BGC CONTRACTING PTY LTD -v- CLIFFS ASIA PACIFIC IRON ORE PTY LTD [2019] WASC 248 (10 July 2019)

Last Updated: 10 July 2019

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : BGC CONTRACTING PTY LTD -v- CLIFFS ASIA PACIFIC IRON ORE PTY LTD [2019] WASC 248

CORAM : SMITH J

HEARD : 24 MAY 2019 & 12 JUNE 2019

DELIVERED : 10 JULY 2019

FILE NO/S : CIV 2405 of 2018

BETWEEN : BGC CONTRACTING PTY LTD

Plaintiff

AND

CLIFFS ASIA PACIFIC IRON ORE PTY LTD

Defendant

CLIFFS ASIA PACIFIC IRON ORE PTY LTD

Plaintiff by counterclaim

BGC CONTRACTING PTY LTD

Defendant by counterclaim

Practice and procedure - Contract - Application for summary judgment or strike out of counterclaim - Construction of indemnities and exclusion clause - Whether appropriate case for summary disposal or strike out of claim for loss of profit

Legislation:

Money-lenders and Infants Loans Act 1941 (NSW), s 24(2)

Rules of the Supreme Court 1971 (WA), O 16 r 1, O 20 r 19

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	Mr M Lundberg & Ms D J Osborn
Defendant	:	Mr M Howard SC & Mr E M Heenan
Plaintiff by counterclaim	:	Mr M Howard SC & Mr E M Heenan
Defendant by counterclaim	:	Mr M Lundberg & Ms D J Osborn

Solicitors:

Plaintiff	:	Quinn Emanuel Urquhart & Sullivan LLP
Defendant	:	Norton Rose Fulbright Australia
Plaintiff by counterclaim	:	Norton Rose Fulbright Australia
Defendant by counterclaim	:	Quinn Emanuel Urquhart & Sullivan LLP

Case(s) referred to in decision(s):

SMITH J:

Application for summary dismissal or strike out of counterclaim and result

This is an application for summary judgment by the defendant by counterclaim, BGC Contracting Pty Ltd (BGC).
BGC seeks an order to summarily dismiss the amended counterclaim, filed by the plaintiff by counterclaim, Cliffs Asia Pacific Iron Ore Pty Ltd (Cliffs), on 17 May 2019, pursuant to O 16 r 1 of the Rules of the Supreme Court 1971 (WA) (the Rules).
In the alternative, BGC seeks an order to strike out [14] and [15] of the amended counterclaim pursuant to O 20 r 19(1)(a), (b), (c) or (d) of the Rules.
Cliffs originally filed its counterclaim on 1 March 2019. BGC's application, when filed on 25 March 2019, was out of time. Consequently, leave was required for the application to be brought. However, Cliffs filed an amended counterclaim on 17 May 2019 and as a result leave is no longer required. However, if leave were required I would grant BGC leave to bring its application.
For the reasons that follow, however, BGC's application should be dismissed.

Cliffs' amended counterclaim

Cliffs pleads in its amended counterclaim that on or about 28 March 2013, Cliffs, as Principal, and BGC, as Contractor, entered into a written mining services contract which took effect from 1 January 2013 in respect of the Koolyanobbing mine complex.[1]
By the terms and conditions of the mining services contract, Cliffs engaged BGC to provide a range of mining services including drilling, blasting, loading, hauling, dumping, crushing, screening and train loadout services, and the operation and maintenance of the iron ore handling plant.
Cliffs claims that it appointed BGC as an independent contractor, and BGC accepted the appointment, to provide (on the terms and conditions of the mining services contract) the mining and related services set out in sch 1 of the mining services contract in accordance with a mine plan prepared by Cliffs, and amended from time to time, describing the sequencing of mining ore from the mines and delivering it to the ore handling plant (OHP).[2]
The Principal's Mine Plan is defined in cl 1.1 of the mining services contract to mean the mine plan prepared by the Principal which:

(a) describes the sequencing of mining of iron ore mined from the mines (as defined) on the site and delivered to the OHP (ROM ore) during the term (as defined); and

(b) incorporates the key parameters for mining, including mining sequence plans, landform designs, access and haulage roads,

as amended by the Principal in accordance with the mining services contract.

Cliffs claims that it was entitled, at its sole discretion by notice to BGC, to change the Principal's Mine Plan.[3]
Cliffs alleges that:

(a) BGC was required by the mining services contract, and specifically, the Principal's Mine Plan, to crush ore in certain quantities and having certain metallurgical properties in each month of the 2017 calendar year;[4]

(b) BGC failed to meet the requirements as to quantity and metallurgical properties of the crushed ore in each month of the 2017 calendar year, as required by particular quarters of the 2017 Principal's Mine Plan, or alternatively, particular quarters of the 2016 Principal's Mine Plan;[5] and

(c) by reason of BGC's alleged failure to deliver the quantity and quality of crushed ore required, Cliffs suffered loss and damage. Cliffs pleads the particulars of the loss that is claimed as the loss of profit, or the opportunity to obtain a profit, from the sale of the additional quantity of crushed ore which it would have been able to sell but for the breaches by BGC of the mining services contract.[6]

Cliffs claims that BGC is obliged to indemnify Cliffs against, hold Cliffs harmless from, and pay to Cliffs, the amount of loss and damage it has suffered.[7]
It is conceded by BGC that the effect of the mining services contract is that BGC carried out all mining operations at the mine, including operating load-out functions, but not including mine planning.[8]

Principles concerning an application for summary judgment

The principles that apply to applications for summary judgment were summarised by Pritchard J in Gerovich v Gerovich as follows:[9]

Order 16 r 1 RSC requires the Court to be satisfied either that the action is frivolous or vexatious, or that the defendant has a good defence on the merits, or that the action should be disposed of summarily.

The principles in relation to the determination of applications for summary judgment are well established. A party should not ordinarily be denied the opportunity to have his or her case determined following trial, and for that reason, the jurisdiction to grant summary judgment should be reserved for the clearest of cases, where there is a high degree of certainty about the ultimate outcome of the action if it were allowed to go to trial. In other words, the question is whether, on the material before the Court, it has been demonstrated that the plaintiff's action should not be permitted to proceed to trial because it is apparent that it must fail.

However, that does not mean that summary judgment will be given only where the case is so hopeless as not to require argument. Extensive argument may be necessary to demonstrate that a party's case is so clearly untenable that it cannot possibly succeed.

A defendant bringing a summary judgment application bears the legal onus of establishing that there is no serious question to be tried on any cause of action raised by the plaintiff. Under O 16 r 1(2), the defendant is required to file an affidavit verifying the facts upon which the application is based.

Pleadings and strike out application principles

The essential requirements for a pleading are to define and limit the issues for decision, provide the basis for decisions on relevance for trial, and ensure a fair trial by putting the other side on notice of the case they must meet.[10]
In DM Drainage & Constructions Pty Ltd v Karara Mining Ltd, Beech J observed:[11]

A statement of claim must not plead allegations at too high a level of generality. A pleading must be sufficiently particular to conform with one of the primary objects of pleadings, to inform the opposing party of the case that it must meet. Whether it is sufficient to plead simply that one thing caused another, or whether further facts must be pleaded to establish a causal link, will depend on the pleaded facts and circumstances.

The caution with which a pleading will be struck out on the ground that it does not disclose a reasonable cause of action is well known.

Pleadings may be struck out on the ground that they may prejudice, embarrass or delay the fair trial of the action 'because they are evasive, they conceal or obscure the real questions in controversy, they are ambiguous or not reasonably intelligible, they raise immaterial or irrelevant issues, they fail to confine the issues or state the case of the party in question with reasonable particularity, or they raise a case in terms which are simply too general'.

It is well established that the court should proceed with caution before striking out a pleading on the ground that it does not disclose a reasonable cause of action.[12] While the court may determine a difficult question of law on such an application, it would usually be appropriate to leave the determination of such questions for trial.[13]
If, however, a plaintiff (including a plaintiff by counterclaim) omits to plead a critical element of a cause of action, or fails to plead facts which are capable of constituting a cause of action, the pleading will fail to disclose a reasonable cause of action.[14]

The indemnities clause cl 24 of the mining services contract

Clause 24 of the mining services contract provides for heads of damage that are recoverable by each party against the other and exclusion of various losses.
Clause 24 is titled 'Indemnities' and comprises seven subclauses giving effect to a scheme by which two sophisticated commercial parties agree to allocate losses between them, including by way of parties' specific indemnities and the mutual exclusion of various losses.
Cliffs allege that, pursuant to cl 24.1 of the mining services contract, BGC is liable to indemnify Cliffs against and hold Cliffs harmless for the loss and damage it pleads in [14] of the amended counterclaim. In particular, Cliffs claim that by cl 24.1(a) BGC indemnified Cliffs against, and promised to hold Cliffs harmless from, and to pay Cliffs on demand the amount of any loss, damage, cost or expense suffered by Cliffs, arising either directly or indirectly out of any omission of BGC in providing or failing to provide the mining services, including, in particular, any loss, damage, cost or expense arising from breach by BGC of its obligations under the mining services contract.
Clause 24.1 provides for BGC's indemnities in favour of Cliffs. Clause 24.1 provides:

Subject to the Contractor's right to recover Direct Costs, the Contractor indemnifies each Principal's Indemnified Party against, must hold each Principal's Indemnified Party harmless from, and must pay to each Principal's Indemnified Party on demand the amount of, any Loss or Claim paid, suffered or incurred by the Principal's Indemnified Party to the extent it arises directly or indirectly out of any act or omission of the Contractor or the Contractor's Personnel in providing or failing to provide the Mining Services, including any Loss or Claim arising from:

(a) any breach by the Contractor or the Contractor's Personnel of the Contractor's obligations under this document save to the extent the breach is caused or contributed to by the Principal's or any Principal's Indemnified Party's breach of the Principal's obligations under this document;

(b) any breach of any applicable Law, save to the extent the breach is caused or contributed to by the Principal or any Principal's Indemnified Party's breach of the Principal's obligations under this document;

(c) any Environmental Liability, save to the extent where the breach is caused or contributed to by the Principal or any Principal's Indemnified Party's breach of the Principal's obligations under this document;

(d) any OHS Liability;

(e) any damage to any property owned by or under the control of a Principal's Indemnified Party;

(f) any loss, damage or destruction of any records, files and materials provided to the Contractor or the Contractor's Personnel;

(g) the Contractor or any of the Contractor's Personnel acting outside the scope of its authority under this document;

(h) the provision of the Mining Services or any Intellectual Property owned or created by the Contractor infringing any Intellectual Property or other rights of any third party; or

(i) fraud, criminal conduct, breach of trust or fiduciary duty, bad faith, misrepresentation, negligence or wilful misconduct by the Contractor or any of the Contractor's Personnel.

Clause 24.2 and cl 24.4 of the mining services contract are not relevant to the matters in issue in this application.
Clause 24.3 provides for Cliffs' indemnities in favour of BGC. Clause 24.3 provides:

The Principal indemnifies each Contractor's Indemnified Party against, must hold each Contractor's Indemnified Party harmless from, and must pay to each Contractor's Indemnified Party on demand the amount of any Loss or Claim arising out of:

(a) injury to or death of any of the Contractor's Personnel engaged in performing the Mining Services at the Site, paid, suffered or incurred by the Contractor's Indemnified Party to the extent it arises directly or indirectly out of any wilful misconduct or negligent act or omission of the Principal, the Principal's officers, employees, contractors (including Separate Contractors), agents and any other person authorised by the Principal under this document; or

(b) any Intellectual Property owned or created by the Principal infringing any Intellectual Property or other rights of any third party.

Clause 24.5(a)(ii) and cl 24.5(iii) provide that each indemnity given in cl 24.1 and cl 24.3 (among other matters):

(a) is an additional, separate and independent obligation of the indemnifying party and no one indemnity limits the generality of any other indemnity; and

(b) applies whether the Loss arises in connection with negligence, misrepresentation, or other cause.

Clause 24.6 provides:

Neither party will be liable to the other party in any circumstances for any indirect, special or consequential loss or damage, including loss of revenue, loss of production, loss of product, loss or deferment of opportunity, loss or deferment of contract, loss of profit (whether direct, indirect, anticipated or otherwise, but such loss of profit does not include the Performance Fee), loss or reduction of goodwill, damage to reputation, howsoever arising and whether in an action in contract, tort (including without limitation, negligence), in equity, product liability, under statute, or on any other basis.

Are there contestable constructions of cl 24.6?

The proper construction of rights and liabilities of parties to a commercial contract is to be determined objectively by reference to the text, context and purpose of the contract. In Electricity Generation Corporation v Woodside Energy Ltd, the plurality of the High Court stated:[15]

[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.

To these principles, the Court of Appeal, in Sino Iron Pty Ltd v Mineralogy Pty Ltd, very recently added that the starting point for the proper construction of a clause in a contract is the language used in the clause. In particular, one starts by identifying the possible meanings that the words chosen by the parties can bear.[16] The Court of Appeal then went on to observe:[17]

Also, the observations of Kiefel, Bell and Gordon JJ in Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd are pertinent:

'[The relevant clause] is to be construed by reference to the commercial purpose sought to be achieved by the terms of the lease. It follows, as was pointed out in the joint judgment in Electricity Generation Corporation v Woodside Energy Ltd, that the court is entitled to approach the task of construction of the clause on the basis that the parties intended to produce a commercial result, one which makes commercial sense. It goes without saying that this requires that the construction placed upon [the relevant clause] be consistent with the commercial object of the agreement. (footnotes omitted) (emphasis added)'

At each point where a constructional choice is available, it is important to consider what reasonable business people reading the relevant clause or agreement would understand it to mean.

Implication of a term in fact, by reference to what is necessary to give the contract business efficacy, is an exercise in construction, raising issues as to the meaning and effect of the contract, albeit not an orthodox instance of construction.

The observations of Barwick CJ in Upper Hunter are also important in approaching the proper construction of the Agreement:

'[A] contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. Lord Tomlin's words in this connexion in Hillas & Co Ltd v Arcos Ltd ought to be kept in mind. So long as the language employed by the parties, to use Lord Wright's words in Scammell (G) & Nephew Ltd v Ouston is not "so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention", the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved. (footnotes omitted) (emphasis added)'

Similarly, in Meehan v Jones, Mason J said that the traditional doctrine of construction is that courts should be astute to adopt the construction which will preserve the validity of the contract.

Given the nature of the CITIC parties' contentions, we bear in mind the limits inherent in the process of construction. As Gageler and Keane JJ observed in Taylor v The Owners - Strata Plan No 11564, albeit in the context of statutory construction, construction involves expounding the meaning of the text, not remedying the parties' inattention. Like construction of a statute, construction of a contract is not repair.

BGC says that cl 24.6 operates to qualify the indemnities given by the parties in the foregoing subpars of cl 24. This is said to be obvious from the language of the clause and its placement within cl 24.[18]
BGC argue that cl 24.6 operates to qualify the indemnities in cl 24.1 so that the loss particularised in [14(a)] of the counterclaim, namely, loss of profit and loss of opportunity to obtain a profit, is expressly excluded, such that to the extent that such losses exist at all, BGC cannot be held liable for them.[19]
BGC also says, there is no reasonable construction of cl 24.6 by which BGC could ever be liable for lost profits of any kind (much less those alleged by Cliffs).[20]
BGC contends that cl 24.6 is expressed to be applicable to both parties and expressly excludes liability in any circumstances, for among other things, 'loss of revenue', 'loss or deferment of opportunity' and 'loss of profit' and that the 'loss of profit' may be 'direct, indirect, anticipated or otherwise' and 'howsoever arising'.[21]
Importantly, BGC argue that the exclusion of loss of profit and loss of opportunity by operation of cl 24.6 applies equally to a direct loss as it does to an indirect loss of profit, and can be properly characterised as a loss that is anticipated or otherwise. BGC contends that cl 24.6 is clear and unambiguous. It is said to relieve both parties from any liability, in any circumstances, and howsoever arising, for not only any indirect, special or consequential loss, but includes a series of defined losses which the parties specifically agreed were to be excluded. [22]
BGC says that the analysis required is therefore to characterise the relevant loss and damage allegedly suffered by Cliffs and assess whether it answers to one of the specific losses identified in cl 24.6. If it does then it is excluded and that is, as BGC contends, the end of the inquiry. If it does not, one asks whether the loss or damage nevertheless answers to the description of 'indirect, special or consequential loss or damage'? In doing so, proper regard must be had to the character of the specific losses and recognise that in addition to identifying what losses are expressly excluded, the words flesh out the meaning of the expression, 'indirect, special or consequential loss or damage'.[23]
However, what constitutes 'consequential loss' must necessarily be approached by reference to the proper construction of the contract as a whole, and in the context in which it appears, rather than by an application of any general rule.[24]
As Mitchell J observed in Patersons Securities Ltd v Financial Ombudsman Service Ltd, what emerges from a review of the authorities considering the approach to the construction of expressions such as 'direct loss', 'indirect loss' and 'consequential loss'[25] (appearing in exclusion clauses) is a variety of different views expressed by very eminent judges and academics as to the proper approach to the construction of those terms.
His Honour also relevantly observed that for many contracts a loss of profits can only arise as a consequential or indirect loss (and thus will not be classified as a normal loss) because generally the profits which a plaintiff will make depend on the particular plaintiff's revenue or cost streams. Although, Mitchell J also points out that there may be particular cases where that is not so.[26]
BGC says it follows that if the parties were at such pains to exclude liability for loss of profit of any kind, it is reasonable to expect that they would also wish to exclude the loss of opportunity to obtain such a profit. It is said, therefore, that it is no surprise that the parties did just that by expressly providing that neither party would be liable to the other for 'loss or deferment of opportunity', a loss which even if it were not expressly excluded, would be excluded in any event, as indirect, special or consequential.[27]
BGC argues that it follows that cl 24.6 is a complete answer to the whole of the amended counterclaim and the amended counterclaim should be dismissed pursuant to O 16 r 1 of the Rules as being frivolous and vexatious (because it is obviously unsustainable) and because BGC has a complete defence on the merits.[28]
For the same reason, BGC argues that [14] and [15] of the counterclaim are liable to be struck out pursuant to O 20 r 19(1)(a), (b) and (d) of the Rules as disclosing no reasonable cause of action (because cl 24.6 renders the claims barred and not maintainable); as being frivolous and vexatious (because they are obviously unsustainable); and as amounting to an abuse of process (because there is an obvious and complete legal bar to the claims).[29]
BGC's position is that cl 24.6 is clear and unambiguous in its terms and expressly identifies the specific losses for which the parties agreed that neither of them would be liable. The parties did not leave it open to others to determine whether those losses were 'indirect, special or consequential'. According to BGC, cl 24.6 is intended to have, and does have, the effect of excluding BGC from liability for all of the losses pleaded in the counterclaim, and in respect of which Cliffs seeks to be indemnified.[30]
Cliffs concedes that the construction contended by BGC is at least contestable.[31] Cliffs, however, argue that BGC's construction must:

(a) necessarily ignore the effect of cl 24.1 or have the effect of overriding cl 24.1; and

(b) necessarily requires for the words 'indirect, special or consequential loss or damage' to be ignored or to be regarded as having no effect.

BGC's construction is also said by Cliffs to ignore the effect of cl 24.5(a)(iii) which provides that the indemnities given in cl 24.1 and cl 24.3 are (each) additional, separate and an independent obligation of the indemnifying party.[32]
Cliffs say if, as BGC contends, cl 24.6 qualifies cl 24.1 and cl 24.3, that would denude cl 24.1(a) of any sphere of operation and fails to congruently construe the mining services contract as a whole. Cliffs submits that cl 24.6 must be construed congruently with cl 24.1 and cl 24.3.[33]
Cliffs contends that the proper construction of cl 24.6, within the context of the mining services contract, with particular regard to cl 24.1 and cl 24.3, is that, to the extent that cl 24.6 excludes direct loss of profit, that exclusion applies only to loss suffered by BGC. That is said to be because by cl 24.1, BGC has expressly indemnified Cliffs against any and all loss directly arising from a breach of the mining services contract by BGC, yet Cliffs (unlike BGC) has not indemnified BGC against any and all losses (cl 24.3).[34]
Cliffs contends that this construction is consistent with the words in the parentheses in cl 24.6, referring to the exclusion of loss of the 'Performance Fee' from the type of loss of profit excluded. That is, accepting for the purposes of this application that a reference to loss of profit that can be suffered only by BGC, indicating that the words in the parentheses are only referable to loss of profit of a type suffered by BGC not Cliffs.[35]
Cliffs argue that cl 24.1(a) applies to direct and indirect losses. It points out that cl 24.1(a) applies to a Loss or Claim (as defined) whereas cl 24.6 applies to a loss of profit (among other losses).
'Loss' is defined in cl 1.1 to mean (unless a contrary intention appears) to include any loss, damage, liability, compensation, fine, penalty, charge, payment, cost or expense however it arises and whether it is present or future, fixed or unascertained, actual or contingent.
'Claim' is defined in cl 1.1 to mean (unless a contrary intention appears), in relation to a person, any claim, cause of action, proceeding, liability, suit or demand made against the person concerned, however it arises and whether it is present or future, fixed or unascertained, actual or contingent.
Cliffs argues that its construction is also consistent with the context in which the mining services contract is to be performed. It says that if cl 24.6 is to be construed as excluding any claim by Cliffs for a loss which might be characterised as a loss of profit (whether direct or indirect, and whether arising from a loss of revenue or production not just an increase in expenses), that would effectively deny Cliffs of any remedy for breach by BGC of its obligation to comply with the Principal's Mine Plan, because such breach will always cause loss of production, loss of revenue, and loss of profit as such loss of benefit is in effect the sole benefit of the mining services contract to Cliffs.[36]
Consequently, Cliffs argue that the construction of cl 24.6 advanced by BGC would in effect deprive BGC's promise to perform the mining services in accordance with the Principal's Mine Plan of all contractual force and reduce it to a mere declaration of intent.[37] It is said that a construction with such effect should not readily be accepted.
While Cliffs accepts that the loss it has particularised at [14(a)] of the amended counterclaim can be characterised as a 'loss of profit' or a loss of 'anticipated' profit, that does not resolve the question of the interpretation of cl 24 as a whole.[38]
Cliffs also points out that tensions arise within the terms of cl 24.6 itself.[39]
The operative part of cl 24.6 excludes liability for 'indirect, special or consequential loss or damage'. Those words have no fixed legal meaning, and must be construed in the context of the particular contract in issue, including, potentially, the surrounding circumstances.[40]
A tension arises from the expression in the inclusive list of examples of such loss purportedly including 'direct' or 'indirect' loss of profit, whereas the operative part of the clause excludes only 'indirect' loss.[41]
The exclusion of 'direct' loss of profit may also have to be reconciled with the absence of that adjective, for example, for loss of revenue. The loss of revenue example may be qualified by the preceding words 'indirect, special or consequential'. Profit, of course, is revenue less expenses.[42]
Perhaps the only way of reconciling the exclusion of a 'direct' loss of profit with the non-exclusion of a 'direct' loss of revenue, may be to construe the exclusion of 'direct' loss of profit as applying only where the loss of profit is caused by an increase in expenses, rather than a ('direct') loss of revenue.[43]
Cliffs' claim, in particular [14(a)] of the amended counterclaim, is said to be by it for a loss of profit caused by a direct loss of revenue (and a direct loss of production) not by an increase in expenses.[44]
Cliffs concedes that its alternative construction to cl 26.4 may necessarily require the words 'neither party will be liable to the other party' be read down so as to not to apply to Cliffs.
BGC takes a different view of Cliffs' alternative construction. BGC says that the construction put forward by Cliffs necessarily requires the adoption of additional words to be read into cl 24.6.[45] It says that Cliffs' approach requires that cl 24.6 be read subject to cl 24.1, and insofar as cl 24.6 does not include certain losses of profit necessarily would require a further exemption to be read into cl 24.6, such as the words 'indirect' loss of profit suffered by Cliffs except where the loss of profit suffered by Cliffs is caused by an increase in expenses or by a loss of revenue and/or a loss of production'.[46]
It also says that Cliffs seek to circumvent the express language of cl 24.6 by pressing an apparent 'as yet unpleaded' case for rectification, masquerading as a question of constructional choice.[47]
During argument, a third possible construction of cl 24.6 emerged and that is by the use of the word 'including' which immediately follows the words 'indirect, special or consequential loss or damage'. What immediately follows are specified losses, which include direct, indirect, anticipated or otherwise loss of profit, which should be construed by the ejusdem generis principle; that is, the words that follow 'including' should be construed to define the class of loss and the damage that is indirect, special or consequential loss.[48]
The construction advanced on behalf of BGC may require the effect of the word 'includes' to be read as a word that does not list the specified matters that follow as words that are categories of indirect, special or consequential loss or damage, but instead are categories of loss or damage that are in addition to any indirect, special or consequential loss. Whether it is open to do so to exclude the loss and damage pleaded by Cliffs may turn upon the proper characterisation of the nature of the loss of profit and loss of opportunity, and in particular, whether such losses and damage are to be characterised as indirect, special or consequential.
The meaning of the word 'including' depends upon the context in which it is used. The word 'including' in a definition can be interpreted to be inclusive but not exhaustive if it is intended to enlarge the ordinary meaning of a word or words.[49]
The word 'including' can also, in some contexts, be interpreted to reduce the ambit of a defined term; that is, to limit a defined term.
In YZ Finance Co Pty Ltd v Cummings, the High Court was called upon to determine whether s 24(2) of the Moneylenders and Infants Loans Act 1941 (NSW) exhaustively prescribed the ambit of the word 'security' which was defined to include certain transactions which did not list a promissory note among the inclusions.[50] In this context, Kitto J observed:[51]

I agree in the conclusion that sub-s (2) of s 24 exhaustively prescribes the ambit of the word 'security' for the purposes of the section. It is expressed as a statement of what the word 'security' in the section 'includes'. Unlike the verb 'means', 'includes' has no exclusive force of its own. It indicates that the whole of its object is within its subject, but not that its object is the whole of its subject. Whether its object is the whole of its subject is a question of the true construction of the entire provision in which the word appears. The well-known statement of Lord Watson in Dilworth v Commissioner of Stamps should not be taken so literally as to reduce the inquiry in a case like the present to an inquiry into the meaning of the word 'includes'. Strictly speaking, that word cannot be equivalent to 'means and includes'. But a provision in which it appears may or may not be enacted as a complete and therefore exclusive statement of what the subject expression includes. A provision which is of that character has the same effect as if 'means' had been the verb instead of 'includes'. The question whether a particular provision is exclusive although 'includes' is the only verb employed is therefore a question of the intention to be gathered from the provision as a whole.

In Credit Suisse AG, Sydney Branch v Springsure Property Holdings Pty Ltd (in liq), Bond J had regard to the observations made by Kitto J in YZ Finance Co Pty Ltd, and pointed out:[52]

(b) In Urica Library System BV v Sanderson Computers Pty Ltd [1997] NSWSC 454, Sheller JA (with whom Mason P and Meagher JA agreed), observed that the word 'including' can serve a number of different functions:

(i) one is to 'extend the meaning of the word defined beyond its ordinary meaning';

(ii) another is 'not merely to add to the natural significance of the word defined, but to afford an exhaustive explanation of the meanings to be attached to that word in the particular document'; and

(iii) a third might be 'not so much to extend the ordinary meaning of the defined term as to specify as falling within the definition that which might otherwise have been in doubt.

The word 'including' is used in cl 24.6 to both 'extend the meaning of the word defined beyond its ordinary meaning' and 'to specify as falling within the definition that which might otherwise have been in doubt'.
In written submissions filed on 12 June 2019, BGC argues that the language of cl 24.6 precludes any argument that loss of profits or anticipated profits may be claimed by one party against the other. In particular:[53]

(a) The term 'including' is used in cl 24.6 to both extend (where necessary) the meaning of 'indirect, special or consequential loss and damage' to include each of the defined losses and damage[54] and to specify and remove any doubt that each of those defined losses or damage falls within the definition of 'indirect, special or consequential loss or damage'. In either event, loss of profit and anticipated profits are excluded.

(b) To construe the word 'including' in cl 24.6 in the manner articulated above removes any socalled 'tension' (real or imagined) within the clause, and gives meaning to both the list of defined losses (which would be redundant otherwise), and to the words in parenthesis 'whether direct, indirect, anticipated or otherwise' by which the parties were at pains to put it beyond doubt that the excluded 'loss of profit' extends to loss of profit of any kind other than BGC's Performance Fee.

(c) If the word 'including' was to be construed in such an unusual manner as to confine the objects in cl 24.6 (ie each of the defined losses and damage, including loss of profit) to those falling within the subject ('indirect, special or consequential loss or damage') such that only loss or damage answering the description of 'indirect, special or consequential loss' was excluded, it would:

(i) be contrary to cl 1.2(b)(v) of the mining services contract; and

(ii) also tend to render both the defined losses themselves, and the words in parenthesis after 'loss of profit', a nullity and of no effect,

and so it cannot reasonably be suggested that this is the proper construction of cl 24.6 or that this was the objective intention of the parties.

BGC then go on, in their written submissions, to observe that contrary to BGC's position, even if the word 'including' in cl 24.6 is taken to be a word of limitation, does this assist Cliffs? It says the answer is no. Even if the word 'including' is construed so as to afford an exhaustive explanation, contrary to the effect of cl 1.2(b)(v) of the mining services contract, of the meanings to be attached to the phrase 'indirect, special or consequential loss and damage', Cliffs must confront the reality that the phrase 'loss of profit (whether direct, indirect, anticipated or otherwise ... )' remains in the clause. Those words cannot be ignored. Given Cliffs has admitted that the loss it seeks by counterclaim is confined to loss of profit and anticipated profit, the inescapable conclusion for Cliffs is that the claim is excluded.[55]
However, as senior counsel for Cliffs points out, such a construction, if applied, may well require some words in cl 24.1 and cl 24.6 to be given no effect or to be read down. In particular, such a construction may require cl 24.1 to be construed as a provision that provides for an indemnity for direct losses and for cl 24.6 to only exclude liability for indirect or consequential loss or damage. Whether such a constructional choice would be open is not clear.
As Allanson J recently pointed out in AGC Industries Pty Ltd v Karara Mining Ltd:[56]

In H & E Van Der Sterren v Cibernetics (Holdings) Pty Ltd Walsh J said:

'The terms of exception clauses must sometimes be read down if they cannot be applied literally without creating an absurdity or defeating the main object of the contract ... But such a modification by implication of the language which the parties have used in an exception clause is not to be made unless it is necessary to give effect to what the parties must be understood to have intended.'

The construction of a clause limiting liability depends on the language used, read in context, and not on assumptions that particular events were not to be protected. The exclusion of liability may still apply even where those events may defeat the main object of the contract.

Importantly, despite the valiant submissions made by counsel for BGC, as senior counsel for Cliffs also points out none of the constructions considered in argument reconciles all of the operative words of cl 24.1 and cl 24.6 (my emphasis).
The problem to be resolved in interpreting cl 24 is that because of the express inclusion of cl 24.1(a), both cl 24.1 and cl 24.6 appear to cover the same 'field' and are open to be each construed broadly. Clause 24.1 does not appear to be confined to Losses and Claims arising out of an action or claim made by a third party. The extent of the subject matter of cl 24.1(a) and cl 24.6 could be said to directly collide. Both prima facie appear to deal squarely with the same subject matter. On one reading of cl 24.1(a) BGC is required to indemnify Cliffs for all loss of profit, whether direct or indirect, arising out of a breach of the mining services contract. On the other hand, cl 24.6 prima facie excludes liability for such losses.
Such a constructional choice should only be resolved in a final hearing on the question.
The argument on this point is proceeded only on the basis of assertions made in the amended counterclaim. There are no facts before the court. The question of what is contemplated by the damage and loss indemnified in cl 24.1 and excluded in cl 24.6 necessarily requires consideration of the context and purpose of the whole of the mining services contract and the pleaded facts.
In the absence of consideration of these matters it is my view that this is not an appropriate case in which to consider, with any finality, the proper construction of cl 24 in a case for summary judgment.
For these reasons, it is also not appropriate to strike out [14] and [15] of the amended counterclaim. BGC's application for summary judgment or strike out is dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

EH

Research Associate/Orderly to the Honourable Justice Smith

10 JULY 2019

[1] Cliffs' amended counterclaim, filed 17 May 2019 [1].

[2] Cliffs' amended counterclaim, filed 17 May 2019 [2(a)].

[3] Cliffs' amended counterclaim, filed 17 May 2019 [2(j)].

[4] Cliffs' amended counterclaim, filed 17 May 2019 [6] – [12]; see generally, the requirements pleaded by Cliffs in its amended defence, filed 3 May 2019 [4] – [12].

[5] Cliffs' amended counterclaim, filed 17 May 2019 [13].

[6] Cliffs' amended counterclaim, filed 17 May 2019 [14].

[7] Cliffs' amended counterclaim, filed 17 May 2019 [15].

[8] ts 24 May 2019, 11 - 12.

[9] Gerovich v Gerovich [2018] WASC 153 [26] [29] (citations omitted).

[10] EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23 [124] (Buss JA; Owen & Newnes JJA agreeing); Great Southern Finance Pty Ltd (in liq) v Rhodes [2014] WASC 431 [28] (Beech J); Betfair Pty Ltd v Racing New South Wales [2010] FCAFC 133; (2010) 273 ALR 664 [49] (Keane CJ, Lander & Buchanan JJ).

[11] DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170 [32] - [34].

[12] Great Southern Finance Pty Ltd (in liq) v Rhodes [2014] WASC 431 [26] (Beech J); applying Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 [46] (Gleeson CJ, Gummow, Hayne & Crennan JJ); Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57] (Gaudron, McHugh, Gummow & Hayne JJ).

[13] Great Southern Finance Pty Ltd (in liq) v Rhodes [2014] WASC 431 [26] (Beech J).

[14] Moran v Atrum Coal NL [No 5] [2016] WASC 23 [11] - [13] (Mitchell J).

[15] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35] (French CJ, Hayne, Crennan & Kiefel JJ).

[16] Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80 [296] (Buss P, Murphy & Beech JJA); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46] - [52] (French CJ, Nettle & Gordon JJ); Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 260 CLR 85 [79] (Gageler, Nettle & Gordon JJ).

[17] Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80 [297] [302].

[18] BGC's outline of submissions in support of its application, filed 1 April 2019 [18].

[19] BGC's outline of submissions in support of its application, filed 1 April 2019 [19].

[20] BGC's outline of submissions in support of its application, filed 1 April 2019 [20].

[21] BGC's outline of submissions in reply, filed 6 May 2019 [10(e)].

[22] BGC's outline of submissions in support of its application, filed 1 April 2019 [15] [16].

[23] BGC's outline of submissions in support of its application, filed 1 April 2019 [17]; citing Transocean Drilling UK Ltd v Providence Resources Plc [2016] EWCA Civ 372; [2016] 1 CLC 585 [24] (Moore-Bick LJ; MacFarlane & Briggs LJJ agreeing).

[24] Patersons Securities Ltd v Financial Ombudsman Service Ltd [2015] WASC 321 [127] (Mitchell J); applying Kenneth Martin J's observations in Regional Power Corporation v Pacific Hydro Group Two Pty Ltd [No 2] [2013] WASC 356; (2013) 46 WAR 281 [88] [89].

[25] Patersons Securities Ltd v Financial Ombudsman Service Ltd [2015] WASC 321 [125].

[26] Patersons Securities Ltd v Financial Ombudsman Service Ltd [2015] WASC 321 [126]; his Honour gives the example of where the relevant contractual obligation is to secure a minimum net rental return, the failure to deliver such a return would then produce a 'normal loss' which any plaintiff having the benefit of that contractual promise would suffer.

[27] BGC's outline of submissions in support of its application, filed 1 April 2019 [21].

[28] BGC's outline of submissions in support of its application, filed 1 April 2019 [23].

[29] BGC's outline of submissions in support of its application, filed 1 April 2019 [24].

[30] BGC's outline of submissions in support of its application, filed 1 April 2019 [25].

[31] ts 31, 24 May 2019.

[32] ts 30, 24 May 2019.

[33] Cliffs' submissions in opposition to BGC's application, filed 18 April 2019 [14].

[34] Cliffs' submissions in opposition to BGC's application, filed 18 April 2019 [15].

[35] Cliffs state that whether the 'Performance Fee' is profit will be in issue at trial.

[36] Cliffs' submissions in opposition to BGC's application, filed 18 April 2019 [17].

[37] Cliffs' submissions in opposition to BGC's application, filed 18 April 2019 [18]; citing Suisse Atlantique Societe d'Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361, 432 (Lord Wilberforce). However, if the words are clear and fairly susceptible to only one meaning that may be the effect of such a clause; noting the discussion in Transocean Drilling UK Ltd v Providence Resources Plc [2016] EWCA CIV 372; [2016] 1 CLC 585 [25] [31] (Moore-Bick LJ; MacFarlane & Briggs LJJ agreeing).

[38] Cliffs' submissions in opposition to BGC's application, filed 18 April 2019 [19].

[39] Cliffs' submissions in opposition to BGC's application, filed 18 April 2019 [20].

[40] Regional Power Corporation v Pacific Hydro Group Two Pty Ltd [No 2] [2013] WASC 356; (2013) 46 WAR 281 [88]-[96] (Kenneth Martin J); SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138 [23] (Pullin, Newnes & Murphy JJA).

[41] Cliffs' submissions in opposition to BGC's application, filed 18 April 2019 [21].

[42] Cliffs' submissions in opposition to BGC's application, filed 18 April 2019 [22].

[43] Cliffs' submissions in opposition to BGC's application, filed 18 April 2019 [22].

[44] Cliffs' amended counterclaim, filed 17 May 2019 [14(a)]; Cliffs' submissions in opposition to BGC's application, filed 18 April 2019 [23].

[45] ts 25, 24 May 2019.

[46] ts 36, 24 May 2019.

[47] BGC's outline of submissions in reply, filed 6 May 2019 [12].

[48] ts 18 22, 24 May 2019.

[49] Sherritt Gordon Mines Ltd v Federal Commissioner of Taxation [1977] VicRp 42; [1977] VR 342; (1976) 10 ALR 441, 353 (McInerney J) (a statute case); applied in Hagipantelis v Legal Services Commissioner of New South Wales [2010] NSWCA 79; (2010) 78 NSWLR 82 [20] (Spigelman CJ; Allsop P & Handley AJA agreeing).

[50] YZ Finance Co Pty Ltd v Cummings [1964] HCA 12; (1964) 109 CLR 395.

[51] YZ Finance Co Pty Ltd v Cummings [1964] HCA 12; (1964) 109 CLR 395, 401 402.

[52] Credit Suisse AG, Sydney Branch v Springsure Property Holdings Pty Ltd (in liq) [2017] QSC 142 [35].

[53] BGC's outline of submissions in reply, filed on 12 June 2019 [11].

[54] Being 'loss of revenue, loss of production, loss of product, loss or deferment of opportunity, loss or deferment of contract, loss of profit etc ... '.

[55] BGC's outline of submissions in reply, filed 14 June 2019 [12].

[56] AGC Industries Pty Ltd v Karara Mining Ltd [2019] WASC 140 [326] – [327]; applying Nissho Iwai Australia Ltd v Malaysian International Shipping Corporation, Berhad [1989] HCA 32; (1989) 167 CLR 219, 226 227; H & E Van Der Sterren v Cibernetics (Holdings) Pty Ltd (1970) 44 ALJR 157, 158 (Barwick CJ & Kitto J agreeing) (citations omitted).

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