re woodside, bp, chevron, bhp, shell - wa supreme court 2011 wasc 268 (s)

[2011] WASC 268 (S)

Document Name: WASC\CIV\2011WASC0268(S).doc (AH)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION : ELECTRICITY GENERATION CORPORATION t/as VERVE ENERGY -v- WOODSIDE ENERGY LTD [2011] WASC 268 (S)

CORAM : LE MIERE J

HEARD : 14-17 MARCH 2011

DELIVERED : 30 SEPTEMBER 2011

PUBLISHED : 30 NOVEMBER 2011

SUPPLEMENTARY DECISION : 30 NOVEMBER 2011

FILE NO/S : CIV 1548 of 2009

BETWEEN : ELECTRICITY GENERATION CORPORATION t/as

VERVE ENERGY Plaintiff AND WOODSIDE ENERGY LTD First Defendant BP DEVELOPMENTS AUSTRALIA PTY LTD Second Defendant CHEVRON TEXACO AUSTRALIA PTY LTD Third Defendant BHP BILLITON PETROLEUM (NORTH WEST SHELF) PTY LTD Fourth Defendant SHELL DEVELOPMENT (AUSTRALIA) PTY LTD Fifth Defendant

[2011] WASC 268 (S)


Catchwords:

Contract - Construction and interpretation - Gas Supply Agreement - Contractual limitation on liability

Legislation:

Nil

Result:

Interpretation of limitation clause determined

Category: B

[2011] WASC 268 (S)


Representation:

Counsel:

Plaintiff : Mr N C Hutley QC & Mr J C Giles First Defendant : Mr C L Zelestis QC & Mr B Dharmananda &

Ms S E Russell Second Defendant : Mr C L Zelestis QC & Mr B Dharmananda &

Ms S E Russell Third Defendant : Mr C L Zelestis QC & Mr B Dharmananda &

Ms S E Russell Fourth Defendant : Mr C L Zelestis QC & Mr B Dharmananda &

Ms S E Russell Fifth Defendant : Mr C L Zelestis QC & Mr B Dharmananda &

Ms S E Russell

Solicitors:

Plaintiff : Jackson McDonald First Defendant : Lavan Legal Second Defendant : Lavan Legal Third Defendant : Lavan Legal Fourth Defendant : Lavan Legal Fifth Defendant : Lavan Legal

Case(s) referred to in judgment(s): Nil

[2011] WASC 268 (S) LE MIERE J


1 LE MIERE J: These reasons for judgment are supplementary to my reasons in [2011] WASC 268. These reasons deal with the interaction of the agreed damages referred to in [53] of my earlier reasons and the cap on liability contained in cl 22.7 of the GSA.

2 I have found that the defendants failed to comply with their obligations under cl 12 to allocate gas on an equitable basis on 26 January 2008. I have found that the defendants breached cl 9.12 by failing to use reasonable endeavours to make the Shortfall Recovery Quantity available for delivery within the Shortfall Recovery Period. The parties have agreed the quantum of the plaintiff's loss and damage resulting from each of those breaches viewed in isolation. However, the parties have not agreed, and make different contentions concerning, the plaintiff's entitlement to damages having regard to the interaction of those agreed damages and the limitation imposed by cl 22.7.

3 The defendants submit that the quantity of gas the defendants failed to deliver equitably on 26 January 2008, in breach of cl 12.1 of the GSA, is part of the same quantity of gas they failed to deliver as Shortfall Recovery Quantity gas in breach of cl 9.12. The defendants then submit that no orders can be made for the payment of two sets of damages for the selfsame loss. They submit that to the extent that a single loss is caused by more than one breach of contract, the fact remains that there is only one loss and only one award of damages may be made for that loss. Furthermore, the defendants submit that even if it was possible for the plaintiff to rely upon breaches of two provisions of the GSA with respect to the non-supply of gas on 26 January, the daily limit of liability provided for under cl 22.7(b)(i) would apply to the entire loss and damage claimed as a result of the non-supply on that day. That is because the limit on liability that is imposed under cl 22.7(b)(i) is a limit which applies to the period during which the defendants fail to supply gas. It is not a limit that is applied separately to breaches of individual terms of the agreement. It is a limit which applies to the loss and damage resulting from the defendants' failure to supply gas during a period, being in this case a single day - 26 January 2008. In essence, the defendants say that the plaintiff's loss resulting from the defendants' breach of cl 12 and cl 9.12 is the same loss and the plaintiff cannot outflank the limitations on damages in cl 22.7.

4 Clause 22.7(b)(i) limits the liability of the defendants to the specified sum in any 12 month period and the pro rata proportion of the specified sum in respect of any period where the Sellers' failure to supply gas is for a period of less than 12 months. The plaintiff submits that this clause



requires that the pro rata proportion be identified by reference to a failure to supply. The plaintiff submits that each time an obligation is identified as not being complied with damages flowing from that shortfall are limited to 1/365th of the specified amount irrespective of the actual damage. If there is a series of obligations to supply a volume of gas on different days the failure to comply with each obligation may be causative of loss which may to a greater or lesser extent be the same loss. The plaintiff is limited to the cl 22.7(b) limit for each failure to supply but if its actual loss flowing from each is greater than the sum of two 22.7(b) limits it can recover both limits.

5 I find that the plaintiff cannot recover damages resulting from the defendants' failure to comply with their obligations under cl 12 to allocate gas on an equitable basis on 26 January in addition to damages for the defendants' failure to use reasonable endeavours to make the Shortfall Recovery Quantity, arising from the failure to deliver gas on 26 January 2008, available for delivery within the Shortfall Recovery Period in breach of cl 9.12. Clause 9.11(c) requires the Buyer to notify the Sellers' Representative whether or not it requires some or all of the Shortfall Gas Quantity to be delivered (Shortfall Recovery Quantity). If the Buyer notifies the Sellers' Representative that it does not require any of the Shortfall Gas Quantity to be delivered then the Buyer may sue the Sellers for damages and such damages are subject to the limitations in cl 22.7. Alternatively, the Buyer may notify the Sellers' Representative that it requires some or all of the Shortfall Gas to be delivered. The Buyer cannot require all of the Shortfall Gas to be delivered and sue the Sellers for damages.

6 When the gas supply was interrupted on 26 January, the plaintiff gave notice that it required all of the Shortfall Gas to be delivered. That Shortfall Gas included the quantity of gas which the defendants were required, but failed, to deliver under cl 12.1. Having elected to require all of the Shortfall Gas to be delivered the plaintiff's remedies were confined to those provided for in cl 9.12(a). Clause 9.12(a)(vi)(B) provides that if at the end of the Shortfall Recovery Period the Shortfall Recovery Quantity has not been delivered to the buyer then a Seller default will be deemed to have occurred and the Buyer's sole remedy (other than the potential right to terminate the agreement pursuant to cl 22.8) is to sue the Sellers for damages subject to the limitations in cl 22.7. The plaintiff cannot maintain a claim for damages for the failure to deliver gas in accordance with the defendants' obligations under cl 12.1 to allocate gas on an equitable basis in addition to its claim for damages pursuant to cl 9.12(a)(vi)(B).



7 The plaintiff's damages for failure to deliver Shortfall Recovery Quantity gas pursuant to their obligation under cl 9.12 is subject to the limitations in cl 22.7. Clause 22.7(b) provides that the liability of each Seller is limited to its Proportionate Share of the amounts specified in that clause and the pro rata proportion of the specified amount in respect of any period where the Sellers' failure to supply gas is for a period less than 12 months. In this case the Sellers' failure was a failure to supply gas on 26 January 2008. The liability of each Seller is limited to its Proportionate Share of 1/365th of the amount specified in cl 22.7.

re woodside, bp, chevron, bhp, shell - wa supreme court 2011 wasc 268 (s)

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