FEDERAL COURT OF AUSTRALIA

Rimfire Energy Pty Ltd v BSF Co Pty Ltd [2024] FCA 602

ORDERS

THE COURT ORDERS THAT:

1.    The separate questions ordered to be heard and determined separately by order made on 14 March 2024 (Orders) be answered as follows:

(a)    Question 1: On the proper construction of the Batchelor PPA (as defined in paragraph 3 of the Applicant’s Concise Statement dated 4 April 2023 (the Concise Statement)) and the Hudson Creek PPA (as defined in paragraph 13 of the Concise Statement), does the Court need to determine the validity of each or any of the extension of time claims set out in Annexure A to the Orders in order to determine whether 50% of the invoiced amount of liquidated damages, in the invoices issued by the Applicant to the relevant Respondent set out in Annexure B to the Orders, is payable under cl 12.4(a) of the Batchelor PPA and cl 11.4(a) of the Hudson Creek PPA? Answer: No.

(b)    Question 2: If the answer is no, has the Applicant proven that 50% of the invoiced amount of liquidated damages is payable (pending determination of the final trial) under cl 12.4(a) of the Batchelor PPA and cl 11.4(a) of the Hudson Creek PPA? Answer: Yes.

2.    The proceeding be listed for further hearing on a date to be fixed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

O’CALLAGHAN J

INTRODUCTION

1    On 14 March 2024, I made orders pursuant to r 30.01(1) of the Federal Court Rules 2011 (Cth) that two questions be heard and determined separately from other questions in this proceeding.

2    Those questions turn on the proper construction of two Power Purchase Agreements, namely the “Power Purchase Agreement – Batchelor Solar Farm” dated 27 February 2020 (the Batchelor PPA) and the “Power Purchase Agreement – Hudson Creek Power Station” dated 18 February 2020 (the Hudson Creek PPA, collectively the PPAs).

3    The applicant is the Buyer under both PPAs.

4    The first respondent is the Owner under the Batchelor PPA. Pursuant to the Batchelor PPA, the first respondent agreed to develop and construct a 10MW solar farm near Batchelor, 100 km south of Darwin, and the applicant agreed to purchase all electricity there generated. The Batchelor PPA set the “Target Commercial Operation Date” for the solar farm as 30 June 2021, “subject to an extension of time”.

5    The second respondent is the Owner under the Hudson Creek PPA. Pursuant to the Hudson Creek PPA, the second respondent agreed to develop and construct a 12MW gas fired power station close to the Hudson Creek Terminal Station in Darwin, and the applicant agreed to purchase all electricity generated by that power station. The Hudson Creek PPA set the Target Commercial Operation Date as 1 July 2021, again subject to an extension of time.

6    Neither the Batchelor solar farm nor the Hudson Creek power station has commenced operating.

7    On 21 November 2022, the applicant issued to each of the respondents an invoice for liquidated damages on the basis that the respondents had failed to achieve the “Commercial Operation Date” by the Target Commercial Operation Date under each PPA. The invoice in respect of the Batchelor solar farm was for $365,000. The invoice in respect of the Hudson Creek power station was for $1,035,000.

8    The respondents have not paid any amount of those invoices and dispute them on the grounds that they have claimed valid extensions of time (EOTs) to the Target Commercial Operation Dates pursuant to clause 5 of the PPAs, which had the effect of extending the Target Commercial Operation Date up to, at least, the current date.

9    In this proceeding, the applicant seeks damages under the Australian Consumer Law (being Schedule 2 of the Competition and Consumer Act 2010 (Cth)) and liquidated damages plus interest in respect of the respondents’ failure to pay the invoices.

10    The applicant contends that the EOTs were not validly made under the PPAs. In the alternative, the applicant contends that — even if the EOTs that the respondents had claimed by 18 August 2023 (being the date of the applicant’s concise statement in reply) were valid — those EOTs were in terms that only extended the Target Commercial Operation Dates to, at the most, 17 February 2023 (for the Batchelor PPA) and 28 February 2023 (for the Hudson Creek PPA). Because the entitlement to liquidated damages under the PPAs is capped at six months of delay, the applicant asserts that even on the respondents’ case (but for one remaining issue of construction referred to below at paragraph 66) by the end of August 2023, the full amount of the liquidated damages is payable under both PPAs.

11    Those issues will be dealt with at the final hearing.

12    The questions with which I am presently concerned are:

(1)    On the proper construction of the Batchelor PPA and the Hudson Creek PPA, does the court need to determine the validity of each or any of the EOT claims in order to determine whether 50% of the invoiced amounts of liquidated damages is payable under clause 12.4(a) of the Batchelor PPA and clause 11.4(a) of the Hudson Creek PPA?

(2)    If the answer to the first question is “no”, has the applicant proven that 50% of the invoiced amounts of liquidated damages is payable (pending determination of the final trial) under clause 12.4(a) of the Batchelor PPA and clause 11.4(a) of the Hudson Creek PPA?

13    For the following reasons, the questions are to be answered as follows:

(1)    No.

(2)    Yes.

14    The applicant submitted that if the court determined that it was entitled to the interim amounts, the respondents should also be required to pay interest. But the evidence about interest was late filed and neither agreed separate question referred to the question. In those circumstances, the parties agreed at the hearing that the issue can be revisited at a later date, if necessary.

APPLICABLE PRINCIPLES OF CONSTRUCTION

15    As I said, determination of the separate questions turns on the proper construction of the PPAs.

16    The principles applicable to the construction of commercial contracts are well-established and were not in dispute.

17    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, construed by reference to the language used by the parties, the entire text of the contract, the surrounding circumstances, and the commercial purpose or objects to be secured by the contract. See Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656–657 [35] (French CJ, Hayne, Crennan and Kiefel JJ); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46] (French CJ, Nettle and Gordon JJ). See also Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514 at [44] (Kiefel CJ, Gageler, Nettle and Gordon JJ).

18    Appreciation of the commercial purpose or objects of the contract is facilitated by an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating. Unless a contrary intention is indicated, a court is entitled to assume 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. See Woodside Energy at 656–657 [35] (French CJ, Hayne, Crennan and Kiefel JJ).

19    Ordinarily, this process of construction is possible by reference to the contract alone. If an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding events, circumstances and things external to the contract cannot be adduced to contradict its plain meaning. See Mount Bruce Mining at [48] (French CJ, Nettle and Gordon JJ).

RELEVANT PROVISIONS OF THE PPAS

20    The relevant provisions of the two PPAs are in near identical terms, save for some differences in clause numbering.

21    Below, I set out below the clauses relevant to the dispute as they appear in the Hudson PPA (noting in parentheses any differences in the Batchelor PPA where these arise).

22    Clause 6.2, under the heading “Liquidated damages payable”, provides that:

(a)    If the Owner fails to achieve the Commercial Operation Date by the Target Commercial Operation Date, the Owner must pay to the Buyer the liquidated damages amount calculated in accordance with schedule 5.

(b)    The Buyer may invoice the Owner, on an interim basis, any amount owed by the Owner to the Buyer under clause 6.2(a) at the end of each Billing Period.

(The Batchelor PPA refers to “schedule 4”, which is in substantially the same terms as schedule 5 of the Hudson PPA.)

23    “Target Commercial Operation Date” is defined in the definitions clause of the PPAs to mean “[s]ubject to an extension of time under clause 5, the date specified in item 6 of schedule 1”.

24    Item 6 of schedule 1 of the Hudson PPA specifies that the Target Commercial Operation Date is 1 July 2021. (In the Batchelor PPA, it is 30 June 2021.)

25    Schedule 5 is in the following terms:

Liquidated damages for failure to achieve the Target Commercial Operation Date

The amount payable by the Owner under clause 6.1 is equal to $5,750, multiplied by the number of days by which the Commercial Operation Date is delayed beyond the Target Commercial Operation Date, up to the earliest to occur of:

(a)    the Commercial Operation Date;

(b)    the date on which the aggregate amount paid or payable by the Owner under clause 6.1 equals or exceeds $1,035,000; and

(c)    the date of termination of this document.

(The amounts in the equivalent schedule of the Batchelor PPA are $2000 and $365,000 respectively.)

26    It was accepted by both parties that schedule 5 incorrectly refers to clause 6.1, and should be read as referring to the liquidated damages provision in clause 6.2. (This error is replicated in the Batchelor PPA.)

27    The effect of clause (b) in schedule 5 is that the maximum liquidated damages payable under clause 6.2 is capped at six months after the Target Commercial Operation Date. The invoices issued by the applicant to the respondents on 21 November 2022 are for the six-month maximum liquidated damages amounts payable under each PPA.

28    Clause 11.2, under the heading “Invoices”, provides:

(a)    The Owner (Invoicing Party) must prepare and submit to the Buyer (Paying Party), within fifteen Business Days after the end of each Billing Period, an invoice setting out each Charge due from the Buyer to the Owner and details how such Charges are calculated (Invoice).

(b)    In respect of any other amount payable by one party (Invoicing Party) to the other party (Paying Party) under this document, the Invoicing Party must deliver to the Paying Party as soon as practicable an invoice (Invoice) for the amount payable under this document.

(The equivalent clause in the Batchelor PPA is clause 12.2.)

29    Clause 11.4, under the heading “Payment and disputes”, relevantly provides that:

(a)    On or before 30 days after the end of each Billing Period, the Paying Party must either:

(i)    pay to the Invoicing Party the amount of the Invoice; or

(ii)    if the Paying Party bona fide disputes any part of the Invoice:

(1)    give to the Invoicing Party a notice stating the part disputed and the reason for the dispute; and

(2)    pay to the Invoicing Party the undisputed amount of the Invoice plus 50% of the disputed amount.

(b)    Promptly after a notice pursuant to clause 11.4(a)(ii)(1) is received by the Invoicing Party, the parties will negotiate with a view to resolving the dispute. If parties fail to agree by the date which is five Business Days after the date the notice is received by the Invoicing Party, either party may give a Dispute Notice pursuant to clause 27.

(c)    Subject to clause 11.4(d), if the Paying Party does not give a notice of dispute in accordance with clause 11.4(a)(ii)(1), the Paying Party is deemed to have accepted the Invoicing Party’s calculations of the amounts included in the relevant Invoice …

(The equivalent clause in the Batchelor PPA is clause 12.4.)

30    Clause 27 sets out the process for resolving any claim, dispute or difference arising between the parties relating to the interpretation or any matter arising out of, or in connection with, the PPAs. It is not necessary to set out clause 27 in full, but in summary it provides that where such a dispute arises it must be resolved in accordance with clause 27 unless otherwise expressly provided in the PPAs. The dispute resolution process in clause 27 is initiated by either party issuing a “Dispute Notice” to the other. The dispute is then referred at the first instance to the chief executive officers of each party for resolution. Failing resolution at the chief executive level, the dispute may (or must in certain circumstances) be referred for resolution by an expert. Absent manifest error, the decision of the expert is final and binding upon the parties. If a dispute is not resolved in accordance with clause 27, the dispute may be referred to a court of the Northern Territory with jurisdiction.

31    Clause 11.6(b) relevantly provides that:

The:

(i)    Paying Party must pay to the Invoicing Party any outstanding amount determined to be payable by the Invoicing Party; or

(ii)    Invoicing Party must pay to the Paying Party the amount of any overpayment,

(as applicable) after:

…

(v) resolution of any Dispute under this document,

by the date which is 15 Business Days after the date of the completion, resolution or adjustment, together with interest on that amount at the Interest Rate.

32    “Dispute” is defined under the PPAs as having the meaning given in clause 27.

33    Clause 5.1(b), under the heading “Claims for extensions of time”, provides that:

If:

(i)    an Extension Event occurs;

(ii)    the Owner can demonstrate that it has been delayed, or is likely to be delayed, in achieving Commercial Operation as a result of that Extension Event; and

(iii)    within 10 Business Days after the full effects of the Extension Event are determined by the Owner, the Owner submits a written claim to the Buyer for an extension of time,

The Owner will be entitled to an extension of time to the Target Commercial Operation Date.

34    If the Owner submits an EOT claim under clause 5.1(b) but the Buyer does not agree with the period by which the Owner proposes to extend the Target Commercial Operation Date, pursuant to clause 5.2, titled “Disputes relating to an extension of time claim”, the Buyer may refer the matter, within ten business days of receiving the claim, for determination by an expert appointed under clause 27.3.

QUESTION 1

35    The first question for determination is whether, on the proper construction of the PPAs, the court needs to determine the validity of each or any of the respondents’ EOT claims in order to determine whether 50% of the invoiced amounts of liquidated damages is payable under clause 11.4(a) of the Hudson Creek PPA and clause 12.4(a) of the Batchelor PPA. For simplicity’s sake, I will consider that question by reference to the clause numbering as it appears in the Hudson Creek PPA.

The competing constructions

36    The applicant submitted that it has a right to be paid (on or before 30 days after the end of each Billing Period) 50% of the invoices issued for liquidated damages. On the proper construction of the PPAs, the applicant said that clause 6.2(b) allows it to issue an invoice for liquidated damages on an “interim” basis, pending determination of any dispute between the parties, including a dispute as to whether the respondents’ EOT claims are valid and have effectively extended the Target Commercial Operation Date. Although the respondents dispute the liquidated damages invoices on that basis, the effect of clause 11.4(a)(ii) is that they must pay the applicant 50% of the invoices now. On the applicant’s construction it is therefore not necessary to determine the validity of the EOT claims to conclude that 50% of the invoices for liquidated damages is currently payable under the PPAs.

37    The respondents, on the other hand, submitted that the applicant’s entitlement to issue invoices for liquidated damages under clause 6.2 only arises if it has been conclusively determined that the respondent has in fact failed to achieve the Commercial Operation Date by the Target Commercial Operation Date. In circumstances where there is an ongoing dispute between the parties as to whether the Target Commercial Operation Date has been validly extended or not, the respondents said that it is impossible to know what the Target Commercial Operation Date is. And without knowing the Target Commercial Operation Date, the applicant cannot possibly issue, and be paid any amount of, invoices which rely on that date having passed. The respondents therefore contended that unless and until the validity of the EOT claims is determined, the mechanism under clause 11.4(a)(ii) which would otherwise require the respondents to pay 50% of a disputed invoice is not engaged.

Consideration

38    In my view, the construction propounded by the applicant is the correct construction.

39    The meaning of clause 6.2(a) is unambiguous. If the relevant projects have not achieved commercial operation by the Target Commercial Operation Date, the respondents are obliged to pay the applicant liquidated damages.

40    Clause 6.2(a) must then be read together with clause 6.2(b), which specifies that “at the end of each Billing Period” the applicant may invoice the respondents for any amount of liquidated damages owed under clause 6.2(a) “on an interim basis”.

41    Because “interim” is not defined in the PPAs, it is to be given its ordinary and natural meaning, viz “belonging to or connected with an intervening period of time” (for example, an “interim” dividend) or in the sense of something being “temporary” or “provisional” (such as an “interim” order).

42    The respondents argued that the reference to “interim” in clause 6.2(b) must be construed only in its “temporal” sense and that clause 6.2(b) should be read as simply allowing the applicant to issue invoices for any liquidated damages owing under clause 6.2(a) on a periodic, or “progressive”, basis.

43    As outlined above, the total amount of liquidated damages payable under clause 6.2(a) is calculated until the earliest of (a) the Commercial Operation Date being achieved; (b) six months after the Target Commercial Operation Date; or (c) the termination of the PPA. The respondent submitted that, by stating that invoices may be issued on an “interim basis”:

[c]lause 6.2(b) of the PPAs makes clear that the Applicant is not required to await the happening of any of the above three events prior to levying liquidated damages. Instead, it is entitled to invoice any amount owed at the end of each month. If the Applicant so elects, it is entitled to invoice for liquidated damages belonging to or connected with the period of time to which the invoice relates. The sense in which an amount payable for liquidated damages could be considered “provisional” under this regime, is that further amounts will become owing over time. In the absence of clause 6.2(b) of the PPAs, the ability for the Applicant to claim liquidated damages on a progressive basis would instead need to arise by implication.

44    I do not accept that submission. In my view, the applicant’s ability to issue progressive invoices in the manner described by the respondents does not depend upon the existence of the words “on an interim basis” in clause 6.2(b). The applicant can invoice the respondents for “any amount owed under clause 6.2(a) … at the end of each Billing Period.” The respondents’ preferred construction of “on an interim basis” would give that phrase little, if any, work to do.

45    In my view, the phrase in clause 6.2(b) “on an interim basis” is to be understood as allowing the applicant to issue invoices for liquidated damages on a “provisional” basis, in the sense of not being “final” or “conclusively determined”.

46    The fact that invoices for liquidated damages may be issued on such a provisional basis indicates that the parties contemplated circumstances in which the applicant’s entitlement to liquidated damages under the PPAs may be disputed, including the circumstances that have arisen in this case.

47    Under clause 6.2(a), the respondents’ obligation to pay liquidated damages to the applicant is expressed as arising only “[i]f the [respondent] fails to achieve the Commercial Operation Date by the Target Commercial Operation Date”. The Target Commercial Operation Date is defined under the PPAs as the date specified in item 6 of schedule 1 “[s]ubject to an extension of time under clause 5”. The definition of Target Commercial Operation Date thereby acknowledges that the Target Commercial Operation Date may be the subject of disputation, namely where the respondents have made an EOT claim under clause 5, the validity and effectiveness of which is contested.

48    Hower, unless and until that dispute is resolved, the date specified in item 6 of schedule 1 must stand as the provisional Target Commercial Operation Date. Accordingly, if commercial operation has not commenced when the date specified in item 6 of schedule 1 passes, and the validity of any EOT claims has not yet been finally determined, the applicant has at least a prima facie entitlement to liquidated damages under clause 6.2(a). It is true that it may ultimately be determined that the applicant had no entitlement to liquidated damages because the respondents’ EOT claims are valid and have effectively extended the Target Commercial Operation Date. But, it seems to me, such a state of affairs is precisely why clause 6.2(b) allows invoices for liquidated damages to be issued on an “interim”, as opposed to final, basis.

49    Such a construction is consistent with the context of the PPAs as a whole. When clauses 6.2(a) and (b) are read with clauses 11.2 and 11.4, it is totally clear that the PPA establishes a specific mechanism for dealing with disputed liquidated damages claims.

50    Through use of the verb “invoice”, describing liquidated damages payable under clause 6.2(a) as an “amount owed by the Owner to the Buyer” and providing that invoices for such amounts may be issued “at the end of each Billing Period”, clause 6.2(b) picks up the language and mechanisms of clauses 11.2 and 11.4 which address the general payment (and disputation) of amounts payable under the PPA .

51    Clause 11.2(b) relevantly defines the terms “Invoicing Party”, “Paying Party” and “Invoice”, which are used subsequently in clause 11.4, as follows:

In respect of any other amount payable by one party (Invoicing Party) to the other party (Paying Party) under this document, the Invoicing Party must deliver to the Paying Party as soon as practicable an invoice (Invoice) for the amount payable under this document.

52    Under the heading “Payment and disputes”, clause 11.4(a) then provides that on or before 30 days after the end of each Billing Period, the Paying Party must do one of the following two things in respect of an Invoice:

(i)    pay to the Invoicing Party the amount of the Invoice; or

(ii)    if the Paying Party bona fide disputes any part of the Invoice:

(1)    give to the Invoicing Party a notice stating the part disputed and the reason for the dispute; and

(2)    pay to the Invoicing Party the undisputed amount of the Invoice plus 50% of the disputed amount.

53    If the Paying Party has issued a notice to the Invoicing Party under clause 11.4(a)(i), clause 11.4(b) provides that the parties must promptly negotiate with a view to resolving the dispute within five business days. If the parties fail to resolve the dispute within that time, either party may issue a “Dispute Notice” thereby initiating the dispute resolution process under clause 27. Following resolution of the dispute in accordance with clause 27, pursuant to clause 11.6(b) either the Paying Party must pay the Invoicing Party any outstanding amount payable, or the Invoicing Party must pay to the Paying Party the amount of any overpayment.

54    The PPAs therefore establish a generally applicable mechanism for dealing with disputes regarding amounts payable under the PPAs. Where an invoice issued under the PPA is disputed on a bona fide basis, the Paying Party must pay 50% of the disputed amount to the Invoicing Party on an interim basis. Once the dispute has been finally resolved, the Paying Party then pays the Invoicing Party any amount determined to be still outstanding, or the Invoicing Party pays back any proportion of the 50% interim payment found to be an overpayment.

55    Such “pay now, argue later” mechanisms are not unfamiliar in the context of commercial construction contracts and have been codified in various “security of payment” legislation. See, for example, the Building and Construction Industry Security of Payment Act 2002 (Vic) and the Building and Construction Industry Security of Payment Act 1999 (NSW). Similarly, the PPAs evince an objective intention of the parties to share the risk and financial burden of payment disputes pending their final determination.

56    Crucially, nothing in clause 6 or clause 11, nor any other clause of the PPA, operates to carve out disputes regarding liquidated damages or EOT claims from the general application of the “pay now, argue later” mechanism.

57    There is, in particular, nothing in the PPAs to suggest that the parties intended to exclude interim invoices for liquidated damages, disputed on the basis that a valid EOT claim has extended the Target Commercial Operation Date, from the general rule that 50% of a disputed invoice must be paid to the Invoicing Party pending final resolution of the dispute.

58    In my view, the text, context, and intended commercial allocation of risk under the contract are consistent with the plain meaning of the relevant words, viz that the PPAs allow the applicant to issue invoices for liquidated damages on a provisional basis, in circumstances where the respondents dispute the applicant’s entitlement to liquidated damages on the basis of contested EOT claims.

59    Where an invoice for liquidated damages is so disputed, the respondent is required to pay 50% of the invoice to the applicant pursuant to clause 11.4(a)(ii), pending final determination of the validity and effectiveness of the EOT claims. Following that final determination, the parties must then account for any outstanding amounts or overpayment, as the case may be, in accordance with clause 11.6(b).

60    There is accordingly no need to determine the validity of disputed EOT claims in order to conclude that 50% of the invoiced amounts of liquidated damages are payable under clause 11.4(a). On the contrary, the whole purpose of the “pay now, argue later” mechanism established by the PPA is to ensure the burden of such a dispute is equally shared between the parties pending its final determination.

61    It follows that the answer to question 1 is “no”.

QUESTION 2

62    It therefore becomes necessary to answer question 2, namely, has the applicant proven that 50% of the invoiced amounts of liquidated damages is payable (pending determination of the final trial) under clause 12.4(a) of the Batchelor PPA and clause 11.4(a) of the Hudson Creek PPA?

63    The applicant submitted that the answer to that question is “yes” for the following reasons:

(a)    The applicant has issued invoices for the amounts payable for liquidated damages;

(b)    the respondents have failed to achieve the Commercial Operation Date by the Target Commercial Operation Date, so that clause 6.2(a) applies to entitle the applicant to the invoice amounts as “liquidated damages calculated in accordance with schedule 4”;

(c)    the respondents seek to dispute the claim for liquidated damages on the grounds that the Target Commercial Operation Date was validly extended by their issuing of claims for EOTs under clause 5 of the relevant PPA (and that dispute remains pending);

(d)    the respondents disputed the invoices for liquidated damages; so that

(e)    by reason of there being a dispute pending as to whether the respondents validly extended the Target Commercial Operation Date by the issue of valid EOTs, the PPA’s interim payment mechanism applies so as to entitle the applicant to be paid 50% of the invoiced amounts of the liquidated damages.

64    While reserving its right to contend otherwise at the final hearing, the applicant said it was willing to have the court assume, for the purposes of determining the separate questions, that the respondents’ dispute of the liquidated damages invoices is bona fide, as is required by clause 11.4(a).

65    The respondents submitted that even if the answer to question 2 was “no”, the applicant has not proven that the 50% amounts are payable pending determination of the remaining issues between the parties.

66    The respondents said that, at the final hearing, they will rely on a construction of the PPAs, or alternatively an implied term, to the effect that where the Target Commercial Operation Date cannot be calculated due to an Extension Event, the applicant has no entitlement to liquidated damages (as set out in the respondent’s concise statement in response filed on 22 June 2023).

67    The respondents also pointed to their extant interlocutory application in this proceeding where they seek leave to file an amended concise statement of cross-claim which would:

(a)    “refine” the construction or implied term referred to in paragraph 66 to clarify that its effect is such that “during the currency of an Extension Event the Target Commercial Operation Date is suspended for the duration of the Extension Event”; and

(b)    advance an alternate case that the PPAs were frustrated on 30 March 2020 (such that no contract existed at the time the liquidated damages invoices were issued).

68    The respondents contended that if they are ultimately successful on either the construction argument or their proposed frustration case, it will be clear that no entitlement of the applicant to payment of 50% of the invoices existed. This, it was said, was a sufficient reason to answer question 2 “no”.

69    That submission cannot be accepted.

70    The respondents consented to me hearing the two separate questions before their application for leave to amend their cross-claim was heard and determined. In such circumstances, as senior counsel for the applicant submitted, it was not open for the respondents at the hearing of those questions to contend that the second question cannot be determined until the extant application to amend the cross-claim or the remaining issues in the proceeding have been heard and determined.

71    In any event, the fact that there are further issues to be determined at the final hearing, or that the respondents may (or may not) be given leave to plead a case of frustration, does not bear upon the question of whether the applicant has failed to prove, on the proper construction of the PPAs, its current entitlement to an interim payment of 50% of the liquidated damages invoices. If the respondents are ultimately successful at the final hearing on their construction or frustration arguments, and the court finds the applicant was never entitled to liquidated damages, any “overpayment” to the applicant arising from the interim liquidated damages payment is a matter which can be addressed then.

72    It is necessary to deal with one further point raised by counsel for the respondents during oral argument in support of their submission that the answer to the second separate question should be “no”. The respondents contended that the liquidated damages invoices were invalid because they were issued “nine days too early”. The respondents submitted that this was the case, in effect, because:

(a)    pursuant to clause 6.2(b) of the PPAs, the applicant can only validly issue invoices for liquidated damages “at the end of each Billing Period” (emphasis added);

(b)    the end of the Billing Period is the end of each month;

(c)    the invoices, which were expressed as being due on 30 November 2022, were issued by the applicant on 21 November 2022;

(d)    the applicant’s written submissions in respect of the separate questions stated that the invoices were payable from 30 December 2022, which confirmed that the relevant Billing Period to which the invoices relate is the November 2022 Billing Period;

(e)    the November 2022 Billing Period ended on 30 November 2022; and therefore

(f)    by issuing the invoices in respect of the November 2022 Billing Period on 21 November 2022, the applicant impermissibly issued invoices nine days before the end of the relevant Billing Period.

73    In my view, this submission fails at the first hurdle. I do not accept, as a matter of construction, that the applicant may only validly issue liquidated damages invoices under the PPAs “at the end of” the Billing Period in the sense that invoices can only be issued on the last day of each month.

74    Clause 6.2(b) provides that the applicant may invoice the respondents for “any amount owed … at the end of each Billing Period”. As the applicant submitted, the phrase “at the end of each Billing Period” clearly attaches to the amount of liquidated damages owed, such that the applicant may invoice the respondent any amount owing as at the end of each Billing Period. There is, accordingly, nothing invalid or impermissible in the applicants issuing the invoices on 21 November 2022 in respect of liquidated damages which will be owed at the end of the November Billing Period on 30 November.

75    It follows that, in my view, the applicant has proven its entitlement to the interim payment of 50% of the invoiced amounts, and the answer to the second separate question is “yes”.

CONCLUSION

76    The separate questions are answered accordingly. I will also order that the proceeding be listed for further hearing on a date to be fixed. The parties should liaise with my chambers to convene a case management hearing in the near future.

Associate:

Dated:    7 June 2024