Qld Court slams port operator with $108m judgment

In a monster judgment against Adani Abbot Point Terminal Pty Ltd (AAPT), the Supreme Court of Queensland has found it acted unconscionably by orchestrating a complex series of dealings to ‘double dip’ on more than $100m in port usage charges it had already received from another party.

Facts

AAPT operates a coal terminal / port on the Queensland coast, where it facilitates the stockpiling, loading and shipping of coal mined in central Queensland and exported overseas.

All contracted users of the terminal were required to enter into long term user agreements with “take-or-pay obligations, which meant they were entitled to move a certain amount of coal through the port – and had to pay – whether they used their quota or not.


In 2016 a Rio Tinto subsidiary (QCPL) wanted out of its port usage obligations and assigned its rights (by way of a complex novation agreement) to a separate Adani subsidiary and paid $117m in “novation payments” to AAPT.


After taking the $117m payout, AAPT allocated QCPL’s unused port capacity / usage across the remaining tenants, claiming QCPL’s maximum tonnage was ‘unused’ and thereby levied an additional $117m on them as the remaining users of the port.


Analysis and decision

In considering the case against AAPT, Dalton J made some useful observations about how a court must approach the ‘very wide’ allegation of unconscionable conduct. He stated:


The cases on statutory unconscionability show that the Courts have striven to bring some certainty to a very wide provision. It is therefore necessary to have regard to the factual context of each case in interpreting statements of principle.

For example, statements as to victimisation may be appropriate in a case where the plaintiff alleges exploitation of a mental illness, emphasis on inequality of bargaining power may be relevant where the applicant is the customer of a bank, and reference to respect for autonomy and cultural diversity may be relevant in considering a case where it is alleged that there was exploitation of Aborigines in a remote community.


Factors considered by the QSC:

1. Relative strength of bargaining position – AAPT was a monopolistic supplier and in a powerful negotiating position.


2. No breach of contract – no allegation of an actual breach of contract was made – which as Dalton J noted “is a very relevant factor in considering whether or not there has been unconscionable conduct.”


3. Market conditions at the time of the impugned conduct – as noted in Ipstar v APS Satellite, the market conditions under which the parties are operating is highly relevant – with APS and the defendants in this case having no option but to deal with AAPT.


4. Protection of legitimate interests – A contracting party (AAPT) is entitled to maximise its profits, particularly for a monopoly asset, but not go out of its way to structure transactions in order to receive a windfall that will impose a detriment on remaining users.


5. Alternatives available – it was not necessary for AAPT to structure the novation in a way that orchestrated a windfall, and in fact AAPT went out of its way to ostensibly create a sham transaction that would entitle it to raise the levies on the remaining port users.


Dalton J noted:

The existence of an alternative means of achieving its ends without causing detriment to the respondents is relevant in assessing whether or not the applicant’s conduct was reasonably necessary in its own legitimate commercial interest.


6. Lack of good faith and commercial morality – Dalton J said it all:


In assessing whether or not there has been unconscionable conduct, the Court’s approach must be to look for conduct which “objectively answers the description of being against conscience” and to avoid intuitive or idiosyncratic approaches to what constitutes commercial morality.

The Court must evaluate business behaviour in the light of the values and norms recognised by the statute. The applicant’s behaviour in attempting to disguise or camouflage the true basis of its dealings with QCPL involved dishonesty – [117] ff and [122], and so far as this proceeding is concerned, involved serious dishonesty

The applicant recognised the risk that its conduct might be successfully impugned in subsequent litigation as beyond the bounds of commercially acceptable behaviour.

The applicant’s behaviour in attempting to disguise or camouflage the true basis of its dealings with QCPL involved dishonesty – [117] ff and [122], and so far as this proceeding is concerned, involved serious dishonesty.


In finding against AAPT for creating a sham transaction and levying more than $100m in fees it had already received on the remaining users of the port, Dalton J concluded:


It attempted to disguise its behaviour in complex transactions.It attempted to include dishonest recitals in those transactions.In my view these matters establish unconscionable conduct as alleged by the respondents.They overwhelm the fact that the applicant was contractually entitled to act as it did.


Authors: Louise Gehrig and Rob Norton