Supreme Court New South Wales Medium Neutral Citation: Causmag Ore Company Pty Limited v Blue NRG Pty Limited [2022] NSWSC 859 Hearing dates: 25 February 2022 Date of orders: 30 June 2022 Decision date: 30 June 2022 Jurisdiction: Common Law Before: Lonergan J Decision: (1) The time within which to file the Summons is extended to 10 September 2021. (2) The appeal is dismissed. (3) The appellant is to pay the respondent's costs of the appeal. Catchwords: LOCAL COURT APPEAL – whether adequate reasons given – whether Local Court erred in not articulating construction of relevant clause in Contract – whether error in constructing clause – whether error in deciding there was no breach of clause 5.2 – no error – reasons adequate – appeal dismissed Legislation Cited: Local Court Act 2007 (NSW) Cases Cited: O'Meara v Adams (No 2) [2021] NSWSC 1167 Spitzer v Ward & Anor [2004] NSWSC 100 Stoker v Adecco Gemvale Constructions Pty Ltd [2004] NSWCA 449 US Manufacturing Co Pty Limited v ABB Service Pty Limited [2008] NSWSC 705 Category: Principal judgment Parties: Causmag Ore Company Pty Limited (Appellant) Blue NRG Pty Limited (Respondent) Representation: Counsel: B Philips (Appellant) A Oakes (Respondent) Solicitors: Mahony Law (Appellant) Steel & Co. Law & Conveyancing (Respondent) File Number(s): 2021/259058 Publication restriction: Nil Decision under appeal Court or tribunal: Local Court Jurisdiction: Civil Date of Decision: 31 May 2021 Before: Magistrate J Kiely File Number(s): 2019/150302 Judgment 1. By Summons filed on 10 September 2021, Causmag Ore Company Pty Ltd ("Causmag") seeks leave (out of time) to appeal a decision of Kiely LCM made in the Local Court sitting at Young on 31 May 2021. 2. Causmag's complaint is that her Honour failed to state her finding as to the proper construction of clause 5.2 of the contract between Causmag and Blue NRG Pty Ltd ("Blue NRG") and that she failed to give any, or any adequate reasons for that finding, and second, that her construction, to the extent she made one, was wrong and she ought to have found Blue NRG repudiated the Contract and so Causmag are entitled to "loss of bargain" damages. 3. It was conceded these are questions of law, and so leave to appeal is not required. An extension of time was sought as the appeal was filed nine days late. No submissions were made about this at the hearing although an affidavit of Mr Pandi sworn 15 October 2021 was read which explained the delay. Accordingly I extend the time within which the appeal could be filed, as there is apparently no opposition to that course. 4. For the reasons that follow however, I have concluded that the grounds of appeal are not made out and the appeal is dismissed. Factual background 1. The facts are fairly and comprehensively set out in her Honour's judgment at pages 1 to 4: "The plaintiff, cross-defendant, Blue NRG Pty Ltd is a wholesale energy provider and the defendant cross-claimant, Causmag Ore Co Pty Ltd is a mining company. The two parties were all parties to a contract for Blue NRG to supply electricity to Causmag between 22 December 2016 and 31 December 2017 inclusive. Invoices for the electricity supply were issued monthly, two invoices were issued on 6 December 2017 and 5 January 2018 totalling $53,379.32. These invoices were unpaid by Causmag. There is no dispute that electricity was supplied and that invoices were property issued. The invoices remained unpaid and a letter of demand was sent out which was not actioned by Causmag. Blue NRG filed a statement of claim on 14 May 2019 for the amount outstanding along with the claim for interest filing, service fees and legal costs. The total of the claim on filing being $58,194.90. Causmag filed a defence in a cross-claim on 14 June 2019. They are claiming set-off for the entirety of the Blue NRG claim on the basis that Blue NRG entered into a new renewed contract with Causmag. Blue NRG's initial offer was by automated letter purported to renew the previous contract at the same prices as they had been paying in the original contract. Causmag claims that in breach of cl 5.2 of the contract Blue NRG increased the cost of the energy supply impermissibly. Causmag claims that Blue NRG, therefore, repudiated the contract and are claiming damages, specifically loss of..(not transcribable).. damages. In defence to the cross-claim Blue NRG denied that a new contract was entered into and that the renewal letter was not an offer capable of acceptance because it was not an offer for a new supply period and/or lacked the fundamental details as to the supply rates payable. Alternatively, Blue NRG say that if, in fact, a new contract was found to have been entered into it was subject to or conditional upon negotiation of price. It also said that if a contract was entered into they were entitled to vary supply rates arid that this was pointed out in the renewal letter dated 13 November 2017 and was done so in compliance with cl 5(2) of the contract entitled "Variations to tariffs and charges'' and also if a new agreed contract was entered into it was uncertain and void because the pricing had not been agreed. After subsequent discussions between the parties a statement of agreed facts was provided stating inter alia that an offer was made and accepted and that there was, in fact, a contract in place. The question then to be determined was significantly narrowed in that it became essential whether or not the proposed price variations complied with cl 5.2 of the contract. The welcome pack sent out to the customer by Blue NRG on the entering into or the renewal of a contract specifically refers on p 4 to when charges may be varied and it included an entire column on this subject. Clause 5(2) of the terms and conditions also provided with the welcome packs specifically provides ….". 1. Her Honour then quoted Clause 5.2, which I reproduce here in the form it appears in the Contract, for clarity: "5.2 Variation to tariffs and charges. "If we vary our tariffs and charges that are applicable to you we will provide you with notices in writing. We may vary your tariffs or charges: (a) to reflect the costs to us of any changes to regulated charges or tariffs, regulatory compliance requirements, metering charges, meter data charges, service charges, loss factors or charges resulting from the operation of the National Electricity Market; (b) to reflect changes in the Consumer Price Index (CPI); (c) to reflect changes in regulated distribution use of system charges, including the introduction of any time of use or flexible pricing distribution network charges or tariffs; (d) to reflect any change in the wholesale electricity hedge arrangements that we have in place, that directly or indirectly increases the cost to us of purchasing the electricity we sell to you, or the cost of hedging its wholesale prices; (e) to reflect any changes in the cost to us in complying with environmental schemes and in any costs arising out of any other regulatory requirements or changes in any other regulatory requirements; (f) to reflect any increase in our costs as a result of a new tax being imposed or the basis for imposing or calculating any existing tax altering." 1. Her Honour continued: "At the end of their contract period for the supply of electricity from Blue NRG the defendant called for tenders for its supply of energy through a broking firm Trans Tasman Energy Group TTEG. TTEG provided a report to the defendant outlining the prospective tenderers and their offers. It recommended that the defendant use Origin as its provider in the future as it was significantly cheaper than the other companies who had submitted tenders. The recommendation report was sent to the defendant company and annexed to it was an analysis report which itemised each tenderer's offer and the ultimate savings over a one to four year contract period. The analysis report included information about best offer, how to accept it, how to change aspects of it, when it was valid to and also some general information about wholesale market prices. It was very clearly set out in the report that Blue NRG's prices were considerably higher than the competitions. Despite its lack of success in the tender process, due to the existing contract ceasing on 31 December 2017, a letter was automatically generated inviting the defendant to renew its contract with Blue NRG. This later letter was dated 30 November 2017 and stated in its reference line "re renewal of your electricity contract". It also stated as part of its general contents "Please not Blue NRG may vary your rates from time to time in accordance with the laws applicable in your State". It would appear that the generation of the renewal letters is an automated process that is undertaken at the conclusion of supply contracts. In this case there had been an exhaustive tender process in which Blue NRG was not chosen by Causmag as its preferred supplier. It would appear that the automated letter should not have been sent out in all the circumstances. In response to the letter of offer to renew the contract under the previous rates Mr Bipin Pandi responded by email on Monday 4 December 2017 "Dear Blue NRG Team, We refer to your email and attached offer. We accept your offer and request you to lease send the confirmation". On 11 December an email was sent from a person by the name of Ang stating "Thank you for letting us know, you will remain an active customer of Blue NRG". There was internal correspondence from Cassie Jennings, the major accounts and channel partner manager of Blue NRG to other members of the company where Ms Jennings indicated that she had spoken to Mr Pandi and the confusion on Mr Pandi's part about the renewal letter. He was purportedly under the impression that the rates would not change for 36 months. She said she had referred him to the terms and conditions and specifically cl 5(2) of the contract setting out that they are committed to increase prices in line with the wholesale market. Ms Jennings sent an email to Mr Pandi on 15 December 2017. In this letter she acknowledged their previous conversation. She stated that Blue NRG has the right to vary rates under cl 5.2 and specifically refers to cl 5.2.B and 5.2.D relating to changes in the CPI and changes in wholesale electricity hedge rates. She explained the auto renewal process automatically places clients on variable rates to ensure that parties are not out of contract. She then goes on to set out the proposed step in pricing rates over the next three years. In response to this letter Mr Pandi sought clarification by email on 15 December 2017. Ms Jennings responded on 19 December 2017 and clarified the reasoning behind the default rates being applied, the operation of 5.2.B as it related to fixed price customers and went on to state with respect to 5.2.D: "The variation depends on the market situation. This year the wholesale electricity prices are up by 100% and some of the retailers have increased their rates by 40% in the last few months. Please note that the current wholesale market situation is very volatile. I usually find that large customers prefer the option of the fixed rate contract." In response to this letter Mr Pandi replied on 19 December 2017. In this letter he stated: 'Further, as discussed today over the phone, we did not receive any clarification re cl 5.2.D which is to reflect any change in the wholesale electricity hedge arrangements that we have in place that directly or indirectly increase the cost to us of purchasing the electricity we sell to you on in the cost of hedging its wholesale price. Please explain how it will affect our rates during the contract and how much variation we should anticipate in the contract period." Ms Jennings wrote back by email on 19 December 2017 providing an explanation about default rates and outlining the fact that the wholesale pool costs are quite variable. On 21 December 2017 Ms Jennings outlined the following: "Your new agreement gives Blue NRG the right to change your retail energy rates by giving notice. We provided notice on 19 December 2017. You have three options: 1. Take up the offer below, you can select one year, two years or three years, see offer below. 2. Take up with another retailer. 3. Remain on the variable offer where Blue NRG can change your rates by notice. Given it is now late Thursday afternoon our trading manager is prepared to reduce the default rate, see below, to equal the rates offered in year one of the three years stepped offer as the default rate. This rate will apply for 31 days only from 1 January 2018 to 31 January 2018. After this date the rates may change again by giving notice. Please see the new default rates and it gives peak, off peak and service property rates. Today is m last working day until the new year. You do not need to respond to this email unless you want to take up the three year stepped offer. The offer expires at 12pm tomorrow, see below." As a result of this letter Mr Pandi, on behalf of Causmag. entered into a contract with the winning tenderer, Origin Energy. There was no cost to Causmag for making this switch to Origin Energy after having entered into the contract with Blue NRG apart from paying higher prices for the energy supplied than they had been paying the previous three years." 1. As I understand it, no challenge is made to her Honour's recount of the facts. The challenge is limited to her Honour's conclusions set out on page 5 of her judgment and in particular the part italicised below: "The renewal letter, in my view, should never have been sent out, it was a mistake especially after there had been a competitive tender process where Blue NRG's pricing was uncompetitive with the other tenderers and was ultimately unsuccessful. The renewal letter purported to offer a new 36 month agreement on the same rates as before. It was not clear in this letter that the intention of the rates remaining the same was not for the entirety of the 36 month period. It caused confusion to Mr Pandi when he was informed that he was going to be charged the default rate when the letter said the rate would remain unchanged. The renewal letter did say that Blue NRG may vary their rates and the contract terms and conditions did stipulate when these variations were permitted to occur. Mr Pandi initially agreed to the renewal offer without question. It was only after Blue NRG purported to increase their rates that Mr Pandi sought clarification as to the default rate and the basis on which the other stepped rates were to be increased. An explanation was provided by Ms Jennings and Mr Pandi exercised his right to terminate the contract and enter into a contract with an alternate provided. Had the automated letter not been sent out none of this confusion would have occurred. The plaintiff is not pleading mistake, although it seems obvious that there was one. Notwithstanding this the letter did stipulate that Blue NRG did have the right to vary its rate from time to time. When Mr Pandi sought clarification of this he was told by Mr Jennings that the market was extremely volatile and that prices had increased significantly. This information was also contained in detail in the tender document provided to Causmag by TTEG. In my view Blue NRG did provide notice that it intended to increase its rate and provided reasons for this. In my view Blue NRG was not in breach of cl 5.2 when it gave notice to Causmag that it intended to increase its rate. It did not repudiate the contract by its actions. Mr Pandi then exercised his right to terminate the contract without any additional cost to himself. I find that Causmag chose to exercise its right to terminate the contract with Blue NRG with no penalty. It benefited from this choice through the new agreement for the supply of energy from Origin at a rate that was significantly less than that proposed by Blue NRG. In my view, despite the difficulties brought about by the automatically generated renewal letter, there was not repudiation of the contract by Blue NRG and the contract was voluntarily terminated by Causmag, as was its right." Summons for leave to appeal 1. The grounds of appeal are expressed in the Summons as follows: "7. To the extent that the Magistrate made a finding as to the proper construction of clause 5.2 of the contract between the plaintiff and defendant, Her Honour failed to state what that finding was and/or to provide any reasons for it. 8. To the extent that the Magistrate found at T 5.21-5.29 that on a proper construction of clause 5.2, the clause merely required the defendant to give notice of a proposed increase in rates and provide reasons, such a finding was in error. 9. Her Honour should have found that: a. on a proper construction of clause 5.2 the defendant was only able to increase its rates to the extent that such increases reflected changes in the consumer price index or the various costs to the defendant described in the clause; b. the increases in rates that the defendant sought to impose were not permitted by clause 5.2; and c. the defendant therefore repudiated the contract in seeking to impose the increases in rates that it did." Appeals from the Local Court and the Supreme Court 1. An appeal to this Court from a judgment of the Local Court is governed by Part 3 Division 4 of the Local Court Act 2007 (NSW). Section 39 provides for appeals on a question of law: 39 Appeals as of right (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law. 1. Section 40(1) enables a party to appeal to this Court on a "question of mixed law and fact", but only with leave of this Court. 2. Argument proceeded before me on the basis that there was no issue that the appeal was dealing with anything other than a question of law. Failure sufficiently to disclose the reasoning process is an error of law which may vitiate a decision: Spitzer v Ward & Anor [2004] NSWSC 100 at [27]. Ground 1 - Her Honour failed to state her finding as to the proper construction of clause 5.2 of the Contract and/or provide reasons for it. Ground 2 - Her Honour's construction of clause 5.2 of the Contract was wrong and there should have been a finding that Blue NRG had repudiated the Contract. 1. The grounds of appeal can conveniently be dealt with together. 2. Causmag submitted that despite the proper construction of clause 5.2 being a central issue in the claim, (if not the central issue), there was no finding by Kiely LCM as to what the proper construction was, let alone any reasons in support of that construction. It submitted that the closest the reasons go to addressing the issue is in the italicised part of the reasons set out in [8] of this judgment and "seems to assume" that the proper construction of the clause was that Blue NRG merely had to provide notice of an intention to raise its rates and give reasons. The reasons of her Honour do not explain whether that construction was found by her Honour, or merely a construction that her Honour considered was agreed between the parties, which was not the case. 3. Causmag complained that if that was her Honour's finding, it was wrong because her Honour should have concluded that the second sentence of clause 5.2 limits the situations when Blue NRG could increase its rates, and in fact limits the scope of increase(s) permitted. This means any increase had to reflect the types of changes in costs described in the condition. 4. Blue NRG submitted, (correctly in my view), that her Honour's reasons self-evidently demonstrate that her Honour accepted the construction of clause 5.2 sought by Causmag and that the obvious effect of the second sentence of clause 5.2 (beginning "We may vary…") was to limit the situations in which Blue NRG could increase its rates and the scope of such increases, but in applying that construction, her Honour found that there was no breach or act of repudiation by Blue NRG. 5. Her Honour identified the primary issue in dispute, being compliance with clause 5.2 of the Contract, and then addressed the constituent parts of that clause on page 2 of her reasons. 6. Her Honour then identified the evidence upon which she relied to conclude that the variations proposed by Blue NRG in fact reflected changes in wholesale electricity prices. That evidence included: 1. The email of Ms Jennings dated 15 December 2017 which stated "this year the wholesale electricity prices are up by 100% and some of the retailers have increased their rates by 40% in the past few months… the current wholesale market is very volatile"; 2. The email of Ms Jennings dated 19 December 2017 which stated "wholesale pool costs vary every half hour and can be as high as 1,420.00 c/kWh. The Peak and Off peak default rates are to cover Blue NRG's possible exposure to the floating pool price"; and 3. The report provided to Causmag by TTEG, which had conducted the electricity contract tender on behalf of Causmag. That report showed the electricity market was extremely volatile and prices had increased significantly compared to the previous rates that were being offered by Blue NRG. 1. Her Honour then correctly concluded that Blue NRG had provided the necessary notice to increase its rate. 2. In concluding that Blue NRG was not in breach of clause 5.2 of the Contract when it proposed to increase its rates, her Honour accepted that the basis given by Blue NRG for its proposed rate increases did in fact reflect changes in wholesale electricity prices as set out in clause 5.2(a) of the Contract. That is the construction which Causmag argued was the correct one and was the construction her Honour adopted. 3. At the time of purported repudiation by Blue NRG, 21 December 2017, the sum effect of the variations proposed by Blue NRG were to increase the peak rate from 9.55 to 13.21c/kWh and the off-peak rate from 5.81 to 9.70c/kWh, consistent with the 21 December 2017 email of Ms Jennings which was also broadly consistent with the rates offered in the open tender documented by TTEG and detailed to Causmag in the TTEG report. 4. In the context of evidence that wholesale prices had risen by 100%, and that there was a need to cover exposure to a highly volatile floating pool price (at times up to 1,420.00c/kWh), her Honour was correct to conclude that the proposed increases by Blue NRG in fact reflected changes in wholesale electricity arrangements that increased the cost to Blue NRG of purchasing electricity it sold or the cost of hedging its wholesale price (5.2(d)). There was no error. Decision 1. Her Honour was dealing with a simple construction point and its application to relatively confined facts. The content of reasons depends on the particular circumstances of the matter being considered by the Court: US Manufacturing Co Pty Limited v ABB Service Pty Limited [2008] NSWSC 705 at [96]. It is unnecessary for a judge, (or Magistrate), to refer to all evidence led in the proceedings, and reasons need not be lengthy or elaborate (at [97] and [99]). 2. A judicial officer is not required to spell out in minute detail, every step in the reasoning process or refer to every piece of evidence. It is sufficient if the reasons adequately reveal the basis of the decision, expressing the specific findings critical to the determination of the proceedings: see Stoker v Adecco Gemvale Constructions Pty Ltd [2004] NSWCA 449 ('Stoker'). 3. The reasons need to be read as a whole, including the context of the dealings between Causmag and Blue NRG that involved the fact of significant market increases in cost of supply which Causmag knew about, having been fully informed by the TTEG report supplied to Mr Pandi on 24 November 2017, even before the reasons were spelt out in the emails of Ms Jennings in December. 4. It was open to her Honour to conclude as she did, that Blue NRG was not in breach of clause 5.2 when it gave notice that it intended to increase its rates. 5. There is nothing controversial or unclear about her Honour's approach. Her Honour's reasons show the centrality of the need for there to be a clause 5.2 referenced explanation for the increases, and she found that there was. She reached a conclusion on breach different to what Causmag, rather optimistically, if not opportunistically, had hoped for. 6. The appeal must fail. Her Honour's construction of clause 5.2 is sufficiently clear in her Honour's focus on the components of clause 5.2(d) and the evidence responsive to the requirements of that part of clause 5.2. There was no error in construction. Indeed it was the construction sought by Causmag. There was no error in the application of that construction to the facts found, and her Honour's conclusion that there had been no breach by Blue NRG was in my view, not only open, but correct. The reasons provided by her Honour were sufficient in the circumstances. 7. Given these conclusions, there is no need to deal with the Notice of Contention filed by Blue NRG or to deal with the claim for loss of bargain damages. Orders 1. I make the following orders: 1. The time within which to file the Summons is extended to 10 September 2021. 2. The appeal is dismissed. 3. The appellant is to pay the respondent's costs of the appeal. ********** Amendments 11 November 2022 - . DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 November 2022