Last year we wrote about the Queensland Supreme Court's decision in Adani Abbot Point Terminal Ltd v Lake Vermont Resources Pty Ltd & Ors (https://www.unconscionable.com.au/post/qld-court-slams-port-operator-with-108m-judgment) and the $108m judgment levied against the terminal operator for creating what was effectively a sham transaction to levy increased usage fees on the remaining port customers.
Overturned on Appeal
On 31 August 2021, the Court of Appeal overturned that first instance decision and held that Adani Abbot Point Terminal had not acted unconscionably when it sort to 'double dip' on usage charges.
McMurdo JA summarised the first instance decision:
"The trial judge held that it was unconscionable for the appellant to agree with QCPL, for its departure as a user, in a way which cast an additional burden for these charges upon the remaining users, whilst yielding $255 million, to the appellant. Her Honour found that the appellant thereby would be “paid two sums of money” for the five years from 1 July 2017 to 30 June 2022, “both [referable] to QCPL’s contractual obligation to [the appellant]. Whereas, had the QCPL [User Agreement] remained on foot, [the appellant] would only have received one such sum”
Consideration of the agreement between Adani Abbot and Qcoal, and whether it was a sham construct for the purpose of levying excessive fees on the remaining port users, and therefore unconscionable, included:
receipt of $255m from Qcoal and whether that was referrable to its remaining contractual obligation for usage;
insistence by Adani Abbot on the remaining port users continuing to strictly abide by their current agreements and thereby be obliged to pay more - effectively paying Adani Abbot twice for the provision of the same service;
The Court of Appeal focussed heavily on point 1 and whilst satisfied 'double dipping' occurred, did not agree the $255m payment was linked to expected future usage payments by Qcoal - noting that this absence severely weakened the case for unconscionability. It noted that gross payments to exit an agreement early were routine and $255m was in fact a substantial discount on what it would have otherwise paid.
Overall, the Court of Appeal asked why the trial judge concluded Adani Abbot should - in good conscience - avoid the burden of Qcoal's termination falling to the other port users and likened it to the case if Ipstar Australia v APS Satellite Pty Ltd (the case in which the writer and Louise Gehrig acted successfully for APS Satellite Pty Ltd at first instance and on appeal - see our discussion here), where a vulnerability of one contracting party (the user) was exploited by the other (the supplier).
However, in this case the Court of Appeal distinguished the two and noted Ipstar had misled APS Satellite during contractual negotiations for a renewal of a contract, whereas in this case Adani Abbot had simply, strictly applied an already binding contract. Referring to the 'sham' agreement contrived by Adani Abbot to colour the $255m payment as something other than a pre-payment of usage charges, McMurdo JA explained:
"A dishonest cover up of conduct might evidence, in some cases, a party’s subjective belief as to the propriety or otherwise of its conduct. However the conduct must be assessed objectively. If, on an objective view, the conduct which caused the detriment of which complaint is made, was not unconscionable, it would not be made so by a dishonest attempt to disguise it"
In reaching its decision, the Court of Appeal asked itself:
"was it offensive to conscience" for Adani Abbot to enjoy the benefit of both sets of contracts that had been on foot; and
how could it be offensive to conscience for Adani Abbot to retain the benefit of the Qcoal contract when it had no obligation to pass that benefit on to the remaining port users.
Relying on the High Court of Australia's illudication of the meaning of unconscionable conduct in ASIC v Kobelt and the Federal Court in Paciocco & Anor v Australia and New Zealand Banking Group Ltd  FCAFC 50 at , the Court of Appeal unanimously held that the actions of Adani Abbot fell short of being so grave as to be against good conscience. McMurdo JA held:
"I have discussed earlier the judgments in Kobelt, and the various descriptions of unconscionability in this statutory sense which were there provided. A common view in the judgments was that the choice of the word “unconscionable” signifies the gravity of misconduct which constitutes a contravention of s 21(1). The word “unconscionable” is not synonymous with “unjust”, “unfair” or “unreasonable”. I should add, however, that I would not characterise the appellant’s conduct even in those terms.
In my conclusion, the appellant’s conduct cannot be characterised as conduct which, in the words of Gageler J, “is so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience.” The trial judge was in error in finding that the appellant’s conduct was unconscionable, and the respondents should not have been given any relief upon this ground."
By Rob Norton and Louise Gehrig