throughput”) is the sum of forecast throughput for all Access Holders based on Utilisation Advices received by [the appellant] for the relevant Financial Year, at a given point in time, of the total number of tonnes of Coal Handled through the Terminal (which as at the start of any Financial year is nil) and proposed to be Presented at the Terminal (as advised by each Access Holder to [the appellant]) by all Access Holders during the Financial Year.” [29] By cl 7.6, where the operator is neither the operator existing as at the execution date of the user agreement, nor an entity owned and/or controlled by at least 60 per cent of the users (by tonnage), then clauses 7.2(b) and 7.3(b) will apply only if the owner demonstrates “that the OFC and the OVC as agreed between [the owner] and the Operator represent a reasonable charge having regard to the efficient operation of the Terminal.” [30] At any relevant time, the operator (APO) was not controlled by 60 per cent of the users; it was a company in the Adani group. It was, therefore, for the appellant to demonstrate that the OFC and OVC, under its agreement with APO, represented reasonable charges having regard to the efficient operation of the Terminal. It was on that question that the respondents were granted the declaration to which I have referred at [17]. [31] Clause 8 provides for a review of the TIC and TPC on each Review Date, by a process initiated by the owner, which must notify the users of its determination of the amount of the TIC and TPC to apply from the Review Date, by a notice given at least eight months prior to then. Any dispute about those amounts can be resolved by an arbitration, in which the arbitrator must apply the relevant pricing provisions of the user agreement. As I will discuss, the proposed TIC and TPC charges, to commence on 1 July 2017, were the subject of a dispute which was resolved by an arbitrator in the appellant’s favour. The QCPL transactions [32] The appellant made two agreements with QCPL, each made on 31 October 2016. [33] One agreement was a so-called Deed of Novation, to which the parties were the appellant, QCPL and AMPL. It recited that QCPL had no further need for any capacity under its user agreement and that it had been unable to identify any potential user for that capacity. It recited that the user agreement permitted an assignment of part of the rights or entitlements of QCPL, as would occur by this Deed. It further recited that it was a requirement of the user agreement that a proposed assignee enter into a deed of assignment under which it agreed to be bound by the terms, conditions and obligations of the user agreement in respect of the assigned rights, and that AMPL had agreed to do so, in consideration of QCPL agreeing to make a payment to AMPL of $138 million (plus GST). -- 9 of 59 -- 10 [34] By cl 3.1, QCPL assigned “absolutely to AMPL the Annual Contract Tonnage Assigned”, which was defined22 to be the AMT for the six financial years, commencing on 1 July 2022 and ending on 30 June 2028, to which QCPL had been entitled. By cl 3.1(b), AMPL assumed and agreed to perform the obligations of QCPL under the user agreement, to the extent that those obligations related to the assigned AMT. By cl 3.1(d), the appellant and AMPL were deemed to have entered into an agreement in respect of that assigned tonnage, upon the same terms as in QCPL’s user agreement. By cl 3.1(g), it was agreed that the so-called Security Deposit Terms should be deemed to be added to this user agreement between the appellant and AMPL. Those terms were the subject of a recital that AMPL had satisfied the appellant that AMPL would provide adequate Credit Support under and for the purposes of cl 4.2(b)(ii), by the Security Deposit Terms.23 Those terms were also the subject of a separate agreement, dated 31 October 2016 and made between the appellant and AMPL, which is discussed below. [35] By cl 8.1, it was provided that “[in] consideration for AMPL’s acceptance of the obligations under the novations or assignments provided for in this Deed, QCPL will pay to AMPL the Novation Payment of $138 million …”. This was to occur by three instalments, the last of which was to be paid on 15 June 2017.24 [36] The second of the agreements which the appellant made with QCPL was the so-called Termination Agreement. That agreement recited the history of the QCPL User Agreement (although the recitals made no reference to the partial assignment under the Deed of Novation).25 It recited that QCPL no longer needed any capacity under its user agreement, and that it had been unable to identify any user with a demand for that capacity.26 Further, it recited that QCPL had not provided information, as requested by the appellant on 10 March 2016, concerning QCPL’s credit standing, and that QCPL’s stance was that it would not respond to such a request.27 [37] By cl 3 of this agreement, the appellant and QCPL agreed to terminate the user agreement on and from the Effective Date, which (again) was 31 October 2016.28 By cl 3.2, the appellant released QCPL from its obligations, save for those which by then had accrued. [38] By cl 3.4, the appellant indemnified QCPL (and its related companies) against any claim made not only by the appellant or its related companies, but also, importantly, by any other user of the Terminal. I will call this term, which was particularly important in the judge’s reasoning, the Indemnity. [39] By cl 4.1, QCPL agreed to pay to the appellant a “Termination Payment” of $117 million, payable by three instalments, contemporaneously with the payment of the instalments under the Deed of Novation. [40] The appellant made a third agreement simultaneously with the QCPL transactions. Again, on 31 October 2016, the appellant and AMPL agreed that AMPL was to pay 22 By Item 7 in the Schedule to the Deed. 23 Recital J. 24 By Item 8 in the Schedule to the Deed. 25 Recital H. 26 Recital G. 27 Recital H. 28 However, it further provided that the parties should account as if the termination had occurred on 1 July 2016. -- 10 of 59 -- 11 to the appellant the $138 million which AMPL was to receive from QCPL under the Deed of Novation. This was to be paid to the appellant as security for the performance by AMPL of the user agreement between them. The companies agreed to add a clause to their user agreement, by which AMPL would pay to the appellant, upon receiving each instalment under the Deed of Novation, the amount of that instalment as Credit Support under cl 24 of AMPL’s user agreement. It was further provided that “for the avoidance of doubt”, AMPL would not have any right, title or interest in the money so paid to the appellant.29 [41] By another term to be added to AMPL’s user agreement, the appellant was authorised to use that money paid to it as Credit Support. And the appellant’s obligation to repay any of this security was conditional upon the appellant being permitted to do so under what were described as “the Secured Documents”. That was a reference to a deed between the appellant and some of its creditors, by which the appellant was constrained in applying its funds except according to a certain order of priority, by which those creditors were to be paid before, in particular, a related company of the appellant such as AMPL. The practical effect of the Security Deposit Agreement was to pass on to the appellant the benefit of the novation payments of $138 million. [42] The effects, of the three agreements made by the appellant on 31 October 2016, were that: • QCPL ceased to be a user as and from that date; • QCPL paid sums, under the two agreements to which it was a party, totalling $255 million; • by July 2017, the whole of that $255 million would be received by the appellant; • AMPL would become a user of the terminal, for a period of six years commencing on 1 July 2022 with an entitlement to the AMTs which QCPL would have had under its user agreement. [43] It is then necessary to consider the appellant’s conduct, in its negotiations with QCPL, which resulted in those agreements. The negotiations with QCPL [44] The trial judge noted that the appellant had called no evidence from anyone who had made the decisions to enter into the QCPL transactions and the Security Deposit Agreement.30 The evidence in chief in this trial was by affidavit, and there was only one affidavit in the appellant’s case which addressed the three agreements, which was from Mr Christopher Wicks. There was also affidavit evidence from another Adani employee, Mr Dwayne Freeman, whom her Honour said was far more involved in negotiating these agreements than Mr Wicks, although Mr Freeman’s affidavit did not deal with the QCPL transactions.31 Nevertheless Mr Freeman gave evidence in cross-examination about the QCPL transactions. The trial judge considered Mr Freeman to be an honest witness, and she accepted his evidence except in certain particular respects.32 She was less impressed with the evidence of Mr Wicks, finding 29 Clause 2.1(b) Annexure A. 30 Judgment [59]. 31 Judgment [59]. 32 Judgment [60]. -- 11 of 59 -- 12 that his evidence was “false in significant respects” and she was unimpressed with his demeanour.33 [45] As the trial judge discussed, the course of much of the negotiations was evidenced by emails and other documents. [46] In 2014 QCPL sold such of its coal mining interests as had been served by the Terminal. The negotiations were initiated by QCPL. In October 2015, and again in February 2016, QCPL enquired of Mr Freeman whether “Adani” (the name used in the correspondence to refer to the group of companies which included the appellant) wished to acquire QCPL’s capacity. [47] The trial judge found that from the outset, Adani made it clear that what had to be negotiated was the price which QCPL would pay to be relieved of its obligations, and that this was accepted by QCPL by February 2016.34 [48] On 18 March 2016, QCPL sent a “Term Sheet” to the appellant, which set out draft terms for its departure on and from 1 July 2016. The proposed consideration was a “relinquishment payment” by QCPL to the appellant by four annual instalments, commencing on 30 June 2017. By this document, QCPL did not propose a particular amount to be paid by it. It did so in a further Term Sheet which it submitted in April 2016,35 when QCPL proposed a figure of $180 million as the price it would pay.36 [49] On 9 May 2016, Mr Gibbons of Rio Tinto emailed Mr Freeman (copied to Mr Wicks and another at Adani) proposing a series of payments, in total having a net present value of $186.53 million. The derivation of that figure appeared from a table in which the anticipated cost to QCPL of its ongoing performance of its user agreement was set out, year by year, from which a net present value of that burden was shown at $423.05 million. The table detailed payments, proposed to be made by QCPL over the next five financial years, totalling $227.3 million, the present value of which was that sum of $186.53 million. [50] In the email, Mr Gibbons made these points: “• You will understand that I am seeking to keep my annual payments under what I would otherwise have paid in terms of the total T/P (TIC/HCF) o I suspect this may also suit your preferred tax effective position • From your perspective this $186.53m should more than compensate for the expected loss of income likely in the next price reset o This represents around 6 years of our forecast TIC payments or around 4.5 years of our forecast (TIC+HCF) payments 33 Judgment [61]. 34 Judgment [66]. 35 The trial judge said that this was done by a term sheet submitted on 6 April 2016, within exhibit 8. However the relevant email from QCPL (or Rio Tinto) was dated 22 April 2016. 36 Judgment [68]. -- 12 of 59 -- 13 • Whilst the NPV provides a reference point for both parties the only certainty in this equation is what is able to be agreed. $186.59m [sic] is a considerable sum on money with certainty attached. o Adani Ports in addition to acquiring the $186.59m [sic] contract relinquishment fee retains the upside of on selling/reusing this capacity all the while also maintaining its socialised port revenue base.” In that last point, the appellant’s “socialised port revenue base”, to which Mr Gibbons was referring, was the appellant’s ability to pass on the cost of the departure of a user to the remaining users, through the higher charges, as I have discussed. [51] Mr Freeman replied on 12 May 2016, making a counter offer under which QCPL would make three payments, in the years ended 30 June 2017, 2018 and 2019, totalling $350 million of which the net present value was said to be $310.68 million. Mr Freeman there wrote: “We continue to recognize [sic] that this needs to be a value sharing process but also believe that this must be framed within the context of risk and heavy weighting should not be applied to potential future incomes which may or may not eventuate.” By “the context of risk”, Mr Freeman’s evidence was that he was referring to the risks of the damage to reputation and of litigation arising from the implementation of “socialisation”.37 He said that his superiors regarded this as a real risk. By “potential future outcomes”, it appears that Mr Freeman was referring to the potential for the appellant to find another user, or to pass on the cost of QCPL’s departure to the remaining users. [52] In its email sent on 18 March 2016, QCPL requested a term whereby the appellant would “grant an indemnity in favour of QCPL in respect of any claim against, or loss, damage or increased cost to QCPL arising out of any dispute or litigation in connection with the relinquished terminal capacity after 1 July 2016.” In an email of 29 April 2016, Mr Freeman resisted the inclusion of the proposed indemnity, saying that it could not be “accepted in its current form”. The trial judge referred to Mr Freeman’s evidence that QCPL was then wanting an indemnity against claims from other users, and that Rio Tinto had concerns about “reputational risks” associated with relinquishing its user agreement.38 Mr Freeman said that Rio Tinto’s concern was that “… if the other users found out about what had happened [QCPL] might get sued”.39 Her Honour accepted that QCPL did apprehend that it might be sued by other users. [53] The trial judge noted that Mr Freeman acknowledged that the appellant intended to “socialise the effect of the proposed QCPL transactions.” She also found that Mr Freeman was “concerned to make it clear in his evidence that it was not his plan, but the plan of others controlling [the appellant] who “instructed” him.40 Her Honour said that Mr Freeman was there attempting to “distance himself from the actions of 37 Transcript 3-48, Judgment [82]. 38 Judgment [73] 39 Transcript 3-43 quoted in the Judgment [73]. 40 Judgment [78]. -- 13 of 59 -- 14 his employer”, which indicated to her that Mr Freeman, as an honest witness, had not wished to be associated with such a “socialisation”.41 [54] It was put to Mr Freeman, and accepted by him, that the then proposed effective date of the QCPL transaction, which was 1 July 2016, was significant in that it was “the date [which] marked the beginning of the review process for the TIC.”42 Her Honour noted Mr Freeman’s evidence that this was the date which the appellant wanted, and commented that Mr Freeman had “again sought to distance himself personally from this matter”.43 [55] Rio Tinto continued to negotiate by emphasising its “sensible value sharing approach”,44 a term which conveyed that Rio Tinto/QCPL would not pay an amount which represented the present value of its entire burden under its user agreement. [56] On 11 June 2016, an email was sent by Mr Gupta of Adani to others within the Adani group, describing a proposal to be put by the appellant. The email was forwarded to Mr Freeman two days later. The proposal contained an updated calculation sheet, although the calculations of what would have been the cost to QCPL, year by year, over the life of its user agreement, remain unchanged from those which had passed between the parties from 9 May 2016. This was a proposal for QCPL to pay $260 million as an initial payment,45 subject to a later adjustment depending upon whether “socialisation” was “successful”. If socialisation was successful, the appellant would repay to QCPL $50 million;46 if it was unsuccessful, QCPL would pay a further $50 million.47 As Mr Gupta’s email summarised the proposal, “Adani would either get $210m or $310m (plus associated tax)”. [57] In his email of 13 June 2016 to Rio Tinto’s representatives, in which that proposal was made, Mr Freeman wrote: “… we would like to table a suggested approach to achieving an outcome that meets the reasonable expectations of both organizations. This is based on a pure 50% split of the value and risks of the transaction including taxation implications and legal risk.” The email referred to a meeting between the parties which was to take place on that day. [58] At that meeting, there were discussions in which the proposal for adjusting the price, according to whether there was socialisation, was abandoned. Mr Freeman’s evidence was that the parties recognised that this “was going to be too difficult and we’re better off just negotiating a number”.48 [59] At that meeting49 consensus was reached on a figure of $255 million as the amount which QCPL would pay to end the relationship once and for all.50 This required the approval of Mr Gautam Adani.51 41 Judgment [78]. 42 Judgment [79]. 43 Judgment [79]. 44 Email 3 May 2016 referred to in the Judgment [74]. 45 Plus 50 per cent of a tax benefit which would accrue to QCPL from the transaction, then estimated at $39 million. AR 5692. 46 And some of the amount paid for the tax benefit. 47 With a further amount for the tax benefit. 48 Transcript 3-54; Judgment [88].AR 6429. 49 Or perhaps at a meeting on 14 June 2016, as the trial judge found at Judgment [89]. 50 Transcript 3-55; Judgment [89]. 51 Transcript 3-55; Judgment [89]. -- 14 of 59 -- 15 [60] The trial judge noted that there was no further evidence as to how the parties negotiated the final terms of the QCPL transactions, because Mr Freeman had little to do with the negotiations after 14 June 2016.52 However, as her Honour discussed, light was thrown upon the matter by a document prepared by PricewaterhouseCoopers (PwC), dated June 2016, entitled “Analysis of options to allocate termination payment”. [61] The PwC report recorded its tasks as follows: “Adani has negotiated a proposed payment of $255 million from Queensland Coal (a wholly-owned subsidiary of Rio Tinto), as consideration for Queensland Coal exiting its existing user agreement with AAPT. The existing user agreement is for 9.3 million tonnes per annum for the period FY2017 to FY2028 … . The negotiated arrangement contemplates that the obligation under the user agreement for an initial six year period FY2017-FY2022 would be cancelled. The obligation relating to a second six year period FY2023-FY2028 would be assigned to AMPL, which does not anticipate a requirement for physical shipping capacity under the assigned user agreement until FY2023. Consequently, Adani needs to determine the appropriate share of the total $255 million payment that would be provided to AAPT as compensation for the cancellation of the initial period of capacity, and that share which would be retained by AMPL for accepting Queensland Coal’s obligation under the remaining term of the user agreement. Adani has requested that PricewaterhouseCoopers Australia (PwC) provide an opinion on the appropriate allocation of the total $255 million payment between the two six year periods: • FY2017-FY2022, to be paid as termination compensation to AAPT (actual period ends March 2022), and • FY2023-FY2028, to be retained by AMPL (actual period commences April 2022).” (emphasis in original) [62] The report referred to modelling which estimated the TIC to be paid in future years, whilst noting: “However, the $255 million payment from [QCPL] is not directly linked to, or derived from, forecasts in this model. Instead, it represents a negotiated outcome between [QCPL] and AMPL, where the amount would be paid in three instalments over the 12 months comprising FY17. This prevents direct analysis of value drivers behind the calculation of the $255 million amount, as a means of determining an allocation between the two periods. The relatively high level of uncertainty around value drivers in the AAPT draft tariff model in later tariff reset periods adds further complication to attempts to derive an appropriate allocation between time periods.” 52 Judgment [91]. -- 15 of 59 -- 16 [63] Nevertheless, PwC used this modelling of the future TIC to apportion the amount of $255 million between the two periods.53 Forecast charges in the modelling were converted by PwC to present value amounts, and this determined the apportionment of the $255 million payment.54 PwC thereby arrived at an allocation approximating $118 million for the first period and $138 million for the second period, which became the apportionment which was employed in the termination and novation agreements. Mr Wicks agreed that the Adani companies decided between themselves the apportionment of the sum of $255 million between the two QCPL transactions.55 The Arbitration [64] In March 2017, the respondents referred a dispute about the TIC/TPC to apply on and from 1 July 2017 to arbitration under cl 8.1 of their user agreements. The parties agreed to the appointment of the Honourable Michael McHugh AC QC as the arbitrator. An arbitration hearing was held in February 2019, and the relevant award was delivered in May 2019. [65] Of the many issues determined by the arbitrator, the presently relevant dispute concerned the calculation of “Tonnes” in Schedule 7 of the user agreements, arising out of what the arbitrator said were “competing views of the parties as to the consequences of the termination of [the QCPL User Agreement] and termination payments received from QCPL.” [66] The arbitrator discussed the terms of the Deed of Novation and the Termination Agreement. He discussed the respondent’s arguments by which they ultimately contended that, consistently with their user agreements, the appellant was not entitled to retain the benefit of the QCPL payments “without considering and ameliorating its effect on the TIC to be paid by the Users.”56 [67] The arbitrator saw a flaw in the respondents’ case, which was that their arguments effectively treated the individual user agreements “as an interlocking arrangement under a single agreement with common terms to which each User is a party.”57 The arbitrator observed that “the individual User Agreements with Adani, though in similar form, entitle Adani to deal with individual Users in very different ways.”58 He noted that: 1. the duration of individual user agreements, and the TICs and TPCs payable under those agreements, could vary significantly; 2. the user agreements did not purport to limit Adani’s freedom to contract with any user, potential user or former user; 3. there was nothing which prevented user agreements between Adani and other users ending, on the terms of those agreements, shortly before a Review, leaving the remaining users to pay a higher TIC than if the other user agreements had remained on foot; 53 FY2017-FY2022 and FY2023-FY2028. 54 With some adjustments for items which need not be discussed here. 55 Transcript 2-97. 56 Award para 299. 57 Award, para 300. 58 Award, para 300. -- 16 of 59 -- 17 4. the position the respondents now found themselves in was the same as if the QCPL agreement had expired by effluxion of time at the end of the previous review period; 5. the only relevance of any other agreement to a particular user was the other user’s AMT which was part of the input to determine the “Tonnes” under Item 3 became Schedule 7 of the particular user’s agreement; 6. the user agreements permitted Adani to settle access prices with any user, whether or not in accordance with Schedule 7, with the result that the total revenue to Adani was not necessarily based on a proportionate basis.59 [68] The arbitrator rejected a contention that the appellant was in breach of an implied term to do all such things as are necessary to enable the other party to have the benefit of the contract. He referred to what he saw as the unambiguous effect of Schedule 7 of the respondents’ agreements, and said that “any implied duty to cooperate cannot be used to re-write the parties’ rights and obligations under their contract.”60 [69] The arbitrator rejected a further submission that the user agreements had an implied term that the appellant would not terminate another user agreement “except in good faith and for reasonable cause”. He held that such an implied term would not satisfy any of the five conditions necessary to establish an implied term in fact.61 In particular, he held that such a term would not be reasonable and equitable “given that nothing in the User Agreement expressly restricts Adani’s freedom of contractual relations with other third parties.”62 [70] The arbitrator rejected a contention that there was an alternative implied term that the appellant would “give credit for any payments received to release another user from obligations under a User Agreement”.63 He said that the user agreements gave no basis for the implication of such a term, one reason being that “[i]n whole or in part, the payment received is the consideration for Adani giving up rights that it had against QCPL.”64 He rejected a further contention by the respondents that the appellant was being reimbursed “twice for the same costs”,65 and said that “all that has occurred is that Adani has done what the User Agreements permitted it to do [and that] [t]here is no basis for the claim that a payment reimbursed it twice for the same costs.”66 [71] Further, the arbitrator rejected the premise that the payments, totalling $255 million, represented the charges which QCPL would have had to pay in the five years ending 30 June 2022, and which the remaining users would have to pay because of QCPL’s departure. The arbitrator’s analysis was that: (a) QCPL’s agreement had a duration until 2028, “well beyond” the current review five year period, so that any payments made by QCPL could not be equated as payments for QCPL’s obligation to pay the TIC between 1 July 2017 and 30 June 2022;67 59 Award, paras 300-306. 60 Award, para 324. 61 Award, para 331, citing BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 282-283. 62 Award, para 331(b). 63 Award, para 332. 64 Award, para 333. 65 Award, para 334. 66 Award, para 335. 67 Award, para 334(a). -- 17 of 59 -- 18 (b) the $138 million paid to AMPL under the novation agreement was for that company to take on the risk of QCPL’s contracted tonnes from 1 July 2022 in circumstances where it then had no operational mine and was taking on a substantial risk with developing a mine. The payment of $138 million concerned QCPL’s assigned tonnes for the next review period from 1 July 2022 and beyond;68 (c) in respect of the $117 million paid under the Termination Agreement, that agreement had an “Effective Economic Date” of 1 July 2016, one year prior to the present review date of 1 July 2017, and that agreement provided that the parties should account as if the respective terminations for which the agreement provided had occurred on 1 July 2016. This had the effect that QCPL was not required to pay the TIC and the HCF fixed for the period 1 July 2016 to 30 June 2017, resulting in QCPL saving $51.9 million, which it would have had a liability to pay Adani for that year;69 (d) in the circumstances, and at the best for the respondents, only $65.1 million of the payment under the Termination Agreement could be said to have had any connection with the five year review period under consideration by the arbitrator.70 [72] As the trial judge correctly observed, the arbitrator’s award did not determine any part of the unconscionability claim in the present proceeding, and nor did not decide the questions about handling charges. The arbitrator recorded the concession by the respondents that he had no power to determine their unconscionability claim.71 Unconscionability: the reasons of the trial judge [73] Without referring to the arbitrator’s characterisation of the QCPL payments,72 the trial judge reached a different view. Her Honour found that the amount of $255 million which the appellant received from QCPL was “referable” to the period 1 July 2016 to 30 June 2022.73 [74] Her Honour reached that finding in this way. She referred to a “gap in the evidence”74 about what happened between the time at which the figure of $255 million was agreed on 13/14 June 2016 and the signing of the agreements on 31 October 2016. She noted that at that earlier date, the basis for agreement on that figure was the present value of QCPL’s obligations over a period from 30 June 2016 to 30 June 2028, with a discount for “value sharing”.75 But her Honour then remarked that “the amount of $255 million was very close indeed to the present value of the amount which QCPL would have paid for TIC and HCF for the period up to 30 June 2022.”76 This was an apparent reference to a calculation of that value in a report of a witness, Mr Houston. Mr Houston calculated the worth of QCPL’s obligations to pay the TIC/TPC and HCF in each of the six years to 30 June 2022, expressed in 2017 dollar terms, as $266.5 million.77 Her Honour continued:78 68 Award, para 334(b). 69 Award, para 334(c). 70 Award, para 334(c), (d). 71 Judgment [16]-[17]. 72 Discussed at [67]-[71] above. 73 Judgment [136]. 74 Judgment [133]. 75 Judgment [133]. 76 Judgment [135]. 77 Houston Report [112]. 78 Judgment [135]. -- 18 of 59 -- 19 “Perhaps the pre-agreed figure determined the two time periods evident in the QCPL transactions (2016 to 2022 and 2022 to 2028). Perhaps the date of 1 July 2022 was the time when AMPL thought it might need terminal facilities. While these are possibilities, the lack of evidence prevents me making a finding.” [75] Her Honour continued:79 “Clearly, although both the termination agreement and the novation agreement are dated 31 October 2016, the novation agreement must have been first in time. If it were not, QCPL would have had nothing to assign. Thus, once the assignment effected by the novation agreement had occurred, the only obligations which QCPL had to the [appellant] were in respect of the period 1 July 2016 to 30 June 2022. I find, therefore, that the amount of $255 million which the [appellant] has received from QCPL is referrable to that period.” [76] That finding featured in her Honour’s subsequent consideration of whether, in the language of s 22(1)(b) of the ACL, the users had been required to comply with conditions which were not reasonably necessary for the protection of the appellant’s legitimate interests. The trial judge there said: “[191] The $255 million payment was agreed when the [appellant] intended not to be out of pocket as a result of QCPL’s departure: until 1 July 2022 the remaining users would pay QCPL’s share of TIC and HCF, and after that AMPL would (ex 3). The [appellant] will be paid two sums of money for the period 1 July 2017-30 June 2022, both referable to QCPL’s contractual obligation to it. Whereas, had the QCPL [User Agreement] remained on foot, it would only have received one such sum. The $255 million payment is a large extra payment compared to the [appellant]’s entitlements under the default pricing mechanism provided by the user agreements. The [appellant] has become entitled to that extra payment without cost to itself, and without having to provide anything extra to any remaining user. In that sense there is a quality of windfall about the $255 million payment. [192] As discussed above, the [appellant] went out of its way to structure the transactions so that it received an extra $255 million payment. The way it achieved that was to impose a detriment on the remaining users. In that sense the payment is at the expense of the users.” [77] The same finding was a premise for her Honour’s assessment of damages, as I will later discuss below. [78] The trial judge described “[t]he nub of the respondent’s unconscionable conduct case” as being that “in receiving the $255 million consideration under the QCPL transactions, the [appellant] in effect accepted payment for QCPL’s future TIC and HCF obligations until 30 June 2022 but required the remaining users to pay the 79 Judgment [136]. -- 19 of 59 -- 20 equivalent of QCPL’s TIC and HCF obligations during this period.”80 By that statement, it was the appellant’s insistence upon the performance by the respondents of their user agreements, that was found to have been unconscionable. [79] The judge found, in the appellant’s favour, that it had “not breached any of the user agreements”, and that its “conduct in demanding a price from QCPL to be relieved of its obligations under its user agreements appears ordinary enough.”81 She further found that it “must have been in the objective contemplation of the parties” and was “plainly foreseeable” that a user might agree to terminate its user agreement “on terms that it paid the owner [the appellant] to be relieved of its obligations.”82 The trial judge observed, correctly, that “the fact that there is no breach of contract is not a bar to the availability of the statutory remedy”.83 [80] However, in other parts of the Judgment, the judge seemed to take a broader view of what constituted the appellant’s unconscionable conduct. One of the reasons for her Honour’s ultimate conclusion of unconscionable conduct, was that the appellant “attempted to disguise its behaviour in complex transactions”.84 [81] As already noted, her Honour made adverse credit findings against Mr Wicks.85 Those findings are not challenged. However what is challenged is the judge’s use of the performance by Mr Wicks, as a witness, as an indication of the appellant’s unconscionability in the events in question. [82] Her Honour was critical of affidavit evidence from Mr Wicks that the termination payment of $117 million “represented a negotiated settlement between the parties and was not an amount worked out by reference to a calculation based on forecast charges payable by QCPL under the QCPL User Agreement.” Her Honour considered this to be plainly false because what stood out from the documents evidencing the negotiations, she said, was that the amounts to be paid “were very much based on its future obligations under its user agreement.”86 [83] Her Honour was critical of affidavit evidence of Mr Wicks, as to a suggested concern, by the Adani companies, that there existed a real risk of QCPL ceasing to be of good financial standing so as to be able to fulfil its obligations under its user agreement. Mr Wicks swore that a significant factor for Adani in these transactions was “the presence of these risks”.87 Her Honour found that the “idea of QCPL’s creditworthiness was only raised as a construct to show some commercial purpose for payment by QCPL to the [appellant] and AMPL which was not related to the extinguishment of QCPL’s future financial obligations under its user agreement.”88 She found that there was “no genuine concern about QCPL’s credit at 10 March 2016, or at any time subsequent to that. Want of Credit Support was not the reason or a reason, for the QCPL transactions.”89 She found that an email sent by Mr Freeman 80 Judgment [57]. 81 Judgment [164]. 82 Judgment [164]. 83 Judgment [165]. 84 Judgment [207]. See also Judgment [103], [120]-[122], [143]. 85 Judgment [59]-[63]. 86 Judgment [96]. 87 Affidavit of Mr Wicks, 12 February 2019, quoted in the Judgment [104]. 88 Judgment [113]. 89 Judgment [120]. -- 20 of 59 -- 21 on 15 July 2016, which suggested otherwise, was “an attempt to document an apparent reason for the QCPL transactions which did not exist.”90 [84] On this point, her Honour referred to recitals G and H of the Termination Agreement, which were as follows: “G QCPL no longer has need for any capacity under the User Agreement at the [Terminal] and has been unable to identify willing acquirers with demand for that [Terminal] capacity. H QCPL has not provided information as requested to [the appellant’s] request of March 10, 2016 concerning QCPL’s credit standing, and QCPL’s position is that it will not be responsive to requests from [the appellant] for Credit Support.” [85] Her Honour found that these recitals were “irrelevant to the QCPL transactions and represent the last vestiges of the disguise which the [appellant] attempted.”91 [86] The judge found that the terms of the three agreements, made on 31 October 2016, did not correspond in all respects with the appellant’s commercial objective, which was that it should receive the entirety of the monies paid by QCPL. The judge rejected the appellant’s pleaded case that the payment by QCPL to AMPL under the novation agreement “was a commercial payment justified by AMPL agreeing to assume QCPL’s rights and liabilities under its user agreement … from 1 July 2022 onwards …”.92 [87] The judge suggested that there were other ways in which the same outcome, between the appellant and QCPL, could have been achieved, and that the appellant’s deliberate choice to structure the transactions dealing with QCPL’s departure was relevant to the question of unconscionability. Her Honour queried why “there was not a straightforward novation of the entire QCPL [User Agreement] to AMPL”93 and that “[i]t would have been simple to provide for [the amount of $255 million] to have been paid either (a) to AMPL to compensate it for its having to bear these burdens before it had coal to be handled at the terminal, or (b) to the [appellant] as a pre- payment of those obligations.”94 Her Honour appeared to consider that the avoidance of that “straightforward scenario”95 was explicable, upon the basis that under it “the QCPL tonnes would have remained the denominator for calculating TIC and HCF, so the users would not have paid more.”96 The judge noted that “[t]o achieve socialisation of the burden of QCPL’s departure, it was necessary to have both the [Termination Agreement] and the novation agreement”.97 In her view, the Security Deposit Agreement was a means of providing the appellant with the entirety of the $255 million, “but covertly”.98 [88] The judge concluded that the three agreements were “more complicated than necessary to document the real transaction between QCPL, AMPL and the [appellant] 90 Judgment [121]. 91 Judgment [122]. 92 Judgment [132]. 93 Judgment [139]. 94 Judgment [139]. 95 Judgment [140]. 96 Judgment [140]. 97 Judgment [141]. 98 Judgment [142]. -- 21 of 59 -- 22 because they sought also to achieve socialisation of the burden of QCPL’s departure and to disguise or camouflage this.”99 [89] The judge said that under a straightforward “price for relinquishment” agreement, the appellant would have received the whole of the consideration, but that would have had the “socialisation apparent on the face of the documents” and it would not have advantaged AMPL.100 She said that the three transactions were made “in the interests of not just the [appellant], but at least of the [appellant] and AMPL, and possibly the wider Adani Group.”101 [90] After some discussion of the authorities, her Honour then considered the case in the framework of s 22 of the ACL. At this point, it is convenient to set out the terms s 22(1): “(1) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the customer; and (b) whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and (f) the extent to which the supplier's conduct towards the customer was consistent with the supplier's conduct in similar transactions between the supplier and other like customers; and (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and 99 Judgment [143]. 100 Judgment [144]. 101 Judgment [144]. -- 22 of 59 -- 23 (i) the extent to which the supplier unreasonably failed to disclose to the customer: (i) any intended conduct of the supplier that might affect the interests of the customer; and (ii) any risks to the customer arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and (j) if there is a contract between the supplier and the customer for the supply of the goods or services: (i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and (ii) the terms and conditions of the contract; and (iii) the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and (iv) any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and (k) without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and (l) the extent to which the supplier and the customer acted in good faith.” [91] The trial judge recorded that she had considered all the subsections of s 22(1) and could see no relevance in this case of paragraphs (c), (d), (g), (h) or (k). [92] As to the matter in s 22(1)(a), the judge said that the evidence about the negotiations about the respondents’ user agreements, which had been between the Ports Corporation and the respondents negotiating as a group, “[did] not disclose anything relevant”.102 [93] Referring to s 22(1)(j)(ii) and (iii), her Honour noted that there was no allegation by the respondents that the appellant had breached the terms of their user agreements, which she said was a “very relevant factor”, and tended against a finding of unconscionable conduct.103 Her Honour added that this was “particularly so … where what the respondents complain of, is the exercise of a contractual entitlement, namely, to charge TIC and HCF determined in accordance with the contract.”104 [94] The trial judge said that the fact that the appellant had not breached the user agreements, and that it was entitled to a price to relinquish its rights against QCPL 102 Judgment [160]. 103 Judgment [161]. 104 Judgment [161]. -- 23 of 59 -- 24 under the QCPL User Agreement, were “very strong points in its favour”.105 However, her Honour said, there were two respects in which the user agreements were “unusual” and which diminished the strength of the appellant’s case. [95] The first of them was that the user agreements were for lengthy durations. Therefore there was “an increased chance of the factual circumstances against which the parties contracted changing substantially over time”, such as in this instance the “significant change to the identity of the owner of the terminal”.106 [96] The second aspect of the user agreements was that they formed “part of a set of standard form agreements regulating the rights of all of the users who share the terminal”,107 which accorded with “the reality that the terminal is shared by several users”.108 Her Honour said that “expressly and implicitly, the user agreements recognise that all the users’ economic fortunes are to some extent linked because of their shared use of the terminal”, making each user “vulnerable to the commercial effects of the owner dealing with another user”.109 [97] Addressing s 22(1)(e), the trial judge said that this was a relevant consideration because of the monopolistic position of the appellant, with the respondents having no option but to deal with the appellant in order to export their coal.110 Her Honour saw their position as analogous to that of the successful respondent in Ipstar Australia Pty Ltd v APS Satellite Pty Ltd.111 [98] Also relevant, in her Honour’s view, was the restriction on the rights of the users to terminate their agreements, and the take-or-pay nature of them. Her Honour said that “[t]he respondents are contractually locked into a long term, [financially] onerous relationship with the owner.”112 All of those factors, in her Honour’s view, put the respondents in a position of economic vulnerability.113 [99] Next, the trial judge discussed “the identity of the Supplier and its Commercial Motivations”, which her Honour related to s 22(1)(b) “to some extent”.114 Her Honour saw as a relevant factor, that the appellant had become the supplier of the service in place of the Ports Corporation.115 That was significant in the circumstance that the appellant had become the effective owner of the Terminal, not under the assignability provisions of the user agreements, but pursuant to “an act of State power”.116 Also significant in her Honour’s view was the circumstance that the transfer by Ports Corporation was made “in favour of the Adani Group which included AMPL, a company which aims to develop a very large coal mine, and export coal through the terminal”.117 Further, at the time of the conduct in question, the appellant was a related entity of the operator of the Terminal (APO).118 The relevance 105 Judgment [167]. 106 Judgment [168]. 107 Judgment [169]. 108 Judgment [170]. 109 Judgment [172]. 110 Judgment [174]. 111 (2018) 356 ALR 440; [2018] NSWCA 15. 112 Judgment [175]. 113 Judgment [176]. 114 Judgment fn 73. 115 Judgment [178]. 116 Transfer pursuant to the Infrastructure Investment (Asset Restructuring and Disposal) Act 2009 (Qld). 117 Judgment [181]. 118 Judgment [182]. -- 24 of 59 -- 25 of these matters, in her Honour’s view, was that “the users were not only locked into long term contracts with a monopolistic supplier who controlled an asset vital to their businesses, but that supplier was no longer a Government entity which did nothing but operate the port; it was a private company with its own profit motives”,119 and that profit motive was “potentially at odds with the users”.120 Her Honour found these circumstances increased the “vulnerability” of the users.121 [100] Her Honour then addressed the question of whether, in the terms of s 22(1)(b), the users were required to comply with conditions that were not reasonably necessary for the protection of the appellant’s legitimate interests. In the discussion which followed, her Honour does not appear to have considered that any of the conditions of the user agreements, most importantly the Schedule 7 pricing mechanism which was common to all user agreements, was unnecessary for the protection of the legitimate interests of the supplier (the appellant). Rather, her Honour accepted the respondents’ argument that the agreements of October 2016 made compliance with that pricing mechanism unnecessary for the protection of the appellant’s interests. There followed the discussion by the trial judge at [191] and [192] of the Judgment which I have set out earlier. [101] The trial judge went yet further, saying that the appellant “went beyond acting in its own interests and acted in the interest of AMPL in structuring and entering into the QCPL transactions and the [Security Deposit Deed]”.122 This, in her view, “was not part of the ordinary or legitimate aspects of the business of a terminal owner”.123 [102] Her Honour did not accept an argument for the respondents that the appellant had acted unconscionably by structuring the QCPL transactions so that there was only a relatively short period of time in which there was excess capacity, from the departure of QCPL, before the arrival of AMPL. It was said that the shortness of this period made it impossible for the capacity to be utilised by another miner. Her Honour noted the evidence that the appellant had offered the remaining users an increase on their AMT, and that only one of the respondents had shown interest. That respondent had asked for a substantial increase from 2020 until 2029, which was rejected by the appellant except for the period of two years preceding the arrival of AMPL.124 [103] Her Honour returned to the subject of the alternative courses, which were available to the appellant in structuring the transactions for the departure of QCPL, which, in her view, would have protected the appellant’s “own legitimate interests”.125 She said that the structure which was effected required “[m]ore effort and some sophistry”, and did not “document the bargain reached by Mr Freeman”.126 Referring to judgments in Australian Securities and Investments Commission v Kobelt (“Kobelt”),127 her Honour said that “the existence of an alternative means of achieving its ends without causing detriment to the respondents” was relevant. 119 Judgment [183]. 120 Judgment [183]. 121 Judgment [184]. 122 Judgment [193]. 123 Judgment [193] citing Keane J in Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 [2016] HCA 28 at [274]. 124 Judgment [194], [195]. 125 Judgment [196]. 126 Judgment [196]. 127 (2019) 267 CLR 1; [2019] HCA 18 at [43] per Kiefel CJ and Bell J; [98] per Gageler J. -- 25 of 59 -- 26 [104] Her Honour remarked that the appellant’s conduct was “deliberate, not just heedless or indifferent to the position of the remaining users”, which was evident from the timing and structure of the QCPL transactions.128 [105] Referring to s 22(1)(l), her Honour then considered whether the appellant had acted in good faith. Acknowledging that unconscionability under this provision required “an objective value judgment on behaviour”, her Honour said that it had been recognised that “the subjective state of mind of the alleged contravener whether actual or constructive is relevant in the broader sense”.129 In that way, her Honour saw relevance in what “the [appellant], QCPL, and Mr Freeman thought of the conduct sought to be impugned.”130 [106] The judge noted that the appellant had recognised a risk that its conduct might be successfully impugned in subsequent litigation, and had legal advice on its position before April 2016.131 The appellant was “aware of risks to its reputation and of litigation” and had "attempted to disguise the fact that its bargain with QCPL involved no more than fixing a price for QCPL’s departure, based on QCPL’s future obligations”.132 By the “convoluted terms of the [Security Deposit Agreement]”, the appellant was said to have “camouflage[d] the fact that, at its discretion, it could keep the whole $255 million payment.”133 [107] Her Honour inferred that QCPL’s state of mind, as to the commercial morality of socialisation, was similar to that of the appellant.134 QCPL had insisted on the Indemnity being included in the Termination Agreement. Her Honour appeared to have inferred from QCPL’s concern that QCPL had believed that it was doing something which was commercially immoral. [108] Her Honour considered that Mr Freeman had “spontaneously distanced himself from the conduct which the respondents seek to impugn” which was an indication to her of “some shame or repugnance at the conduct”.135 [109] Her Honour returned to her earlier findings that the appellant’s behaviour, in attempting to disguise or camouflage the true basis of its dealings with QCPL, involved “serious dishonesty”,136 saying that it had been designed “to prevent remaining users having a true appreciation of the QCPL transactions, and thus their legal rights”.137 [110] Her Honour’s conclusions, as to unconscionable conduct, were summarised in this passage: “[207] As explained at [172], [176] and [184] above there were several factors which made the respondents vulnerable to an exercise of 128 Judgment [197], citing Keane J Kobelt at [118], who referred to Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at 439 [161]. 129 Citing Australian Competition and Consumer Commission v Medibank Private Ltd (2018) 267 FCR 554; [2018] FCAFC 235 at [247] per Beach J. 130 Judgment [199] (emphasis added). 131 Judgment [200]. 132 Judgment [200]. 133 Judgment [200]. 134 Judgment [201]. 135 Judgment ]202]. 136 Judgment [203]. 137 Judgment [204]. -- 26 of 59 -- 27 contractual power by the [appellant]. Counsel for the second to fourth respondents characterised the result of these matters as “situational disadvantage and vulnerability” to the [appellant] within the meaning of the decided cases. I accept that. The [appellant] exercised contractual power to obtain a large financial reward. It deliberately chose to do so knowing that it would thereby disadvantage the respondents. It was not just acting in its own commercial interests as port owner; it was acting on instructions from, and in the interests of AMPL. There were alternatives available which would have enabled it to protect its own interests; advantage AMPL, and not disadvantage the respondents. It, QCPL and Mr Freeman recognised that its conduct was not within the boundaries of normal commercial behaviour. It attempted to disguise its behaviour in complex transactions. It attempted to include dishonest recitals in those transactions. It pleaded matters which were false in this proceeding and had Mr Wicks give false evidence in its case. In my view these matters establish unconscionable conduct as alleged by the respondents. They overwhelm the fact that the [appellant] was contractually entitled to act as it did.” Damages: the trial judge’s reasons [111] After quoting s 236(1) of the ACL, her Honour said that the Court’s task was to compare the position in which the respondents were in, with the position in which they would have been, had there been no contravention.138 The appellant had “socialised, or shared the burdens of the QCPL transactions, but not their benefits.”139 In her view, damages were to be calculated on the basis that the appellant “ought to have brought into account the money it received from QCPL.”140 Alternatively, her Honour said, damages could be assessed by “effectively putting the QCPL tonnes back into the denominator for the formulas for TIC and HCF and describing the extra that the respondents have paid as loss because of the unconscionable conduct.”141 In a footnote, her Honour said “[b]ecause the amount of $255 million is so close to being the present value of QCPL’s obligations under its user agreement between 1 July 2016 and 30 June 2022, damages calculated on this alternative basis are not very different from those calculated on the basis I adopt; they are slightly more.”142 Her Honour continued: “[211] Although it is a slightly more sophisticated approach, I think that the conduct in contravention should be regarded as charging pursuant to the user agreements without bringing into account the $255 million payment. If that is so, the basis for calculation of damages which I have adopted produces loss and damage suffered because of the conduct. [212] The respondents have suffered loss from 1 July 2017 and will continue to do so until 30 June 2022. The amount of 138 Judgment [208]-[209]. 139 Judgment [209]. 140 Judgment [209]. 141 Judgment [210]. 142 Judgment fn 91. -- 27 of 59 -- 28 $255 million was paid in respect of the period 1 July 2016 to 30 June 2022. To put the respondents in the position they would have been had the [appellant] shared the benefits of the QCPL transactions, as well as the burden of those transactions, a proportionate amount of the $255 million payment ought to be paid to the respondents as damages. Understandably calculations in relation to this were somewhat complex and were the subject of evidence. Except for one point, the economists Mr Houston and Professor Grey agreed as to what the amount of damages was.” The nature of unconscionability [112] Section 21(1) of the ACL provides that a person must not, in trade or commerce, in connection with the supply of services to a person, engage in conduct that is, in all of the circumstances, unconscionable. [113] By s 21(4) it is the stated intention of the Parliament that (relevantly): • the section is not limited by the unwritten law relating to unconscionable conduct; and that • in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of the terms of the contract, the manner in which and the extent to which the contract is carried out and is not limited to consideration of the circumstances relating to the formation of the contract.143 [114] Section 22(1) of the ACL prescribes a non-exhaustive list of considerations to which a Court may have regard for the purpose of determining whether a supplier has contravened s 21. [115] In Kobelt, the High Court considered the relevantly identical provisions of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act).144 Each of the five judgments described the necessary level of gravity of conduct for it to be unconscionable in this statutory sense. [116] Kiefel CJ and Bell J said that the term unconscionable, being undefined in the ASIC Act (and the ACL), “is to be understood as bearing its ordinary meaning.145 Their Honours said:146 “The proscription in s 12CB(1) is of conduct in connection with the supply of financial services that objectively answers the description of being against conscience. The values that inform the standard of conscience fixed by s 12CB(1) include those identified by Allsop CJ in Paciocco v Australia & New Zealand Banking Group Ltd: certainty in commercial transactions, honesty, the absence of trickery or sharp practice, fairness when dealing with customers, the faithful performance of bargains and promises freely made, and: 143 Section 21(4)(a), (c). 144 Section 12CB(1), (4) and s 12CC(1). 145 Kobelt at [14]. 146 Kobelt at [14]. -- 28 of 59 -- 29 “the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage”.” [117] Justice Gageler said that the function of a court exercising jurisdiction in a matter arising under this section is to recognise and administer the normative standard of conduct which the section itself marks out.147 In his view, it was significant that the Parliament had appropriated “the terminology of courts administering equity in the expression of the normative standard which the section prescribes”,148 signifying “the gravity of the conduct necessary to be found by a court in order to be satisfied of a breach of that standard”.149 He acknowledged that this statutory standard had a “potential application within a range of factual scenarios not all of which would be recognised in equity as giving rise to relief on the basis of unconscionable conduct”.150 But the appropriation of the terminology of equity and the expression of the normative standard, he said, did not authorise a court exercising jurisdiction under that section “to dilute the gravity of the equitable conception of unconscionable conduct so as to produce a form of equity-lite”.151 His Honour expressed regret for having described, in his judgment in Paciocco,152 the required conduct as involving “a high level of moral obloquy”. He explained that by that description, he meant to convey that “conduct proscribed by the section as unconscionable is conduct that is so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience”.153 [118] Justice Keane said: [118] The use of the word “unconscionable” in s 12CB – rather than terms such as “unjust”, “unfair” or “unreasonable” which are familiar in consumer protection legislation – reflects a deliberate legislative choice to proscribe a particular type of conduct. In its ordinary meaning, the term “unconscionable” requires an element of exploitation. The term imports the “high level of moral obloquy” associated with the victimisation of the vulnerable. As five members of this Court observed recently in Thorne v Kennedy, a finding of unconscionable conduct requires the unconscientious taking advantage of a special disadvantage, which has “been variously described as requiring ‘victimisation’, ‘unconscientious conduct’, or ‘exploitation’”. And in Kakavas v Crown Melbourne Ltd, this Court unanimously confirmed that “[h]eedlessness of, or indifference to, the best interests of the other party is not sufficient” to establish the “predatory state of mind” that must be shown. [119] The legislative choice of “unconscionability” as the key statutory concept, rather than less morally freighted terms such as “unjust”, “unfair” or “unreasonable”, confirms that the moral 147 Kobelt at [87]. 148 “ Kobelt at [88]. 149 Kobelt at [88]. 150 Kobelt at [89]. 151 Kobelt at [90]. 152 (2016) 258 CLR 525. 153 Kobelt at [91]-[92]. -- 29 of 59 -- 30 obloquy involved in the exploitation or victimisation that is characteristic of unconscionable conduct is also required for a finding of unconscionability under s 12CB. Section 12CB(4)(a) of the ASIC Act does not require a contrary conclusion. The direction in s 12CB(4)(a) means that the application of s 12CB(1) is not limited to conduct that has been held to be “unconscionable” under the general law, but it does not operate to give the term “unconscionable” a meaning different from its ordinary meaning. Adherence to the ordinary meaning of the term “unconscionable” is appropriate for two reasons rooted in the nature of the judicial function. First, the courts must give effect to what Parliament has enacted. Here, it must be acknowledged that the Parliament has deliberately chosen to use this expression as the focus of attention, and not a more open- textured or morally neutral expression that would be less certain in its scope. And secondly, the appellant did not propound a meaning for “unconscionable” different from its ordinary meaning; and so the respondent had no occasion or opportunity to meet such a contention.” (Footnotes omitted.) [119] Justices Nettle and Gordon said that the list of factors set out in s 12CC (the equivalent of s 22(1) of the ACL) “necessarily implies that the statutory conception of unconscionability is more broad-ranging than that of the unwritten law”, but that “[n]evertheless, the unwritten law has a significant part to play in ascribing meaning to the term “unconscionable” under s 12CB(1).”154 They extensively discussed the unwritten law of unconscionable conduct, which signified the gravity of the conduct which was required for unconscionability in the statutory sense. They said that under the unwritten law, unconscionable conduct does not require a finding of dishonesty, although it is not merely concerned with what is “fair” or “just”.155 [120] Justice Edelman described the background of the statutory proscription of unconscionable conduct as being “in equitable doctrine and the repeated responses by parliaments to that equitable doctrine.”156 He described the series of amendments of that statutory proscription as involving “continued efforts to require courts to take a less restrictive approach shorn from either of the equitable preconditions imposed in the 20th century, by which equity had raised the required bar of moral disapprobation.”157 His Honour said:158 “Like other open-textured criteria, such as “unfair” or “unjust”, there is no clear baseline moral standard for what constitutes “unconscionable” conduct within s 12CB of the ASIC Act. Nevertheless, the history of development of that statutory proscription demonstrates a clear legislative intention that the bar over which conduct will be unconscionable must be lower than that developed in 154 Kobelt at [144]. 155 Kobelt at [149] citing Commercial Bank of Amadio [1983] HCA 14; (1983) 151 CLR 447 at 478 per Deane J and Attorney-General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557; 223 ALR 346; [2005] NSWCA 261 at [121]. 156 Kobelt at [279]. 157 Kobelt at [295]. 158 Kobelt at [295]. -- 30 of 59 -- 31 equity even if the bar might not have been lowered to the “unreasonableness” and “unfairness” assessments in the various categories in 19th century equity.” [121] In the present case, the trial judge found that the appellant exploited a vulnerability of the respondents. More recently, in Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd,159 the Full Court of the Federal Court (Allsop CJ, Besanko and McKerracher JJ), in an analysis of Kobelt, observed that in only one of the judgments (that of Keane J) was there said to be a requirement, in every case, for “some form of pre-existing disability, vulnerability or disadvantage of which advantage was taken.”160 Nevertheless, as I will discuss, the judge’s error in finding this vulnerability is important for the outcome of this appeal. [122] Section 21(1) proscribes conduct that is in all the circumstances, unconscionable. As s 21(4)(c) illustrates, the circumstances will include the contractual context in which the conduct occurred, whether in the formation, enforcement or performance of that contract. Section 21 operates to require a standard of conduct, in a contractual context, which involves a fidelity to the bargain. In his judgment in the Full Court of the Federal Court in Paciocco & Anor v Australia and New Zealand Banking Group Ltd,161 Allsop CJ said: “The variety of considerations that may affect the assessment of unconscionability only reflects the variety and richness of commercial life. It should be emphasised, however, that faithfulness or fidelity to a bargain freely and fairly made should be seen as a central aspect of legal policy and commercial law. It binds commerce; it engenders trust; it is a core element of decency in commerce; and it gives life and content to the other considerations that attend the qualifications to it that focus on whether the bargain was free or fair in its making or enforcement.” Consideration of the appellant’s conduct: unconscionability? [123] As can be seen, there were many considerations which contributed to the trial judge’s ultimate conclusion of unconscionable conduct. However, the case which the judge upheld had two core elements. [124] The first of them was that the appellant had received $255 million, which was said to be referrable to the charges which would have been paid by QCPL for the six year period ending on 30 June 2022. Put another way, QCPL had paid that sum for the termination of its user agreement, under which, by then, QCPL’s liability had been confined to that period.162 [125] The second element was that the appellant had then insisted upon the performance by the other users of their agreements, by which the appellant would receive substantially the same sum. The other users were required to pay more, so that the appellant could be paid twice for the provision of the same service. 159 (2021) 388 ALR 577; [2021] FCAFC 40. 160 Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 388 ALR 577; [2021] FCAFC 40 at [78]. 161 (2015) 236 FCR 199 at 275; [2015] FCAFC 50 at [297]. 162 By the effect of the Deed of Novation. -- 31 of 59 -- 32 [126] It is convenient to discuss first the judge’s finding that the sum of $255 million was referable to QCPL’s obligations for the period from 1 July 2016 until 30 June 2022. That finding, in my respectful view, was inconsistent with the evidence of the negotiations by which that sum was agreed. [127] Those negotiations occurred in the context that QCPL had not used the Terminal since 2014, and that consequently, it was in breach of its user agreement. By cl 4.4 of the agreement, QCPL was obliged to use all reasonable endeavours to present its AMT through the Terminal each financial year. [128] QCPL had no need for the Terminal. It was unable to terminate unilaterally its agreement. In the absence of a breach by the appellant, QCPL could be released from its agreement only with the appellant’s concurrence. It was unremarkable, and indeed inevitable, that QCPL would be required by the appellant to pay a substantial consideration to be released from its contract. [129] Their negotiations proceeded upon the basis of a set of projections of the anticipated costs to QCPL of remaining bound by its user agreement, year by year, to 2028.163 The projections were presented by QCPL soon after the commencement of the negotiations, and were not challenged by the appellant at any stage. [130] The course of the negotiations, culminating in a consensus on the amount of $255 million, is clear from the evidence which I have discussed. QCPL’s position was that it should be permitted to depart at a price which was a substantial discount on the projected cost to it of remaining bound by its contract. QCPL pointed to the possibility of the appellant finding a new user, or an existing user or users, who would agree to take up all or some of QCPL’s tonnage. It pointed also to the possibility that existing users might be required to pay more, under their agreements, by “socialisation”. These possibilities were just that; at that time, the appellant could not have been certain about when, if at all, any of them would eventuate. The possibility of socialisation was subject to an uncertainty as to whether that course would be inconsistent with the express and implied terms of the user agreements, as the respondents subsequently argued in the arbitration. [131] Importantly, QCPL insisted that the parties would “share” the appellant’s loss from QCPL’s departure, measured over the entire duration of its user agreement. [132] It is also clear that whilst the parties did explore, briefly, the possibility of an agreed price varying according to whether the socialisation was effected, QCPL quickly and firmly rejected that proposal. QCPL’s position was that the possibility of socialisation should affect the price, without that possibility being given a particular value. [133] The amount of $255 million was agreed before the legal structure for the transaction was developed. That is evident, for example, from the PwC report. It was the Adani side which proposed that the agreed amount of $255 million would be paid under what became the Deed of Novation and the Termination Agreement. The trial judge considered that there was something of an evidentiary gap, about the dealings between the parties in the few months prior to the signing of these agreements. However, just what that evidence might have revealed, which could have mattered to an understanding of the transaction as ultimately agreed, was not explained. 163 See [49] of these reasons. -- 32 of 59 -- 33 [134] Clearly then the price to be paid by QCPL for its release was struck by July 2016, and it was not a price referable only to what would have been QCPL’s liability to 30 June 2022. [135] At [74] and [75], I have set out the trial judge’s reasoning in reaching her finding that the amount of $255 million was referable to the six year period to 30 June 2022. In my respectful opinion, that reasoning was erroneous. [136] It may be accepted that, as her Honour reasoned, the Termination Agreement took effect only after the operation of the Deed of Novation, so that what was terminated was a user agreement with a life until 30 June 2022. But as her Honour otherwise reasoned, it was necessary to take a broader view of the QCPL transaction, in order to identify the appellant’s commercial objectives and to assess whether its conduct was unconscionable. In substance, the sum of $255 million was the result of arm’s length negotiations of the price which QCPL was prepared to pay, and the appellant was prepared to accept, for QCPL to be relieved of a contract by which it was bound until 2028. [137] Her Honour saw significance in the fact that the amount of $255 million was “very close indeed” to an economist’s calculations which he made some years later for his evidence in the case of the present value of the amount which QCPL would have paid until 30 June 2022. However, that was not a basis for a finding that the appellant and QCPL had reached the figure of $255 million by reference to the present value of the charges for that period only, when the evidence of their negotiations demonstrated otherwise. [138] The agreed sum could be fairly described, in part, as compensating the appellant for the lost benefit of its contract. And the error by the trial judge in attributing all of the agreed consideration to this six year period, is not fatal to the respondents’ case. However the case was weaker when the error is identified. [139] I go then to the second core element, namely the appellant’s insistence of the respondents’ performance of their contracts. [140] In this case, there was no vitiating factor affecting the respondents’ user agreements. The respondents, each a large commercial entity, were bound by the terms of the user agreements, as interpreted by the arbitrator. [141] There were issues between the parties as to the effect of their contracts on the HCF, which were not referred to the arbitrator and which were resolved by declarations made by the judge and are challenged in this appeal. The respondents now accept, however, that according to their user agreements, the appellant was entitled to an HCF calculated by removing what had been QCPL’s tonnage. [142] By the respondents’ contracts, there was no impediment to the appellant agreeing with QCPL as it did. As the arbitrator held, “the individual User Agreements with Adani, though in similar form, entitle Adani to deal with individual Users in very different ways”, and “there is nothing in the User Agreements which limits or restricts the ability of Adani to agree upon an early termination of any other User Agreement to handle coal.” As he also observed, “the position the Users now find themselves in is the same as if the QCPL Agreement had expired by effluxion of time at the end of the previous Review Period.”164 164 Award paras 300, 302. -- 33 of 59 -- 34 [143] The consequence of QCPL being released from its user agreement was that a higher burden was placed on those who continued to use the facility. The operation of the user agreements that way did not create a burden upon the respondents, which they could not have anticipated when they entered into their user agreements. [144] The trial judge held that, in good conscience, the appellant should have taken other courses, so that that burden to the respondents could have been avoided. The judge queried why there had not been “a straightforward novation of the entire QCPL [User Agreement] to AMPL”, so that as at the Review Date, the aggregate AMT would have been unchanged. There are three things which must be said about that suggestion. [145] The first is that, notwithstanding that the appellant and AMPL are members of the same corporate group, they are distinct entities and with distinct interests. AMPL did not then have a coal mine, its proposed mine was the subject of a substantial public controversy and it had not been granted all necessary regulatory approvals. In those circumstances, it is not apparent that it would have been in the interests of AMPL to take over QCPL’s contracted tonnes from July 2017 or earlier. [146] Secondly, this would have required the appellant to mothball that part of the capacity of the Terminal, for a period of five to six years, to the potential disadvantage of another miner which might have had a real use to make of it for at some of that period. [147] Thirdly, this course would have required an agreement to be made with AMPL, in terms which would have been artificial. AMPL would have been entitled to use the Terminal, whilst having no means of doing so, unless and until it had a mine. [148] Another alternative course which was suggested by the trial judge was that the appellant could have simply accepted $255 million in consideration for the termination of the QCPL User Agreement. Under this “price for relinquishment”, her Honour said, the “socialisation” would have been apparent on the face of the documents, and there would have been no advantage to AMPL.165 However, had that become the agreed structure for QCPL’s departure, the respondents would have suffered the same damage of which they complained, and for which they were compensated. I will return to the relevance of her Honour’s findings as to the appellant’s conduct lacking transparency and involving attempts to disguise aspects of the QCPL transactions. [149] The first respondent pleaded that there was another alternative course which could have been taken by the appellant. It was alleged that the appellant could have reduced QCPL’s AMT pursuant to cl 10.2 of its user agreement, upon the ground that QCPL was not presenting at the Terminal its AMT for handling. Clause 10.3 of QCPL’s user agreement provided that if the AMT was so reduced, QCPL remained obliged to pay the relevant charges on its AMT (before reduction) unless and until the appellant provided that capacity to another Access Holder. The trial judge did not discuss this alternative. The first respondent’s point was without merit. Clause 10.2 permitted the reduction of the AMT only where there was one or more requests from others wishing to use the Terminal which the owner could not satisfy from “uncommitted terminal capacity”. The trial judge found (in response to another argument) that “there were indications that no other user wished to take up any extra capacity at 165 Judgment [144]. -- 34 of 59 -- 35 around this time”, and that it was because QCPL could not find anyone to take over its tonnage, it approached Adani.166 [150] There is another alternative, which although not discussed by the trial judge, might be mentioned. The damage of which the respondents complained would have been avoided, at least for the TIC and TPC calculations, if the appellant and QCPL had agreed to terminate the user agreement from a later date, and after the Review Date. However, the evidence of the negotiations with QCPL provided no indication that QCPL would have so agreed. QCPL was prepared to pay $255 million for an immediate termination of its user agreement, and with effect from 1 July 2016. [151] The trial judge viewed the case as one of the exploitation by one party to a contract of the vulnerability of the other(s). That vulnerability resulted from a number of circumstances, in her view. The appellant was a monopolistic supplier of its services: the users had no choice but to export their coal through this facility. The users were bound by long term contracts which gave very little scope for withdrawing from them. The fortunes of the users were in the hands of the owner and another user. They were exposed to the consequences of the appellant acting not only in its own commercial interests, but in the interests of a related company, AMPL. And their vulnerability was enhanced by the effective ownership of the Terminal, and the rights of the owner under their user agreements, having passed from a government owned corporation to an entity whose objects were entirely commercial. [152] From those circumstances, her Honour likened the case to Ipstar Australia v APS Satellite Pty Ltd,167 saying:168 “There is an analogy between [the respondents’] position and the position of SkyMesh in the Ipstar case. SkyMesh sold internet services for which Ipstar’s hardware was necessary. When Ipstar wished to increase the price of the services (as it was entitled to do in a contractual renegotiation), SkyMesh needed to agree with Ipstar as to price, or effectively start its business again, with a new supplier of hardware, at a cost of tens of millions of dollars.” [153] However, Ipstar did not have the likeness to the present case which her Honour perceived. The impugned conduct in that case occurred in the context of negotiations between the parties as to the price which SkyMesh would pay. In the present case, the price was already agreed, by the provisions for the review of charges according to the application of agreed formulae. Further, there were other aspects of Ipstar’s unconscionability. Ipstar had misleadingly concealed relevant information. [154] The user agreements, by their provisions for the review of these charges, made the respondents susceptible to the effects of commercial dealings in which they would not be participants. However that was simply the consequence of their agreements containing no provision by which one user could affect the duration of another user’s agreement. This was a position to which the users had agreed, by contracts which were unaffected by any vitiating factor. [155] The fact that the respondents had contracted not with the appellant, but with the Ports Corporation, was of no importance in the assessment of whether the appellant acted 166 Judgment [195]. 167 [2018] NSWCA 15. 168 Judgment [174]. -- 35 of 59 -- 36 unconscionably. The premise of her Honour’s reasoning in that respect seems to have been that the Ports Corporation, as the owner of a major piece of infrastructure and as a party to commercial contracts made with substantial commercial entities, would not have sought to secure the full benefit of its contract with a user who was in default of that user’s agreement and enforce the other user agreements according to their terms. [156] The relationship between the appellant and AMPL was unimportant to the question of whether the appellant acted unconscionably. The appellant was entitled to prefer the interests of AMPL, as well as its own interests, over the interests of the respondents. Its conduct was not made unconscionable by its transacting with QCPL on terms which were intended to accommodate the future needs of AMPL for the use of the Terminal. [157] The trial judge found that the appellant had attempted to disguise or camouflage the basis of its dealings with QCPL, by conduct which she said involved “serious dishonesty”. The appellant’s conduct, her Honour concluded, had been designed to prevent the remaining users having a “true appreciation of the QCPL transactions, and thus their legal rights.” [158] The “legal rights” to which her Honour referred were not described. As the respondents had to accept, they had no contractual rights for which they could have obtained relief against the appellant. Their only legal rights could have been their rights of action for what the judge held was the appellant’s contravention of s 21. [159] This was not a case, such as Ipstar, where a benefit was obtained, unconscionably, by the deception of an innocent party. The detriment for which the respondents sought to be compensated in this case, was not caused, or contributed to, by what was found to have been the appellant’s deception. Had the respondents always known everything which was known by the conclusion of the trial, the respondents would have been no better off. [160] A dishonest cover up of conduct might evidence, in some cases, a party’s subjective belief as to the propriety or otherwise of its conduct. However the conduct must be assessed objectively. If, on an objective view, the conduct which caused the detriment of which complaint is made, was not unconscionable, it would not be made so by a dishonest attempt to disguise it. [161] The point is most starkly illustrated by her Honour’s reliance upon what she found was the falsity of the testimony of Mr Wicks. If the appellant’s conduct had not been unconscionable before Mr Wicks testified, a contravention of s 21 did not occur as his evidence was given. [162] Further, there was evidence which indicated that there had not been such a sustained cover up as the trial judge understood had occurred. An affidavit by Mr Mitchell, the solicitor for the second, third and fourth respondents, contained extracts from the published financial reports of Adani Enterprises Limited and the appellant, for the year ended 31 March 2017. The report by Adani Enterprises, which was published in May 2017, disclosed and described the effect of the Deed of Novation and the Security Deposit Agreement. The report by the appellant, which was published in July 2017, described the effect of the Termination Agreement with QCPL, the Deed of Novation and the Security Deposit Agreement. From those reports, Mr Mitchell was able to swear to his belief, in October 2017, as to the aspects of those transactions -- 36 of 59 -- 37 which became his clients’ unconscionability case. From the fact that these details were published in the financial reports, it may be inferred that the Adani companies anticipated that they would be so published, when these agreements were signed in 2016. The trial judge did not discuss this evidence. [163] The trial judge was persuaded by arguments for the respondents that to require the respondents to perform their contracts, would provide the appellant with a windfall. These arguments appealed to notions of unjust enrichment, as reflected in her Honour’s remark that the payment of $255 million was “at the expense of the users”.169 As I have said, there were two core elements to the case which the judge accepted. The first was that the appellant had successfully negotiated agreements by which it received $255 million from QCPL. The second was that the appellant had insisted upon performance by the other users of their agreements, with the consequence that the appellant would be paid twice for the provision of the same service. [164] The appellant enjoyed that position by the force of its contracts, and not by any deception, trickery or intimidation. It was under no contractual obligation, or any other obligation under the general law, to effectively elect between the benefits the QCPL contract and the benefits of the respondents’ contracts. It was entitled to enforce each contract, or in the case of the QCPL contract, to negotiate a substantial payment by a defaulting party for its release. [165] How then, it may be asked, was it “offensive to conscience” for it to enjoy the benefit of both sets of contracts? More particularly, how was it offensive to conscience for it to retain the benefit of its contract with QCPL, rather than passing that on to the respondents and other remaining users? [166] It is evident from the terms of the user agreements that the broad objective of the terms for the calculation of the TIC, TPC and HCF was to provide the owner, to an extent which was possible and practicable, with an income which, aggregated with like payments made by other users, would provide a certain level of return on the owner’s capital investment and a reimbursement of the owner’s fixed handling charges as paid to the operator. [167] However the provisions for the quantification of these charges were an imperfect means of achieving that objective. The TIC and the TPC were to be reviewed at five yearly intervals, and the HCF at yearly intervals. The charges might be fixed at a review date when the Terminal was operating with a substantial amount of unused capacity. If, well before the following review date, that capacity came to be used, the owner would benefit from the price per tonne having been fixed when it was. Conversely, if a substantial unused capacity arose soon after a review date, it would be the owner which bore the burden. They were risks which the parties accepted by the terms of their contracts. [168] What happened here was that this risk to the users eventuated, and not by the appellant’s contrivance or breach of a legal obligation. [169] Like the trial judge, I will record that I have considered all of the paragraphs of s 22(1). It is unnecessary to repeat my reasons by cross referencing them to parts of s 22(1). However, something should be said about paragraph (b) of s 22(1), which is 169 Judgment [192]. -- 37 of 59 -- 38 “whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier”. [170] The “conditions” of which the respondents’ compliance, on their case, caused them damage, were the contractual terms for the calculation of these charges. It may be doubted whether “conditions” in this paragraph could include “the terms and conditions of the contract”, which are the subject of paragraphs (j) and (k). The customer here (the user) was not required to comply with the conditions “as a result of conduct engaged in by the supplier”. It was required to perform the conditions as terms of its contract, as it had contracted with the Ports Corporation. [171] I have discussed earlier the judgments in Kobelt, and the various descriptions of unconscionability in this statutory sense which were there provided. A common view in the judgments was that the choice of the word “unconscionable” signifies the gravity of misconduct which constitutes a contravention of s 21(1). The word “unconscionable” is not synonymous with “unjust”, “unfair” or “unreasonable”. I should add, however, that I would not characterise the appellant’s conduct even in those terms. [172] In my conclusion, the appellant’s conduct cannot be characterised as conduct which, in the words of Gageler J, “is so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience.” 170 The trial judge was in error in finding that the appellant’s conduct was unconscionable, and the respondents should not have been given any relief upon this ground. [173] Because of that conclusion, I will discuss only briefly the ground of appeal which complains of a denial of procedural fairness. Denial of procedural fairness? [174] The first of the appellant’s complaints of this kind is that the judge found that AMPL aimed to become a coal miner, a user of the Terminal and that it intended “to operate at the same level of the market as the respondents”,171 when those facts were not pleaded. After the trial had concluded, and the judgment was reserved, the judge convened a further hearing on 20 May 2020. Her Honour then raised with the parties a submission, which had been made by the second, third and fourth respondents, that the appellant had acted in the interests of AMPL, and beyond the appellant’s self interest. Her Honour then said that although, in her view, “it’s quite a significant point in favour of unconscionability”,172 she could not see that it had been pleaded. This issue resulted in an “appendix” to the reasons for judgment, in which the judge discussed whether the point had been pleaded, and in which her Honour concluded that it had been pleaded in the Rejoinder.173 At the same time, she accepted that it was not pleaded that AMPL was or would become a competitor of the respondents, so that, her Honour recorded, in making her findings about unconscionability she had “respected this distinction and proceeded on the basis that there is no pleading or evidence that AMPL is or will be a competitor of the respondent.”174 However, that 170 Kobelt at [92]. 171 Judgment [193]. 172 Transcript 1-3. 173 Appendix [13]. 174 Appendix [14]. -- 38 of 59 -- 39 distinction may not have been observed in her Honour’s finding that AMPL intended to operate at the same level of the market as the respondents, a matter which she found had increased the vulnerability of the users.175 [175] A related complaint is that the judge was wrong to hold that the second, third and fourth respondents had pleaded that the appellant was acting in the interest of AMPL. That complaint cannot be accepted, having regard to the terms of paragraph 39A of the Rejoinder and I agree with the judge’s ruling on that point. That fact was not pleaded by the first respondent. However it was a live issue on the pleading of the other respondents, and there was no injustice in treating it as a plea which was relevant to the first respondent’s case. [176] The next complaint is that the trial judge denied the appellant procedural fairness in considering, and then finding,176 an attempt to disguise or camouflage its conduct in the QCPL transactions, where those allegations were not pleaded. The parties each presented written submissions before the trial. In its opening submissions, in reply to the respondents’ submissions on the question of unconscionability, the appellant itemised the pleaded allegations, and then the unpleaded allegations, which were the subject of the respondents’ opening submissions. Most notably, the appellant pointed to the submission that the QCPL transactions were “artificial and appear to have been designed to avoid scrutiny or challenge” and were “manufactured”. Counsel for the appellant said that the judge should ignore such unpleaded allegations. However, no application was made by the respondents to amend their pleadings accordingly. In my respectful opinion, the trial judge ought to have ruled upon that objection at the commencement of the trial. An allegation of misconduct, of the nature of unconscionable conduct, was one which required a pleading in strict compliance with the pleading rules. That case should have been pleaded, and the judge was incorrect to consider it. [177] A further complaint is that the trial judge denied the appellant procedural fairness in considering, and then finding,177 that Mr Freeman and QCPL held views about the morality or appropriateness of the QCPL transactions, when there was no evidence of those subjective views and the allegations were not pleaded. [178] As for Mr Freeman, no such allegation was put to him in cross-examination. As for QCPL, her Honour inferred that its state of mind, as to the commercial morality of “socialisation”, was similar to that of the appellant.178 The apparent basis for this inference was QCPL’s insistence upon the Indemnity being included in its Termination Agreement. In my opinion, that inference ought not to have been drawn. QCPL’s insistence upon the Indemnity evidenced a concern that other users would make claims, potentially in large sums, against it. It was not proof of a guilty mind. Moreover there had been no witness from QCPL or Rio Tinto, to whom such an allegation could have been put. [179] The remaining complaint, under this ground of appeal, is that the trial judge denied the appellant procedural fairness in considering, and finding, that the appellant “[had] Mr Wicks give false evidence …”.179 This was said by the trial judge in her discussion of an email of 15 July 2016, from Mr Freeman to an employee of Rio 175 Judgment [184]. 176 Judgment [207]. 177 Judgment [207], [201] and [202]. 178 Judgment [201]. 179 Judgment [121]. -- 39 of 59 -- 40 Tinto. Attached to the email was a draft letter to be sent by the appellant to QCPL, in the form of a letter of demand for credit support pursuant to cl 24.2 of the user agreement. The judge found that there was no genuine concern as to QCPL’s creditworthiness and that the extent of its credit support was not a reason for the QCPL transactions. Those findings can be accepted. However, her Honour went on to find that the email was clearly an attempt to document an apparent reason for the QCPL transactions which did not exist. This was a falsity which, it was further found, infected the appellant’s instructions for its pleadings in the case and resulted in Mr Wicks giving false evidence. [180] I have discussed the irrelevance of Mr Wicks giving false testimony, as an indication that the appellant’s conduct, in 2016-2017, had been unconscionable. I have also discussed why the respondents’ allegations of deception and disguise are ultimately inconsequential. This confirms my impression that, with respect, her Honour’s characterisation of the appellant’s relevant conduct as unconscionable was unduly influenced by her disapproval of Mr Wicks as a witness. Damages for unconscionable conduct: consideration [181] Had I agreed with the trial judge’s conclusion that the appellant contravened s 21, I would have disagreed with her Honour’s assessment of damages for that contravention. [182] In assessing damages, her Honour said that “the conduct in contravention should be regarded as charging pursuant to the user agreements without bringing into account the $255 million payment”.180 Her Honour said (again) at this point that the amount of $255 million was paid in respect of the period from 1 July 2016 to 30 June 2022.181 She said that in order to put the respondents in the position they would have been had “the [appellant] shared the benefits of the QCPL transactions”,182 a “proportionate amount of the $255 million payment ought to be paid to the respondents as damages.”183 [183] I have explained why I disagree with her Honour’s characterisation of the sum of $255 million as being referable only to that six year period. However, the error by her Honour in that respect was not of itself fatal to the respondent’s case. To an extent, the $255 million was to compensate the appellant for the loss of the benefit of its contract with QCPL in that period. However, to a substantial extent, it was also to compensate for the lost benefit of the contract beyond that date. [184] According to the judge’s reasoning, apart from that error, the respondents would be compensated by being placed in the position they would have enjoyed had the appellant passed on such part of the $255 million which could be attributed to that six year period. [185] A rational apportionment of the $255 million to the six year period was provided by the PwC Report of June 2016. That report attributed approximately $118 million to the six year period. [186] The trial judge accepted evidence to the effect that the present value of QCPL’s obligations under its user agreement, between 1 July 2016 and 30 June 2022 was 180 Judgment [211]. 181 Judgment [212]. 182 Judgment [212]. 183 Judgment [212]. -- 40 of 59 -- 41 $266.5 million.184 However, consistently with her Honour’s reasoning, that would not have been an appropriate amount from which to assess the damages for the appellant’s contravention. This was because, on her Honour’s reasoning, the appellant’s contravention was in not passing on to the remaining users the fruits of its negotiations with QCPL. [187] Her Honour discussed a point of difference between two economists who gave evidence, namely Mr Houston, who was called in the respondent’s case, and Professor Grey, who was called in the appellant’s case. The point related to an amount of approximately $41.9 million, which was the TIC for the 2017 financial year, which was lost to the appellant by the departure of QCPL from an effective date of 1 July 2016. Because the remaining users were not affected until the commencement of the 2018 financial year, Professor Grey considered that this amount should be excluded from the calculation of damages. Her Honour noted that this point was relevant, according to Professor Grey’s analysis, even on the basis, as he suggested was appropriate, that the damages were assessed from a starting point of $117 million, rather than $255 million.185 Her Honour rejected Professor Grey’s opinion on the point. [188] In the appellant’s challenge to the assessment of damages, it is submitted that the respondents suffered no loss at all from the conduct which was alleged, so that they should not have been awarded any damages. The argument is that the appellant could have transacted with QCPL upon the alternative basis suggested by the trial judge, under which the appellant would have been paid $255 million simply for its agreement to the termination of the QCPL contract. In that event, the remaining users would have been no better off. Consequently, it is said, by dealing with QCPL as the appellant did, the appellant caused no loss to the remaining users. [189] That argument could not be accepted, because it misstates the conduct which the judge found was unconscionable. The judge’s conclusion was that the conduct in contravention should be regarded as charging pursuant to the user agreements without bringing into account the $255 million payment. If that finding stood, the remaining users were worse off for not receiving their shares of that payment. [190] An alternative argument for the appellant is that only an amount of $50 million should have been used as the starting point in the calculation of damages. The submission is that this was a value attributed to “socialisation” in the appellant’s negotiations with QCPL. As I have discussed, the appellant at one stage suggested that the amount to be paid by QCPL should vary according to whether socialisation was effected, and more particularly, the appellant suggested that the amount which QCPL agreed to pay be increased by $50 million in the event that socialisation was not effected. However, as I have discussed, that proposal was promptly and firmly rejected by QCPL. That piece of evidence provided no rational basis for the assessment of the respondents’ damages. The primary judge was correct in rejecting this argument.186 [191] However, I would accept the appellant’s other arguments in their challenge to the assessment of damages. One of them has been discussed already, namely that some of the $255 million was attributable to a period beyond 30 June 2022. Secondly, it is argued that the judge was wrong to reject the analysis of Professor Grey, on the point 184 Judgment fn 45, apparently referring to the Houston Report [112]. 185 Judgment [213]; fn 92. 186 Judgment [217]. -- 41 of 59 -- 42 to which I have referred.187 He said that the charges which were lost to the appellant by the departure of QCPL, before the “socialisation” took effect, should be excluded. I respectfully disagree with the judge who said that she could see no logic in Professor Grey’s point. [192] Consistently with her Honour’s reasoning, the appellant, in good conscience, should have passed on to the remaining users such part of the $255 million which was fairly attributable to the period in which the remaining users had to pay higher charges because of QCPL’s departure. Consequently, the starting point in the assessment of damages ought to have been $118 million (as per the PwC report), reduced by a sum which fairly represented a share of QCPL’s payments for any period prior to 30 June 2017. [193] Consequently, had I upheld the judge’s conclusion as to unconscionability, I would have varied the damages as follows. Consistently with Professor Grey’s evidence, I would have deducted an amount of $41.9 million from $118 million, resulting in an amount of $76.1 million as the sum which ought to have been passed on to the remaining users. This means that the respective awards in favour of the respondents would be commensurately reduced. The first respondent’s award would have been $11.309 million, the second respondent’s award ought to have been $7.549 million, the third respondent’s award would have been $9.464 million, and the fourth respondent’s award would have been $3.547 million. The calculation of handling charges [194] The user agreements provide for two types of handling charges. One is the HCF, and the other is the “HCV” (“Handling Charge – variable”). By cl 5.2 of the agreements, the user must pay the HCF and HCV, as determined in accordance with cl 7, for each tonne of the user’s coal handled through the Terminal in a financial year. [195] Subject to the issue I am about to discuss, the users are to pay handling charges to the appellant which, in aggregate, will reimburse the appellant for the handling charges which it pays to the operator. The amounts payable by the appellant to the operator relevantly comprise payments for the operator’s fixed costs (OFC) and for its variable costs (OVC). [196] At [27]-[28], I have set out clauses 7.2 and 7.3 of the user agreements. They require the owner to advise the user, as soon as practicable after consulting with the Operator, of the HCF and HCV which are to be paid by the user during the next financial year. By cl 7.5, as soon as practicable after the end of each financial year, there is an annual reconciliation of these charges by which they are adjusted to accord with the actual costs which were payable by the appellant to the Operator, and the actual volumes of coal handled for that user and for all access holders during that year. [197] The controversy concerns the interpretation and application of cl 7.6, which is as follows: “7.6 Determination of OFC and OVC (a) While the Operator is either: (i) the Operator existing as at the Execution Date; or 187 See [187] of these reasons. -- 42 of 59 -- 43 (ii) an Operator owned and/or controlled by at least sixty per cent (60%) of [the users] by tonnage, then, Clauses 7.2(b) and 7.3(b) will apply. (b) Whilst Clause 7.6(a) does not apply, then Clauses 7.2(b) and 7.3(b) will apply, provided that PCQ must demonstrate that the OFC and the OVC as agreed between PCQ and the Operator represent a reasonable charge having regard to the efficient operation of the Terminal.” [198] The issue arose when the appellant advised the respondents of their handling charges ahead of the 2018 financial year. The Operator was then APO, which was neither the operator existing at the execution date of any of the user agreements, nor an entity owned or controlled by at least 60 per cent of the access holders. Therefore by cl 7.6(a), cl 7.2(b) and cl 7.3(b) were not to apply, except if the proviso in cl 7.6(b) was satisfied. The respondents disputed that the proviso had been satisfied. By cl 6.3 of the user agreements, if the user disputes the quantum of an invoice from the owner, the user must pay the whole of the undisputed part of the invoice and 50 per cent of the disputed portion, pending a resolution of that dispute. The respondents withheld amounts constituting 50 per cent of all of the handling charges invoiced by the appellant, and they have withheld, or threatened to withhold, the same percentage for each year since. The amounts withheld totalled more than $30 million over the 2018 and 2019 years. [199] The respondents’ stance was that the appellant had failed to demonstrate the reasonableness of the operator’s chargers having regard to the efficient operation of the Terminal, with the result that they need pay nothing for the costs of operating the Terminal. [200] The trial judge agreed, and made this declaration: “Declare that the [appellant] has not demonstrated that the OFC and OVC agreed between it and the operator in the financial years commencing 1 July 2017 and 1 July 2018 represent reasonable charges having regard to the efficient operation of the Terminal in accordance with cl 7.6(b) of the user agreements between the [appellant] and the respondents.” [201] There was no finding that the OFC or the OVC, or any element of them, was an unreasonable charge. Indeed the judge found, that in the way that the Terminal was being operated, these were reasonable charges.188 [202] Further, there was no finding that, in any respect, the way in which the Terminal was being operated was inefficient. The judge said that the operation may have been, or may not have been, efficient.189 [203] The reason for the declaration made by the judge was that, in her conclusion, the appellant had failed to prove that the way in which the Terminal was being operated was efficient. This was not because of any evidence tendered by the respondents. It was because of what her Honour saw as an evidentiary gap in the appellant’s case. 188 Judgment [303]. 189 Judgment [303]. -- 43 of 59 -- 44 She reasoned that because it was “entirely possible” that “the terminal’s operational processes are themselves inefficient due to its design, [setup], age, or any number of other factors”,190 the appellant had failed to demonstrate the reasonableness of the operator’s charges. The operators’ agreements [204] When the respondents entered into their user agreements, the operator was APB. It was a related entity of Glencore Coal Queensland Pty Ltd, which, from 1984 to 2005, had been the only user of the Terminal.191 When the respondents became users, APB had an Operation and Maintenance Contract with the Ports Corporation (the 2000 OMC). The 2000 OMC was for an initial term of 10 years from July 2000, with options to extend for periods totalling up to a further 10 years.192 The options were dependent upon APB’s related entity remaining a user of the Terminal for the period of the extension.193 The 2000 OMC provided that no person, who was not a related body corporate of a user, could acquire a shareholding or beneficial interest in the operator without the owner’s approval.194 [205] The 2000 OMC was extended until 30 June 2020. When the appellant became the owner of the Terminal, in June 2011, it replaced the Ports Corporation under the 2000 OMC and APB continued as the operator. [206] In July 2015, the appellant entered into another Operation and Maintenance Contract for the Terminal, under which a related entity, APO, would be the operator (the 2015 OMC). However, this OMC did not have an immediate effect, and APB continued as the operator. [207] In October 2016, APO acquired the shares in APB and at about the same time, the 2015 OMC took effect. APO became the operator and it then engaged APB as its subcontractor. The effect of these dealings was that APB continued to provide the same services as it had provided as the operator under the 2000 OMC. The 2015 OMC contained relevantly the same terms as those of the 2000 OMC. [208] By cl 28.1 of the 2000 OMC or cl 27.1 of the 2015 OMC, either party might propose any “Enhancement” of the Terminal. The word “Enhancement” was defined to mean: “(a) the construction, installation or erection of new buildings, plant equipment, facilities or other things at or for the Terminal; (b) the alteration or renovation of existing buildings, plant, equipment, facilities or other things at or for the Terminal; (c) the provision of any new or modified technology; or (d) the acquisition of new land intended to form part of the Terminal. for the purpose of increasing the Nominal Throughput Capacity or for the purpose of enhancing the efficiency, Environmental performance, 190 Judgment [302]. 191 Judgment [2]. 192 Clause 6.2(b)(i). 193 Clause 6.2(b)(ii). 194 Clause 39.2. -- 44 of 59 -- 45 or economy of the operation, safety or maintenance of the Terminal or the performance of the Services.”195 Importantly, it is the owner which is to carry out any Enhancement.196 [209] By cl 10.2 of each OMC, the operator was bound to ensure that the Terminal was maintained and operated so as to achieve “Optimum reliability and efficiency of the Terminal”,197 and to keep and maintain the Terminal “in good and substantial repair and condition”.198 The word “Optimum” was defined as the “achievement, as far as practicable, of the best and most cost-effective outcome,”199 taking into account, amongst other considerations, in the case of competing interests of users and persons other than users, fairness and the efficiency and economy of the Coal Transport Chain as a whole. [210] Anything which was required of APB as the operator under the 2000 OMC, was required of APO under the 2015 OMC, and, in turn, was required of APB under its sub-contract. There was no finding that in any respect, APO’s performance of its OMC had fallen short of APB’s performance of the 2000 OMC. Nor was there a finding that, in any respect, the operation of the Terminal under the 2000 OMC had been inefficient. [211] The two OMCs contained relevantly identical remuneration provisions. Each expressed the intention that the rates to be paid to the operator, over an operating year, would reimburse the operator for its costs, and would include an operator’s margin of 10 per cent or such other margin as the owner and operator might agree.200 However the user agreements limited the operator’s margin, for which reimbursement could be sought by the owner from the users, to 10 per cent.201 The respondents’ cases at the trial [212] Before discussing the evidence, it is necessary to explain the ways in which the respondents’ challenges to their handling charges were pleaded. [213] The appellant’s pleading addressed a particular interpretation of cl 7.6(b), which, as appears from the absence of any consideration of the point by the trial judge, was apparently not argued at the trial. This was an interpretation of the proviso by which it would be satisfied only if the respondents were themselves “subjectively satisfied” that the OFC and OVC were reasonable charges. [214] The appellant’s pleading sought a further declaration, which was that certain amounts202 were reasonable charges having regard to the efficient operation of the Terminal, for the 2018 financial year. The respondents’ pleaded case in answer to that claim was as follows. [215] Each of the respondents pleaded a point which is now the subject of the Notice of Contention, which is that upon the proper interpretation of cl 7.2 of the user 195 Clause 2.1 of each OMC. 196 Clause 28.1(b) of the 2000 OMC; Clause 27.1(b) of the 2015 OMC. 197 Clause 10.2(b)(i). 198 Clause 10.2(e). 199 Clause 2.1 of each OMC. 200 Schedule 5 of each OMC. 201 Definition of “Operator’s Margin” in Schedule 2 of the standard user agreement. 202 $60,339,094 for the OFC and $8,954,229 for the OVC. -- 45 of 59 -- 46 agreements, the “total costs payable by [the owner] to the operator”, in the definition of OFC, excludes any amount for which the owner has been indemnified. The respondents pleaded that the appellant had been indemnified by the payments which it received from QCPL. [216] Each of the respondents pleaded, in effect, that the appellant had not presented material, in support of its claims for handling charges, which demonstrated that the operator’s charges were reasonable having regard to the efficient operation of the Terminal. The respondents alleged that the material which was provided to them by the appellant, which included two reports of PwC respectively addressing the 2018 and 2019 claims, fell short of proving the reasonableness of the charges. There was no specific plea that the Terminal had been operated inefficiently. [217] However, in the first respondent’s pleading,203 it was alleged that the PwC Report for the claim for the 2018 financial year was insufficient, because (amongst other reasons) “the review scope [of the Report] was limited in that it did not include a detailed bottom-up technical efficiency and effectiveness review of the operator’s operational policies, business processes, work practices or equipment (e.g. labour force structure, salary/wage levels, maintenance strategy, etc) …”.204 (That plea was evidently derived by a disclaimer, in identical words, in the PwC report itself.) [218] The first respondent counterclaimed for declarations that: (a) the appellant had not demonstrated that the OFC and OVC for the 2018 and 2019 financial years represented a reasonable charge having regard to the efficient operation of the Terminal; (b) the appellant had not demonstrated that the sum claimed by it pursuant to cl 7.5 in respect of the OFC and OVC for the 2017 financial year was based upon a reasonable charge having regard to the efficient operation of the Terminal. [219] The first respondent’s pleading did not suggest an amount that would be a reasonable charge. Apart from its allegation that a “bottom up analysis”, had not been done by PwC, it pleaded nothing about the efficiency of the operation of the Terminal. [220] The other respondents (“the QCoal Respondents”) pleaded a letter which they had written to the appellant, on 24 July 2017, in response to the appellant’s invoices for the charges for the 2018 financial year. They pleaded, as they had written, that the appellant should have provided detailed information, which included a detailed break down of each cost component comprising the OFC, a similar break down for each cost component comprising the OVC, information as to the operator’s margin and “[v]erifiable evidence demonstrating that the OFC and OVC as agreed between [the appellant] and the operator represent a reasonable charge having regard to the efficient operation of the Terminal.”205 They pleaded that the PwC reports were inadequate in several respects, one being that the reports did not “establish that the Operator’s operational policies, business processes, work practices or equipment, including its labour force structure, salary and wage levels, and maintenance strategy, are technically efficient, or that despite changes to the cost of providing these services and undertaking these tasks, they remain technically efficient …”.206 203 The First Respondent’s Second Further Amended Defence and Counterclaim dated 17 June 2020. 204 Paragraph 40(c)(ii) of that pleading. 205 Paragraph 50(b)(iii), (iv), (v) and (vi) of the Second to Fourth Respondents’ Second Further Amended Defence and Counterclaim, dated 17 February 2020. 206 Paragraph 58(b)(iii) and paragraph 62J(b)(i) of the pleading. -- 46 of 59 -- 47 [221] The QCoal respondents pleaded a specific non-admission “that an actual OFC of $58,668,000.00 would be reasonable having regard to the efficient operation of the Terminal, and thus in fact the OFC.”207 [222] They counterclaimed for declaratory relief in the same terms as claimed by the first respondent, and claimed a further order that the appellant refund to them “any difference between the HCF, calculated using an OFC that has been demonstrated to be reasonable having regard to the efficient operation of the Terminal, and the HCF in fact paid by [them] for the [2018 and 2019] financial years.” [223] The case of all respondents was that the proviso was unsatisfied, not because the operation of the Terminal was inefficient, but because the appellant had not demonstrated otherwise. [224] The absence of any pleaded criticism of the operation of the Terminal is remarkable. The respondents, of course, had not themselves operated the Terminal. However their use of the Terminal well pre-dated the arrival of the Adani Group in 2011. [225] Further, the user agreements established a regime under which they were able to participate in a consideration of the efficiency of the Terminal’s operations. Clause 29 of the user agreements provided for a User Committee, constituted by a representative of each of the owner, the operator and each user.208 By cl 29.2, the User Committee was established for the following purposes: “(a) to provide a forum for discussion between all participants on matters relating to the operation and performance of the Terminal, including (without limitation) any factors relating to any participant which may impact on the future performance or efficiency of the Terminal; (b) to enable discussion between all participants on current and planned Terminal facilities, including all proposals for any enhancement of the Terminal; (c) to provide a forum for discussion between all participants on matters relating to Coal Transport Chain efficiencies and co- ordination; and (d) to discuss and comment on matters relating to the Terminal Regulations, including (without limitation) any proposed changes to the Terminal Regulations.” By cl 29.3, the User Committee was to meet at the least on a quarterly basis, and by cl 29.5, the owner had to cause the operator to provide appropriate support to the User Committee, including the provision of any relevant operational reports, as the Committee might reasonably request the operator to provide from time to time. The evidence about handling charges [226] Three witnesses testified in the appellant’s case about the operator’s charges. One was Mr Fenton, the author of the PwC reports. Another was Mr Poulton, a chartered 207 Paragraph 6(aa)(i) of the Counterclaim. 208 And any Access Seeker, meaning the party seeking access under a user agreement. -- 47 of 59 -- 48 accountant who was employed from 2012 until 2018 by APB as the Commercial Manager in relation to the operation of the Terminal, and from October 2018, was employed by the appellant as its Financial Controller. The third witness was Mr Freeman (whose evidence in other respects was discussed earlier for the unconscionability case). [227] PwC was engaged to provide a report in April 2017, in anticipation that users, or some of them, would challenge the reasonableness of the amounts paid to the operator. The appellant engaged PwC to undertake a review of the proposed operator charges for the 2018 financial year, and to report on the reasonableness of them having regard to the efficient operation of the Terminal. [228] The trial judge was critical of Mr Fenton’s initial response to this retainer, which her Honour thought introduced a gloss upon it.209 Mr Fenton wrote that his assistance was being sought on “whether the proposed FY 2018 operations charges for T1 are consistent with the requirements of clause 7.6(b) of the user agreement”. Although the point is not important for my conclusion, I have to say that I do not discern the gloss to which her Honour referred. Her Honour was also critical of Mr Fenton’s reports, both for the 2018 financial year and for the 2019 year, being provided later than the time which he had indicated, although the significance of that was not explained. [229] Mr Fenton’s methodology was as follows. He assumed that the budgets for the operating costs for the years 2014-2017 were reasonable having regard to the efficient operation of the Terminal. He then compared the budgets for the 2018 and 2019 financial years with those budgets, and compared the actual costs in those earlier years with the 2018 and 2019 budgets. In his second report he included the actual costs of the 2018 year as an additional comparator.210 He looked at particular items for which the cost had increased in the 2018 and 2019 budgets from their cost in the previous year, and recorded the appellant’s explanation for those increases. He compared the 2018 and 2019 budgets with the operating costs, as far as they were known, for another coal handling terminal, at Dalrymple Bay.211 [230] As her Honour recognised, the comparisons in the reports showed that the budgeted OFC and OVC for the 2018 and 2019 financial years were “not greatly different from those in the years 2014-2017”.212 She said that there was more difference shown in a comparison in between those budgets and the actual spend in 2014-2017.213 [231] Her Honour was critical of Mr Fenton’s analysis, in that it simply compared total numbers, either budgeted or actual, against the 2018 and 2019 budgets.214 She saw another limitation in his analysis from his assumption that the budgets and charges in the 2014-2017 period were reasonable charges having regard to the efficient operation of the Terminal.215 She was also critical of his reports for having relied upon evidence which was “essentially hearsay from employees of the operator” which Mr Fenton had not checked or analysed in any critical way.216 And her Honour saw no value in 209 Judgment [258]. 210 Judgment [270]. 211 Judgment [270]. 212 Judgment [273]. 213 Judgment [273]. 214 Judgment [274]. 215 Judgment [275]. 216 Judgment [276]. -- 48 of 59 -- 49 the comparison with the Dalrymple Bay coal terminal, which she said differed in many respects from this Terminal.217 [232] Mr Poulton was responsible for preparing the operator’s budgets for the Terminal. From October 2016 until October 2018, he reported to Mr Freeman, who was the CEO of both APO and APB.218 Mr Poulton gave evidence that APB continued to provide the same services, and perform the same functions, after its shares were acquired by APO. Her Honour remarked that Mr Poulton’s employment had “straddled the transition from the original operator to the Adani operator”, as had the employment of the production manager and the maintenance manager at the Terminal.219 She noted that there was no challenge to Mr Freeman’s evidence that this continuity in management resulted in a significant part of the corporate knowledge and experience of the original operator being transferred to the Adani operator.220 [233] Mr Poulton said that APB budgeted for the future costs of operating and maintaining the Terminal five years in advance, and reviewed that budget on a monthly basis. He attended two meetings a month with the personnel responsible for the operations of the Terminal, focussing upon the performance against budget, when the site personnel would be challenged where cost or lead times associated with planned activities required that challenge.221 The judge said that it was evident that these twice monthly reviews were “disciplined, detailed and thorough.”222 The judge described these five year budgets, as well as budgets produced each year for the next three years, as “very detailed”.223 [234] Mr Poulton gave a detailed explanation of the increased costs within the 2018 budget and in the 2019 budget.224 In describing the process of the preparation of the Annual Operation Maintenance and Capital Plan and Budget for the Terminal, he said its purpose was to “identify the resources the Operator will require to perform the Services in accordance with its contractual and legislative obligations and to forecast the costs the Operator will incur in providing those Services.”225 [235] The judge found Mr Poulton to be “honest and meticulous”.226 [236] Mr Freeman’s academic qualifications, like those of Mr Poulton, are in the financial field. He joined the Adani Group at the end of 2014, having had “extensive port and infrastructure services related experience through a range of Commercial Manager roles” with other large organisations for more than a decade. [237] Mr Freeman was directly involved in the budgetary development process for the Terminal. He reviewed drafts of the budget and provided comments on the assumptions and inputs which informed the budget, and he sought to understand the reason for any variation from a previous year’s projected cost in order to satisfy 217 Judgment [278]. 218 Judgment [285]. 219 Judgment [288]. 220 Judgment [288]. 221 Judgment [290]. 222 Judgment [290]. 223 Judgment [291]. 224 Judgment [293]-[294]. 225 This is a document which cl 5.1 of the 2015 OMC was required to be prepared and submitted in June each operating year by the operator to the owner. 226 Judgment [286]. -- 49 of 59 -- 50 himself that it was appropriate. He said that in considering the budget for the 2018 year, he was of the opinion that it reflected a reasonable estimate of the cost to APO of providing the operations and maintenance services required of it in accordance with its contractual and legal obligations.227 Referring to that evidence, the judge noted that Mr Freeman had earlier detailed the operator’s obligations with respect to efficiency under the 2015 OMC. He gave the same evidence about the 2019 budget. [238] Her Honour said that Mr Freeman impressed as “more robust and businesslike” than Mr Poulton.228 Referring to his “extensive port and infrastructure services related experience”, the judge thought that Mr Freeman was “more able to, and concerned to, look at the overall operations of the terminal to address inefficiencies and poor systems.”229 [239] Mr Freeman’s oral evidence featured in the judgment under a heading entitled “Indications as to Inefficiency”. In this section, her Honour referred to “some aspects of the evidence which indicated that the operations of the Terminal may not be efficient.”230 Importantly however, none of those “aspects” was found to constitute an inefficiency. [240] One of those aspects involved the absence of “a formal asset management strategy or maintenance plan for the terminal”, with the maintenance of machinery and equipment being instead based upon a series of rolling work orders based on the manufacturer’s recommendation for that item.231 Mr Poulton said that this was a sufficient strategy, but Mr Freeman thought that the Terminal ought to have had a formal asset management strategy.232 Mr Freeman expected the implementation of such a strategy would cost two or three million dollars in total, which he said would be a worthwhile spend in terms of the efficient operation of the Terminal.233 However, Mr Freeman said that such a strategy was “fundamental” from “the owner’s perspective”, and not from the operator’s perspective. That distinction was critical, as I will discuss.234 [241] Another aspect of Mr Freeman’s evidence was that he had formed a view, at one stage, that the operator was using more contractors that he was comfortable with, and that had he been charge of the Terminal five years earlier, than would have been addressed then. [242] Her Honour referred to Mr Freeman’s evidence that he hoped to achieve the introduction of computer logistics information, rather than manual spreadsheets, to organise the arrival and departure of coal from the Terminal. She referred also to his evidence that as at October 2016, there had been no external reviews of the systems of work employed by the operator, and that his initial familiarisation with the business then had led him to conclude that there was “room for improvement” in the efficiency with which the Terminal was operating.235 Under his management, a Five Year Operation, Maintenance and Capital Plan was developed (as part of the 2017-18 227 Judgment [296]. 228 Judgment [309]. 229 Judgment [309]. 230 Judgment [304]. (emphasis added). 231 Judgment [310]. 232 Judgment [313]. 233 Judgment [313]. 234 See [251]-[253] of these reasons. 235 Judgment [318]. -- 50 of 59 -- 51 Annual Operations, Maintenance and Capital Plan and Budget). This Five Year Plan outlined goals for “Operating Performance” and “Asset Management”. Her Honour noted that there was no evidence that those strategies had been implemented, or that they had been successful.236 [243] These “indications” of inefficiency, in her Honour’s view, strengthened the conclusion which she had reached and showed what she perceived was a gap in the evidence.237 [244] The two economists gave evidence on the cl 7.6(b) issue, Professor Grey in the appellant’s case and Mr Houston who was (jointly) called by the respondents. Her Honour found the evidence of both witnesses to be of “limited value” on the question, based as it was on a “partial understanding of the facts of this matter and assumptions not made out in the evidence.”238 [245] Her Honour rejected Mr Houston’s evidence that when Glencore (APO) was the operator, it had had an incentive to allocate costs to the operating budget of the Terminal rather than to where those costs belonged, in some other part of the overall Glencore operation.239 Mr Poulton’s evidence was that he had never seen evidence of such a practice. Her Honour accepted Mr Poulton’s evidence and added that the evidence was that when Glencore was replaced with the Adani operator, the operator’s costs increased in some respects because of the advantage which the Glencore operator had received from sharing services that were part of the wider Glencore operation.240 Her Honour therefore dismissed Mr Houston’s “speculative ideas” about common costs.241 [246] Her Honour rejected also Mr Houston’s evidence that the operator had a cashflow incentive not to capitalise items of expenditure but to recover them in the financial year in which they were incurred. Her Honour accepted Mr Poulton’s evidence that there were well established procedures to categorise, allocate and charge expenditure as capital, and found there was nothing relevant in Mr Houston’s evidence about capitalisation.242 [247] Her Honour rejected other opinions of Mr Houston, which need not be discussed here, because she accepted evidence relevant to those points which was given by Mr Poulton.243 An evidentiary gap? [248] The trial judge referred to a submission by the respondents that the appellant had not provided any information, either before the proceeding or in the evidence in the appellant’s case, as to the efficiency of the operations of the Terminal, but only about the costs of those operations. She referred to a submission that none of Mr Fenton, Mr Poulton nor Mr Freeman could speak “with any authority as to whether or not the tasks, resources and labour (however well-priced) were reasonably necessary for the efficient operation of the Terminal.”244 236 Judgment [319]. 237 Judgment [304]. 238 Judgment [320]. 239 Judgment [327]. 240 Judgment [329]. 241 Judgment [332]. 242 Judgment [336]. 243 Judgment [337]-[344]. 244 Judgment [297]. -- 51 of 59 -- 52 [249] At the trial, the appellant described the respondents’ case as being that the only way in which a demonstration could be made in accordance with cl 7.6(b) was for a “bottom up assessment to be made of how the terminal operates and the costs of its operating.”245 The trial judge said that she did not understand the respondents to go that far. It should be noted, however, that this was the respondents’ pleaded case, as I have discussed at [217] to [220]. [250] Her Honour’s critical finding, and her single reason for it, were expressed in these two paragraphs of the judgment: “[302] I do not consider that a demonstration in accordance with cl 7.6(b) has occurred, even taking into account the evidence in this proceeding. The reason is that the information given by Mr Poulton and Mr Freeman, impressive as far as it goes, does not address the operational processes in the terminal. It is entirely possible that although the financial managers of the operator have done a good job over the years in making sure that expenditure on the terminal’s operation has been organised and scrutinised, the terminal’s operational processes are themselves inefficient due to its design, set up, age, or any number of other factors. [303] No evidence at all was produced by the [appellant] from the operational or engineering equivalent of Mr Poulton or Mr Freeman to explain how the terminal operates. It would not in my view be necessary to have an independent expert conduct a review of the terminal in order to satisfy the requirements of cl 7.6(b). Evidence from the experienced Production Manager or Maintenance Manager, mentioned by Mr Freeman… would likely have been sufficient, if it had been of the calibre and detail given by Mr Poulton. However, without some evidence as to the operational side I cannot see that the [appellant] has demonstrated that the OFC and OVC produced by its budget processes in 2018 and 2019, and agreed with the operator, are reasonable charges having regard to the efficient operation of the terminal. As I have endeavoured to explain, on the present state of the evidence it is only possible to conclude that they are reasonable charges having regard to the way the terminal is operated. That may, or may not, be efficient. The evidence that Glencore had an incentive to keep costs to a minimum and the weight that adds to Mr Fenton’s comparisons is not sufficient to remedy this deficit. It is the [appellant] which must make the demonstration under cl 7.6(b), and in my opinion it has not done so. I will make the declaration sought by the respondents. It follows that I refuse the relief sought in the originating application and statement of claim.” Analysis of the judge’s reasoning [251] Her Honour accepted that the OFC and OVC produced by the budget processes in 2018 and 2019 were reasonable charges having regard to the way in which the 245 Judgment [298]. -- 52 of 59 -- 53 Terminal was operated. The difficulty, in her view, was that that operation may, or may not, have been efficient. The possibility about which the judge speculated was that “the terminal’s operational processes [were] themselves inefficient due to its design, set up, age, or any number of other factors.” The expression of that possibility revealed an error. [252] The reasonableness of the operator’s charges could be assessed only by reference to the content of the operator’s contractual obligations. The operator was bound to operate the Terminal efficiently, and to keep and maintain the Terminal in good and substantial repair and condition. But the operator was not required to effect any “Enhancement” of the facility. Enhancement was defined in the 2015 OMC to include improvements such as the construction, installation or erection of new buildings, plant, equipment, facilities or other things at or for the Terminal, the alteration or renovation of existing buildings, plant, equipment, facilities or other things and the provision of any new or modified technology for purposes including enhancing the efficiency or the economy of the operation of the Terminal.246 As I have discussed, if that is to occur, it is to be done by the owner. The operator must operate and maintain the Terminal as it is, as distinct from how it might be “Enhanced”. [253] That error is the apparent explanation for her Honour’s perception of a “deficit” in the appellant’s case. There was no evidentiary gap as to the efficiency of operation of the Terminal as it then was. The efficient operation of the Terminal was proved, to the requisite standard, by the combined effect of several parts of the evidence. [254] Her Honour’s distinction between accounting or commercial evidence, and operational evidence, was too strict. Mr Freeman was the CEO with a responsibility for all of APO’s business operations, including the day to day operation and maintenance of the Terminal under the OMC. He was involved in the preparation of the annual terminal operations and maintenance budgets, which required an identification of the resources required by the operator to provide the operator’s services. That was not a task of simply costing those resources. [255] The judge recognised that Mr Freeman had an experience and expertise from which he was “able to, and concerned to, look at the overall operations of the terminal to address inefficiencies and poor systems”.247 Her Honour instanced Mr Freeman’s concerns about aspects of the operations, in her discussion of “indications” of inefficiency. At that point of the Judgment, she appears to have accepted that Mr Freeman was able to speak about the efficiency of the operations. [256] Tellingly, there was no evidence that he had identified any inefficiency which ought to have been, but was not remedied. As for the “indications” which the judge discussed, it would have been remarkable if, over the years, there had been nothing which had seemed to Mr Freeman to be inefficient. With a facility of this scale, inevitably there would be some things from time to time which could be improved. Their identification and their improvement would be marks of efficiency, not inefficiency. [257] Mr Poulton’s evidence was not unimportant on the question of efficiency. Mr Poulton described one purpose of the annual budget as being the identification of 246 Definition of “Enhancement” in cl 27.1, set out above at [208] of these reasons. 247 Judgment [309]. -- 53 of 59 -- 54 the resources which would be required in the operation of the Terminal. He described the twice monthly reviews, at which site personnel were challenged on planned activities as to their costs and lead times. Mr Poulton was thereby routinely engaged in assessments of the efficiency of aspects of the Terminal’s operation. It is telling that, as an honest and meticulous witness, Mr Poulton saw no unremedied inefficiency. [258] Her Honour was critical of Mr Fenton’s evidence in several respects. I have identified two of those criticisms with which I would not agree. Mr Fenton’s evidence as to his reports, given in 2017 and 2018, was important. It showed that there was no significant difference between the costs of operations before the change of operator, and those after it. That evidence was to be considered with the evidence that the Terminal continued to be operated in the same way after the change of operator, and under the management of the same key personnel. [259] Her Honour observed that this continuity did not demonstrate the reasonableness of APO’s charges, because those of APB (the Glencore operator) may not have been reasonable either, because there may have been an inefficiency in the Terminal’s operation. Yet, in the critical passage set out earlier, her Honour indicated at least one circumstance which, in my view, strongly indicated the probability that Glencore’s operation was efficient. There were other circumstances which contributed to that likelihood. For years before the arrival of the Adani Group, APB operated the Terminal without, it appears, any apparent concern from the respondents about the efficiency of the Terminal. [260] At the end of the part of the judgment which related to the cl 7.6(b) issue, her Honour again referred to the incentive which Glencore had to minimise costs during its operation of the Terminal,248 before remarking that until AMPL became a user of the Terminal, there would be “no disadvantage to the Adani group generally if the operator’s costs are higher than they need be; to the contrary.” She said that “these considerations supported her conclusion that the appellant had not made the demonstration requirement by cl 7.6(b) …”.249 That observation, with respect, is difficult to reconcile with her Honour’s complete acceptance of the evidence of Mr Poulton and Mr Freeman on this part of the case. Each referred in detail to the process of managing the operations of the Terminal, and the care taken in the processes of budgeting for and reviewing the costs of the operation. The notion that, at the same time, they would be recklessly indifferent to the efficiency of the operation, or even inclined towards inefficiency, is impossible to reconcile with evidence which the judge accepted. [261] I do not understand her Honour to have characterised this suggested deficit in the evidence in a Jones v Dunkel250 sense. There is no indication in the judgment that her Honour saw the absence of evidence from someone from “the operational side” as the basis for an inference that it would not have assisted the appellant’s case. [262] The evidence, which her Honour accepted, as to the efficiency of the operation of the Terminal, had to be considered in combination. The Terminal was operated from 2016 as it had been for many years previously, when its operation was in the hands of a well resourced operator with a strong commercial incentive to conduct the 248 Judgment [344]. 249 Judgment [344]. 250 [1959] HCA 8; (1959) 101 CLR 298. -- 54 of 59 -- 55 operation efficiently. The costs of the operation did not change significantly with the change of operator. The terms of the 2015 OMC were relevantly identical to those of the 2000 OMC. Senior managers, including the operator’s CEO, gave detailed evidence of processes to ensure the prudent use of the resources in the Terminal’s operation. The respondents, each of whom had used the Terminal for many years prior to 2016, offered no evidence of any waste or other inefficiency. [263] Ultimately, the appellant’s case failed because her Honour was left in doubt as to whether the Terminal itself, as a piece of infrastructure, was of optimal efficiency. That was not the question. It was whether the operator was efficient in its operation of the Terminal, as the Terminal was. [264] The judge ought to have held that the operator’s charges were reasonable for the efficient operation and maintenance of the Terminal. [265] At this point, however, there are two further things to be considered. The first is that raised by the Notice of Contention. The second is the effect of another declaration which was made in the respondents’ favour (against which there is no appeal) in relation to berthage and mooring charges. The Notice of Contention [266] This contention was made against the possibility, as I would hold, that this Court should overturn the judge’s conclusion that the appellant engaged in unconscionable conduct. [267] The respondents contend that the trial judge ought to have found that on the proper construction of cl 7.2, the “total costs payable by [the owner] to the operator”, in the definition of OFC, excludes any amount of costs payable by the appellant to the operator for which the appellant has, in substance, been indemnified. [268] The trial judge recorded this argument, as advanced at the trial, as a complaint that “in calculating the OFC [the appellant] has not taken into account any part of the money it received under the QCPL transactions” which “was in substance an indemnity for the HCF which QCPL would have paid, had it remained a user and not entered into the QCPL transactions”.251 [269] Her Honour rejected their argument as inconsistent with the unambiguous text of the contract. She said: “[228] … The word “costs” is used twice in the definition of OFC. Under the operating agreement the owner is obliged to pay the operator its total fixed costs and a margin. Whether or not the owner recovers these costs from anyone else is irrelevant to the owner’s obligation to pay the operator. Here, whether or not the owner received an amount which “in substance” indemnified it for the QCPL’s share of the OFC, the owner was still obliged to pay the operator under the operating agreement and it is those costs, payable by the owner to the operator, which are the subject matter of the definition of OFC. 251 Judgment [227]. -- 55 of 59 -- 56 [229] Likewise, so far as the text of the user agreements is concerned, after the QCPL transactions, QCPL was not an Access Holder and it did not have an Annual Maximum Tonnage. There was no basis to include its previous Annual Maximum Tonnage when calculating the ART.” [270] The respondents argue that her Honour’s reasoning at [228] of the Judgment was wrong. They submit that an alternative construction, which excludes from “the costs payable by [the appellant]” amounts for which it has already been indemnified, would fulfill the purpose of the user agreements of providing the appellant with reimbursement of its obligation to pay the operator, “but no more”. [271] The trial judge was correct to reject this argument. The OFC comprises two components: the total costs payable to the operator in respect of the operator’s total fixed operating costs, and the operator’s margin on that amount. The OFC is quantified by the operator’s costs, and such of those costs which the operator is entitled to be paid by the owner under their contract. There is no ambiguity in the word “costs” in either of its uses in cl 7.2(b). None of the amount paid by QCPL went to the operator so that none of it affected, in any sense, the operator’s costs. The OFC was unaffected by the suggested “indemnity”. [272] The respondents’ argument depended upon the OFC having to be quantified by allowing for something from the QCPL payments. The respondents’ contention must be rejected. Berthage and mooring charges [273] The issue here involved berthage and mooring charges, levied on ships at the Terminal being loaded with coal. The trial judge said that it had always been the operator which was paid these charges, on invoices issued by it. Prior to October 2016, the operator had offset the income from these charges against what it charged the owner for its variable operating costs. That changed in October 2016. The charges were still levied by the operator, and the operator then notified the appellant of the berthage and mooring charges collected and the operator’s own costs in earning that income. The operator paid to the appellant the berthage and mooring charges received by it, less its costs of deriving that income.252 [274] The question was whether the change in 2016 affected the HCV payable by the respondents to the appellant. The trial judge considered that “the Operator’s total variable operating costs” had to be construed to mean “costs less the berthage and mooring fees”, because those fees were received by the operator for doing what the operator was obliged to do under its contract, namely load the coal onto ships.253 [275] The trial judge declared that: “…on the proper construction of the user agreements between the [appellant] and the respondents, revenue received by the operator as charges for berthage and mooring from ships to be loaded with coal pursuant to a user agreement must be deducted from the operator’s variable operating costs in calculating OVC as defined by cl 7.3(b)(i)(A) of those agreements.” 252 Judgment [236]. 253 Judgment [244]. -- 56 of 59 -- 57 [276] That declaration is not challenged in this Court. It may be noted that there is no inconsistency between the judge’s reasoning on this question and her rejection of the argument which was the subject of the Notice of Contention. In this instance, the money which had to be brought into account in calculating the operator’s operating costs was money received by the operator. [277] The present relevance of this unchallenged declaration is that it should not be affected by the orders in this Court in consequence of the outcome of the controversy about cl 7.6(b). [278] In this Court, the appellant does not seek relief in terms which would specify specific amounts as the HCV to which it was entitled from the respondents. The relief sought is a declaration that: “… the appellant has demonstrated that the OFC and OVC agreed between it and the operator in the financial years commencing 1 July 2017 and 1 July 2018 represent reasonable charges having regard to the efficient operation of the Terminal in accordance with cl 7.6(b) of the user agreements between the appellant and the respondents.” That order would not compromise the outcome from the trial on the issue of berthage and mooring fees. Clause 25 of the Sonoma user agreement [279] The user agreement with the fourth respondent (Sonoma) contained this provision at cl 25.1(a)(v): “… no other Access Holder Presenting Coal for Handling at the Terminal will be charged less than the User is charged at that time for a substantially similar commercial arrangement. For the purposes of comparison of charges, amounts payable for TIC, TPC, HCF and HCV, and any rebates receivable by the User and other relevant Access Holder will be taken into account.” [280] From 1 July 2017, the appellant charged another user,254 which was not a party to the litigation, an HCF and an HCV at the same rates as it has charged Sonoma, but the appellant charged the other user a TIC at a lower rate than Sonoma. [281] At the trial there was an issue about whether Sonoma’s user agreement was sufficiently different in its terms from those of the other user (which had the standard user agreement) that the two did not have “a substantially similar commercial arrangement”. That argument is not pressed by the appellant here. [282] The trial judge declared that: “…since 1 July 2017 the [appellant] has been in breach of cl 25.1(a)(v) of the user agreement it has with the fourth respondent because it has charged Clermont Coal Mines Ltd less than Sonoma is charged to handle the coal which it presents to the terminal under its user agreement.” 254 Clermont Coal Mines Pty Ltd. -- 57 of 59 -- 58 [283] The appellant advanced two reasons why the trial judge erred in finding that it was in breach of cl 25.1(a)(v). One of them was that the judge erred by failing to take into account any of the damages awarded to Sonoma for unconscionable conduct. That point is irrelevant if, as I would order, the awards of damages for unconscionable conduct are set aside. In any case, I would reject that argument. It was submitted that Sonoma’s damages were, in the terms of cl 25(a)(v), something in the nature of a “rebate receivable by the user”. However the damages awarded in Sonoma’s favour were in the nature of a statutory remedy for the contravention of a statute, the ACL. They were not awarded to give effect to Sonoma’s contract. In my opinion, “rebates receivable by [Sonoma]” would be any amounts which, according to Sonoma’s user agreement, would reduce amounts otherwise payable for TIC, TPC, HCF and HCV. The damages awarded for unconscionable conduct were not “rebates” of this kind. [284] The other argument which is advanced by the appellant is based upon the effect of cl 6.3(a)(ii) of the Sonoma user agreement. This provision is identical to cl 6.3(a)(ii) of the standard user agreement, to which I have referred earlier at [198]. [285] As I have discussed, Sonoma, like the other respondents, disputed the entirety of the appellant’s invoices for handling charges, and paid only 50 per cent of the invoiced amounts, pending resolution of that dispute. The appellant’s argument is that, in the terms of cl 25.1(a)(v), the necessary comparison is between the “amounts payable” by Sonoma and the “amounts payable” by the other user. The “amounts payable” by Sonoma, at what is said to have been any relevant time, were reduced by the operation of cl 6.3(a). [286] However, what must be compared, under cl 25.1(a)(v), are the charges levied by the owner. The comparison is between what the owner is entitled to charge Sonoma and what it is entitled to charge the other user. The “amounts payable” are those which the owner is entitled to charge. I agree with the reasoning of the trial judge as follows:255 “[353] In my view this argument must fail. Clause 25.1(a)(v) focuses on amounts which the user is charged. Here there is no doubt that the full HCV and HCF have been charged to Sonoma since 1 July 2017. For this period Sonoma has been charged more than the other user. The fact that Sonoma had, and continues to have, a lawful reason not to pay the handling charges does not derogate from that point. The clause is concerned with what the owner is entitled to charge Sonoma.” [287] The appellant’s argument sought to make something of the words “at that time” in cl 25.1(a)(v). However those words do not assist the argument. The words define the necessary comparison by requiring a comparison of what the two users are charged at that time. [288] The challenge to this declaration fails. Orders [289] I would order as follows: 255 Judgment [353]. -- 58 of 59 -- 59 1. Allow the appeal against the judgments given and the orders made on 26 August 2020 and 1 September 2020, save for the declarations numbered 5 and 7 made on 26 August 2020, and the orders numbered 8 and 9 made on 26 August 2020. 2. Set aside the judgments and orders made on those dates, save for those two declarations, and the orders numbered 8 and 9 made on 26 August 2020. 3. Give judgment for the appellant against the first respondent on the first respondent’s counterclaim, save for its claim for the declaration numbered 5 made on 26 August 2020. 4. Give judgment for the appellant against the second and third respondents on their counterclaims, save for the declaration numbered 5 made on 26 August 2020. 5. Give judgment for the appellant against the fourth respondent on its counterclaim, save for the declarations numbered 5 and 7 made on 26 August 2020. 6. Declare that the appellant has demonstrated that the OFC and OVC agreed between it and the operator for the financial years commencing 1 July 2017 and 1 July 2018 represent reasonable charges having regard to the efficient operation of the Terminal in accordance with cl 7.6(b) of the user agreements between the appellant and the respondents. 7. Give the appellant liberty to apply for such further order, of the nature of that specified in paragraph 4 of the orders sought in the notice of appeal, within 21 days of the date of this judgment. 8. Direct the parties to provide, within 21 days of this judgment, written submissions, not exceeding six pages in length, as to the orders which are to be made about the costs of the proceeding in the Trial Division and in this Court. [290] I propose order number 7 because the order sought by the appellant in paragraph 4 of its notice of appeal, in my view, would be unsatisfactory. Possibly there could be a controversy as to the amounts which would have to be paid under such an order. If such an order is to be made, it is preferrable that it specify the amounts involved. [291] MULLINS JA: I agree with McMurdo JA. -- 59 of 59 --