Coulson Aviation (Australia) Pty Ltd v Techfuel Pty Ltd (subject to deed of company arrangement)

1. [1]

   LEEMING JA: Coulson Aviation (Australia) Pty Ltd appeals from a judgment of the District Court entered against it in the amount of $277,000 following a three day trial. The judgment amount is (approximately) the sum of two amounts agreed to be paid to the respondent, Techfuel Pty Ltd, in the event insufficient notice was given for the termination for convenience of two agreements concerning the supply of aviation fuel to two Boeing CH-47 Chinook helicopters, modified for use in fire fighting operations, which Coulson made available to fire fighting authorities in New South Wales and Victoria.

2. [2]

   The two issues on appeal are considerably narrower than the issues at trial. They are pure questions of contractual construction. The first maintains that the obligation to pay did not arise, because Coulson’s obligations under its contracts with Techfuel ceased automatically upon the ending of Coulson’s contracts with the fire fighting authorities; this was described as the “co-terminous argument”. The second maintains that if Coulson did in fact exercise its power to terminate for convenience, then it gave sufficient notice, because of the meaning to be given to the words “start of the fire season” in the contracts, which turned not on the declarations given by fire fighting authorities, but, so it was said, by reference to when Coulson would have been called upon to supply its aircraft.

Background

1. [3]

   Coulson is an Australian subsidiary of a Canadian company, and its aircraft have been used seasonally in Australia and in North America. The particular helicopters giving rise to this litigation had previously been used in the Australian and Canadian summers to fight bushfires.

2. [4]

   Techfuel’s sole director is Mr Syd Bower. At relevant times, Techfuel maintained a small fleet of fuel delivery vehicles which could accompany and supply fuel to a helicopter when it was based away from its home airfield during fire fighting operations. They were required to have a capacity of 30,000 litres. The vehicles were modified to facilitate that role, including being fitted with GPS and radio communication facilities.

3. [5]

   A voluntary administrator was appointed to Techfuel a few months before the trial. Techfuel is presently subject to a deed of company arrangement, and orders were made at the commencement of this hearing altering the title of this appeal, in accordance with s 450E(2) of the Corporations Act 2001 (Cth). However, it was common ground that Coulson is not bound by the deed, and thus the prohibition against commencing proceedings (such as this appeal) in s 444E was inapplicable.

4. [6]

   Following bushfires in the Australian summer of 2019/2020, Coulson had entered into two agreements with Australasian Fire and Emergency Service Authorities Council Ltd (“AFAC”). The NSW Rural Fire Service (“RFS”) and the Victorian Country Fire Authority (“CFA”) are members of AFAC. The “National Aerial Firefighting Centre” (“NAFC”) is a business unit of AFAC, concerned with procurement, which is mentioned in the contracts.

5. [7]

   Each agreement concerned making available a particular CH-47 helicopter (N40CU and N42CU) to the RFS or CFA. (There was a third agreement, involving a Sikorsky S-61 aircraft, but that is relevant only to explain references to it in the contracts.)

6. [8]

   The original agreements between Coulson and AFAC, entered into in 2020, were for terms of three years, with two one year options for extension. However, after the first year’s operation, AFAC went to tender again. Coulson was successful, and new three year contracts were entered into between AFAC and Coulson. The significance of this is that Coulson had entered into a “Fuel Purchase and Services Contract” with Techfuel in 2020, also with a three year term with two one year options for extension. This contract did not include a right of termination for convenience. When AFAC went to tender again in 2021, Coulson and Techfuel treated their existing contract as being at an end, and when Coulson succeeded in obtaining further agreements with AFAC, Coulson and Techfuel entered into new Fuel Purchase and Services Contracts, this time containing cl 6.2 which addressed termination for convenience and the circumstances in which an amount was payable to Techfuel. I shall in due course return to the differences between the superseded Fuel Purchase and Services Contract and those upon which Techfuel sued.

7. [9]

   Turning first to the agreements on which Techfuel sued, Techfuel relevantly entered into two contracts with Coulson in the second half of 2021. Each was wholly in writing. Each was formally titled “Fuel Purchase and Services Contract” followed by a reference number, a reference to Coulson and the CH47 aircraft, although there was a lack of precision which is worth mentioning in light of some of the submissions. One was titled:

8. [10]

   The other was titled:

9. [11]

   Neither document was a model of legal drafting. Each had two execution clauses (both of which were completed), one on the front page and the other on the last page. The executed form of the first agreement had “TBC” in its title, rather than N42CU. The haphazard capitalisation and naming of Coulson in the heading were replicated elsewhere. The execution clause said “Executed by Coulson Aviation Australia PTY under section 127 of the Corporation act”. To be clear, the absence of “Ltd” and the aircraft registration in no way detracted from the legal efficacy of the contracts. However, it is relevant in light of the submissions, some of which turned on fine textual distinctions between references to “Term” and “term”. For example, it was said:

10. [12]

    In a written contract where the parties have evidently disregarded attention to consistent capitalisation, such submissions will have little force; cf Norton Property Group Pty Ltd v Ozzy States Pty Ltd (in liq) [2020] NSWCA 23 at [48]-[49] and S&C Nicola Pty Ltd v Peter Holmes Investment Pty Ltd (2022) 108 NSWLR 165; [2022] NSWCA 72 at [26] and [29], both of which concerned the construction of similarly carelessly drafted contracts. In the latter, it was said that “where errors are numerous, and the drafter’s approach to grammar and syntax is casual, it would be wrong to place great weight on considerations turning on the precise form of the clauses”: at [30].

11. [13]

    Both documents also disclose conceptual imprecision. This is perhaps most manifest in the definition of the “Term” in, and the “options” granted by, each agreement. Term was defined as follows:

12. [14]

    The difference between “term” when first used (“three (3) year term”) and secondly used (“yearly term”), both being parts of the definition of “Term” is, to say the least, awkward. Moreover, the natures of the “option to extend” and “option to renew” were left unstated; there is nothing even to indicate which party had the benefit of the option. The reference to a “first option” might perhaps be a reference to a so-called “right of first refusal”, obliging Coulson if it obtained a further contract from AFAC to make an offer to Techfuel before contracting with an alternative fuel supplier. Happily it is unnecessary to resolve any of those questions.

13. [15]

    The concluding words of the definition reinforce what is apparent from other clauses, namely, that Coulson’s contract with Techfuel was linked to its contract with AFAC. This bears on the “co-terminous” submission. As will be seen below, Coulson also sought to rely upon the definition of “Term” in support of other submissions of construction.

14. [16]

    In each contract, Coulson was the “Customer” and Techfuel was the “Contractor”. Clause 1 provided:

15. [17]

    Coulson’s submissions gave prominence to the promise in cl 1.1 and the definition of “Refueller” in cl 1.4 because both were explicitly linked with the AFAC Contract. As it happens, the contracts with Techfuel did not in fact use the defined term “Refueller”, although that of itself does not necessarily detract from Coulson’s submission.

16. [18]

    As well as what was said in cl 1, “Services” was defined on the front page to mean “Services as specified in schedule 1”. Schedule 1 was extensive. It occupied some 3½ pages. It commenced:

17. [19]

    The reference to RAAF Base Richmond appeared both in the New South Wales agreement where the helicopter was based at Richmond, and in the Victorian agreement, where a different helicopter (N42CU, whose registration had been left as “TBC” in the executed version of the contract) was based at Essendon.

18. [20]

    There followed within Schedule 1 a table of “Rates Wet A Fuel tanker support 2021 / 2022” with ten rows, including the daily and nightly rates for making a tanker and its driver available. The tables were identical, save that the Essendon contract specified the price of fuel at Essendon monthly PAP less 27 cents per litre, while the Richmond contract specified Bankstown monthly PAP less 27 cents per litre. There were “Explanations” underneath the table, including that “‘PAP’ stands for Posted Airport Price”, and PAP Calculations were, in the case of NSW based operations, based upon Viva “PAP” Bankstown, while Victorian based operations were based on Viva “PAP” Essendon.

19. [21]

    In each case, the “Hot standby response time” in the table was 15 minutes, and the “Relaxed standby – Subject to Agency / Customer determination” was “1-2 hours or as determined by the relevant agency”.

20. [22]

    In each case, the top row of the table was the Single Daily rate of AUD$1400.00 plus GST. The second and third rows were for “Single Nightly Rate” and “Single Day-VFR/Night VFR Rate”, which were AUD$725.00 plus GST and AUD$1400.00 plus GST respectively. However, these rows were followed by words in brackets which were absent from the top row, upon which Coulson placed reliance: “($60,900 maximum for minimum 84-day term yearly)” and “($117,600 maximum for minimum 84-day term yearly)” respectively. Obviously 84 x $725 = $60,900, and 84 x $1400 = $117,600. Less obvious is the notion of those amounts being a “maximum” for the minimum 84 day term. Putting that peculiarity to one side, Coulson’s point was that the references to 84 day terms in the second and third rows of the table indicated a shared expectation that the expected period during which services were supplied was 12 weeks.

21. [23]

    The table in Schedule 1 was followed by other “Explanations”, and then “Schedule 1(a): Fuel Price Structure”. The next heading was “Schedule 1: Supply of Vehicles and Drivers – NOTES” (it would seem that “Schedule 1(a)” is either wrongly placed or wrongly named). This section contained eight notes and other information. Notes 1 and 2 referred to the table at the beginning of the Schedule. Note 1 stated that the daily rates covered “the cost of the truck and driver for a full day time shift and remains in place for the contract term and any additional extension periods that may occur. There are no additional or overtime charges”. Note 2 was in similar terms for the night rate.

22. [24]

    At the conclusion of the Schedule were six subheadings, the last of which was “Additional Information”, under which appears:

23. [25]

    The front page of the contract also refers to Schedules 2 and 3, which identify the “Rates and the Rate Adjustment Mechanism” and “Key Performance Indicators”. There is also Schedule 4, which is headed “Special Conditions”. The body of the contract makes no reference to Schedule 4. Nor was any reference made to it before the primary judge. However, in this Court, Coulson placed reliance on its first clause, because of its reference to “the fire season”. The entirety of this schedule is as follows:

24. [26]

    Returning to the body of the contract, provision for termination was made in cl 6. Relevantly, this was as follows:

25. [27]

    The critical words which give rise to this litigation are the last sentence in cl 6.2, to which emphasis has been added. The 90 day period is the amount claimed by Techfuel in relation to each contract: 2 x 90 x ($1400 + GST) = $277,200 which was the amount claimed. That amount was recorded by the primary judge as not being in dispute at [176], although the judgment entered was $277,000.

26. [28]

    To be clear, it is not necessary to construe the effect of the definition of “Term” or “Services” or the options or many of the other infelicitously drafted clauses in these contracts. The only questions of construction before this Court are those summarised at the outset of these reasons. The other clauses are mentioned because the parties’ submissions invoked those clauses in the course of their arguments on the “co-terminous argument” and the “start of the fire season” argument.

27. [29]

    Clause 17.7 provided that the agreement was governed by the laws of the jurisdiction of the State or Territory of the Contractor’s nominated address. It was accepted that this was New South Wales.

28. [30]

    This contract was in evidence. It was in very similar terms. The relevant differences were as follows.

29. [31]

    The definition of “Term” on the coversheet not only contained earlier dates, but it was also more straightforwardly drafted:

30. [32]

    Instead of there being three rows of rates in Schedule 1, there were merely two rows, the daily rate and the nightly rate for a 30,000 litre tanker and qualified refueller/driver, at $1400 and $900 respectively, plus GST. Schedule 4 was identical. Clause 6.1 was identical to cl 6.1 of the later contract, and cl 6.2 was identical to cl 6.3 of the later contract, but the 2020 contract had no power to terminate for convenience.

31. [33]

    After the 2020 agreement was brought to an end, and AFAC proceeded to retender, Mr Bower, the principal of Techfuel, supplied to Coulson certain “files for your tender submission” (email of 9 June 2021).

32. [34]

    One of the attachments identified the “management systems” Techfuel had in place. This included provision for training and induction of drivers. This section relevantly stated:

33. [35]

    Coulson relied on this as supporting a shared understanding that the bush fire season commenced later than 1 October. Counsel fairly acknowledged that a large number of documents had been tendered at trial, and the parties had proceeded on the basis that his Honour would not refer to anything that had not been specifically drawn to his attention, and this document fell within the large majority which had not been relied upon. Nonetheless, the document was in evidence, and in this appeal by way of rehearing, it was open to this Court to have regard to it.

Pre-contractual negotiations

1. [36]

   Mr Bower distributed a revised and edited contract on 12 October 2021. His email concluded “[i]t will be a pleasure to work along side such well-presented and capable aircraft during the coming fire seasons”.

2. [37]

   Mr Bruner, on behalf of Coulson, responded on 14 October. One suggestion was that the contract should make it “clear what we are committed to for the 84 days. Also, what happens if we don’t meet the minimum (i.e. Australia has a low fire season and we’re not flying)?”. Mr Bower’s response was “[t]he table now shows the maximum amount payable for the 84-day contract period”. This is most likely the source of the statements in two of the three rows concerning a “maximum”; the proper construction of those words does not arise in this appeal.

3. [38]

   The third point of Mr Bruner’s email was as follows:

4. [39]

   Mr Bower’s response was:

5. [40]

   Mr Bower said he could not recollect the discussions he had at the time.

The contracts come to an end

1. [41]

   On 5 August 2023, Mr Coulson sent the following email to Mr Bower:

2. [42]

   Techfuel responded by letter dated 27 September 2023, asserting that Techfuel understood that the Richmond-based helicopter would commence at Richmond in early November, and that while it was aware of an unresolved dispute concerning night vision with the Victorian CFA, Techfuel believed that a minimum three year term would still be fulfilled. However, the letter also asserted that the 5 August email amounted to Coulson terminating the Melbourne and Richmond Fuel Agreements, and Techfuel sought payment. It attached invoices totalling the $277,200. That is the amount which was sought in this litigation.

3. [43]

   It is not necessary to summarise the ensuing correspondence, not all of which was consistent with the stance adopted in the litigation. By its defence and consistently thereafter, Coulson maintained that its contract with Techfuel automatically came to an end with the non-renewal of any contracts between it and RFS or CFA in relation to the CH-47 helicopters, but if that was wrong, the email of 5 August amounted to written notice within the meaning of cl 6.2.

4. [44]

   On 1 October 2023, the NSW Minister for Emergency Services issued a media release which referred to the “official start” of the 2023–24 bushfire season in areas including Greater Sydney, the Central Coast, Illawarra and the Central West. That is fewer than 100 days after 5 August 2023.

Reasoning of the primary judge

1. [45]

   The primary judge produced substantial reasons of 198 paragraphs, only some eight days after the conclusion of the three day hearing, addressing the numerous issues which had been advanced, which extended to whether cl 6.2 was void for uncertainty, was invalid as a penalty, and whether there was an implied term that Techfuel was not insolvent.

2. [46]

   The reasoning of the primary judge on the only two arguments advanced by Coulson on appeal is at [123]-[151]. Part of that reasoning turned on the Rural Fires Act 1997 (NSW) and the Country Fire Authority Act 1958 (Vic), which both utilise the expression “fire danger period”. The primary judge noted that in both States, the relevant executive officer of the RFS and the CFA designated and declared a fire danger period. The consequence of such a declaration was to cause certain conduct (for example, lighting a fire without a permit) to be an offence. The process by which such a declaration was made involved mandatory consultation with various bodies (in New South Wales, local councils and various fire fighting authorities). His Honour observed that in New South Wales, there is a default (bush) fire danger period, commencing on 1 December and ending on 31 March, subject to a power conferred upon the Commissioner to modify those dates. His Honour said that the legislative framework was known to the parties, and added:

3. [47]

   The primary judge then returned to the consultation required before determining the fire danger period, noting that there was much more involved in fighting bushfires than aerial fire fighting, but noted that all the services involved would be doing so in “the fire season”, supporting the proposition that a “fire season” was “likely to be broader than the period in which it is expected that Coulson’s services, and therefore Techfuel’s services, would be required”.

4. [48]

   Drawing those considerations together, his Honour said at [135]-[137]:

5. [49]

   The primary judge then addressed questions of certainty:

6. [50]

   Concerning whether the agreements were “co-terminous”, Coulson complained that the primary judge treated this as being whether the AFAC contract was incorporated by reference. That criticism may have been a little unfair. It is quite possible that the submissions advanced at trial differed, at least in emphasis, from those advanced in this Court. At trial, Coulson positively contended that “[e]ach of the Techfuel Contracts explicitly picks up and incorporates the terms and purpose of the relevant AFAC Contract”, although in oral submissions, counsel then appearing for Coulson disavowed a contention that the AFAC contract was incorporated. That said, there is some force in Coulson’s proposition that the primary judge did not fully attend to the somewhat subtle way in which Coulson had pleaded its case. Ultimately, I have concluded that nothing turns on this, but in the circumstances it is best to reproduce the entirety of the reasons of the primary judge on the co-terminous argument:

7. [51]

   For those reasons, and also for others not challenged on appeal, judgment was entered in the amount of $277,000. Coulson’s appeal to this Court, pursuant to s 127 of the District Court Act 1973 (NSW), is as of right.

First issue: Were the contracts co-terminous with the AFAC contract?

1. [52]

   In Coulson’s written submissions, it was said that:

2. [53]

   In reply Coulson added that “[i]f no services were required, the fire season under either the NSW or the Victorian agreement did not commence”.

3. [54]

   In oral submissions, when explaining how the point had been pleaded, it was said:

4. [55]

   At the conclusion of his oral address, Coulson’s counsel reiterated:

5. [56]

   It will be seen that the submission went so far as to contend that the cessation of the AFAC contracts brought about the ending of contractual relations between Coulson and Techfuel. However, Coulson also pitched this submission at the level of bringing Coulson’s obligations under its contract with Techfuel at an end.

6. [57]

   It is far from clear to me that there is any real difference in the different ways in which Coulson advanced its submission. I agree with counsel’s final submission that the different ways ultimately make no difference. Nonetheless, I shall address the various ways in terms, although doing so will make these reasons more cumbersome.

7. [58]

   Coulson invoked the proposition that contracts should be construed so as to produce a commercial result, and that it was obvious that its contracts with Techfuel were back-to-back with Coulson’s contracts with AFAC to provide fire fighting capability involving the same nominated aircraft based at Richmond and Essendon. There were numerous references to the AFAC contracts in Coulson’s contracts with Techfuel, including the contract number designated by AFAC, the particular AFAC standard, and the particular aircraft. The most important contractual language was found in cll 1.1 and 1.4 and the opening words of Schedule 1.

8. [59]

   Coulson emphasised that Techfuel’s obligation to it, and its obligation to AFAC, was to supply a capability. It put this orally as follows:

9. [60]

   Clauses 1.1 and 1.4 have been reproduced above. Although “Refueller” was not elsewhere used, both clauses referred to the AFAC contract which both parties knew Coulson had entered into and which was, after all, the premise of Coulson’s fuel supply contracts with Techfuel.

10. [61]

    Coulson relied on the opening words of Schedule 1 identifying the Services:

11. [62]

    It was said that the words “for the full term of the AFAC / NAFC NSW RFS contract period” qualified the obligation to provide Services:

12. [63]

    Coulson concluded its written submissions on this ground as follows:

Consideration

1. [64]

   The first thing to note is that it is plain that the existence, or probable existence, of Coulson’s contracts with AFAC was an important part of the commercial context in which the Fuel Purchase and Services Contracts were entered into. Indeed, it was the raison d’être for doing so. It is scarcely unexpected that there are references in the executed contracts to Coulson’s obligations under its contracts with AFAC.

2. [65]

   It does not follow that the Fuel Purchase and Services Contracts automatically came to an end when Coulson’s contracts with AFAC came to an end. Nor does it follow that Coulson’s obligations under the Fuel Purchase and Services Contracts automatically came to an end. The proposition on which this first ground of appeal turns requires the conclusion that by reason of the contractual relations between AFAC and Coulson altering, there is as a matter of construction an automatic termination of, or effect upon, contractual relations between Coulson and Techfuel.

3. [66]

   It is of course possible for the parties to contract on the basis that their contract comes to an end automatically, on the occurrence of an event which may be beyond their control: see Rudi’s Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568 at 576-580 and Perovich v Whitton (No 2) (2016) 250 FCR 272; [2016] FCAFC 152 at [58]-[64], where there is also discussion of the principles applicable where one party is at fault. It has been said that clear and unambiguous words and context are required to bring about the result that the contract comes to an end, as opposed to entitling the non-defaulting party to terminate. That reflects the unlikelihood that parties to a commercial contract would include in their bargain a provision which would entitle one to bring the contract to an end by that party’s own wrongful act. Those authorities were not considered by the parties, either in the District Court or in this Court.

4. [67]

   It is also possible that the parties may agree that the obligations of one party are dispensed with upon the happening of some event such as the cessation of the contract between one of the parties and a third party. But similar considerations apply. It is unlikely that such an intention will be imputed to the parties, in circumstances where the other party may have no knowledge of the event. It is also unlikely that the dispensation of contractual obligations will take place irrespective of whether that party is at fault or is blameless in its dealing with the third party.

5. [68]

   For present purposes, all that matters is that howsoever Coulson couches its submissions, the conclusion for which Coulson contends is one that must come from the text and the context of the contract, and is to be reached by the application of ordinary principles of construction.

6. [69]

   Hence, the references to the AFAC contracts by themselves in cl 1.1, 1.4, Schedule 1 and elsewhere do not dictate the answer to the question of construction. They are merely aspects of the contract which are available to support such a construction.

7. [70]

   Coulson also referred to the ready acceptance by Mr Bower in cross-examination, to the effect that if AFAC no longer required the services of Coulson’s helicopter, Coulson would no longer require the services of the tanker and refueller. But that does not affect the construction of the contract either. Those considerations of the practical reality informed the commercial context in which a power to terminate for convenience came to be inserted, rather than being bound to the contract for the whole of the “Term”.

8. [71]

   Absent from either contract is any express provision bringing Coulson’s and Techfuel’s contract to an end when Coulson’s contract with AFAC comes to an end, or relieving Coulson of its obligation under the contract when its contract with AFAC comes to an end.

9. [72]

   The clauses upon which Coulson relies fall well short of such express provision. The first difficulty with cl 1.1 in Schedule 1 is that “the contract period” is apt to mean the period during which the helicopter is to be made available, as opposed to the period during which the contractual relationship between AFAC and Coulson is in force. That meaning is supported by the words “including any extension periods”, which would be wholly otiose on Coulson’s construction.

10. [73]

    Against this, Coulson said that Techfuel did not possess a copy of the AFAC contract and is not to be taken to understand its terminology. Taking that at its highest, it does not detract from the submission that the natural meaning of the words is not that for which Coulson contends.

11. [74]

    The second difficulty is that the schedule identifying the Services is an unlikely location to find a clause which, on its proper construction, brings about the automatic termination of the contract between Coulson and Techfuel, or the cessation of Coulson’s obligations under that contract.

12. [75]

    Much the same may be said in relation to cl 1.4. The existence of an unnecessary definition is an unlikely foundation for an inference that each Fuel Purchase and Services Contract automatically comes to an end upon the termination of each AFAC contract, or that Coulson’s obligations under the contract automatically cease.

13. [76]

    The same may be said of Coulson’s reliance on the “Additional Information”. The clause is, in form, an acknowledgement. It is a considerable strain of the parties’ contractual language to derive an automatic termination, or an automatic cessation of one party’s obligations, from an acknowledgement.

14. [77]

    Probably in recognition of those textual limitations, Coulson appeared to give greatest prominence to the language which commences Schedule 1. But the references there to Techfuel being required to provide refuelling capacity for “the full term of the AFAC / NAFC NSW RFS contract period, including any extension periods” have an ordinary natural meaning, namely, a positive statement of the time when Techfuel is to be ready to provide services. It is a considerable stretch to imply from those words a negative, namely, that if the contract between Coulson and AFAC comes to an end, that between Coulson and Techfuel does too, immediately and automatically, or that there are no longer any obligations upon Coulson for the purposes of its contract with Techfuel.

15. [78]

    One difficulty is that there is no provision for notification by Coulson to Techfuel. One would expect, even in this not especially well-drafted contract, a provision whereby Techfuel would know that its contract has come to an end, or that Coulson’s obligations under it have ceased.

16. [79]

    A related but more fundamental difficulty is that in 2021 both parties made a significant departure from their earlier 2020 bargain. The earlier bargain was for a term of at least three years. Confronted by the reality of the retendering that occurred after the first year of operation of that earlier contract, Coulson and Techfuel renegotiated, such that notwithstanding the “Term” defined on the first page of the contract, each enjoyed a right to terminate for convenience on 90 days’ notice. One of the circumstances when that right might be exercised would be if Coulson’s contract with AFAC came to an end; indeed there is every reason to think that the course taken by AFAC prompted the insertion, in 2021, of the new right. There is no necessity for an automatic termination, or for an automatic cessation of obligations, when both sides can escape from the contract freely, on giving 90 days’ notice.

17. [80]

    This conclusion is strengthened by Schedule 4. Coulson relied upon this in support of ground 2, but it also bears upon the first ground. Let it be assumed that Schedule 4 has contractual force despite not being picked up in the body of the contract. The ordinary meaning of its language is to confer a right of termination on the part of Coulson in certain circumstances (namely, where Coulson is in breach of its contract with AFAC as a direct result of a breach by Techfuel). These are precisely the circumstances where AFAC might exercise a right to terminate its contract with Coulson. The proposition that Coulson might have a right to bring its contract with Techfuel to an end, but only if that is “to coincide with the end of the fire season”, sits uneasily with the automatic termination or automatic cessation of obligations for which Coulson contends.

18. [81]

    Moreover, the construction for which Coulson contends undermines the central aspect of the bargain the parties made in 2021 concerning the protection which would be given to Techfuel in the event of termination for convenience. The short point is that the parties’ bargain in 2021 conferred a new right to terminate if either side wished to do so, irrespective of fault, and that is inconsistent with the construction for which Coulson contends.

19. [82]

    True it is that in some circumstances, the exercise of that new right to terminate for convenience carried with it an obligation to make a specified payment, which is the dispute giving rise to this litigation. But irrespective of whether the new right was subject to an obligation to make a payment in certain circumstances, and irrespective of whether those circumstances were made out, the existence of the new right conferred by cl 6.2 is inconsistent with the need to imply that the Fuel Purchase and Services Contracts would automatically come to an end upon the termination of Coulson’s agreements with AFAC. Much the same may be said of Coulson’s submission insofar as it is framed in terms of Coulson’s obligations under the contract coming to an end.

20. [83]

    This ground is not made out.

Second issue: The construction of “start of the fire season”

1. [84]

   Against the possibility that its “co-terminous” argument might fail, Coulson also contended that the construction of the words “the start of the fire season” in cl 6.2 was wrong.

2. [85]

   Coulson contended “that ‘fire season’ was a reference to the period each year during which the Respondent provided refuelling services to the Appellant, which in turn was dependent on the requirement for services by the Appellant under the AFAC Contracts” (written submissions, para 64). Coulson relied on two principal considerations in support of that construction.

3. [86]

   The first was that it was said to be commercially sensible. It was said:

4. [87]

   Coulson added, in its written submissions in reply, that it was notorious that in any year the start and end of the fire season in any particular part of Australia would be affected by weather conditions, and could not have a stable date range each year, and that reference in a special condition in Schedule 4 to the “fire season” was a reference to the period when actual aerial fire fighting was occurring.

5. [88]

   The second matter was what were said to be admissions by Mr Bower as to the circumstances known to the parties at the time at which the Contracts were concluded. One admission was said to be Mr Bower’s evidence that the 2020 Contract worked as follows:

6. [89]

   Coulson also submitted that Mr Bower had admitted that, at the time that the Fuel Contracts were entered into, Techfuel’s understanding was that the term “fire season” was the period during which the Respondent would be called upon to provide refuelling services, and that that “fire season” would start and end at different times, turning on the timing of notice being given of the commencement of the service period by CFA and RFS under the AFAC Contracts.

7. [90]

   This knowledge on the part of Mr Bower, which was said to be shared by Coulson, was said to be admissible as an aid to construction in order to establish the relevant surrounding circumstances known to both parties at the time of entry into the Contract, reinforced by the admissions by Mr Bower as to his knowledge of how the Contracts were to be performed, his industry experience, and the performance of the 2020 Contract (which involved identical operative terms).

8. [91]

   Coulson added that there was no evidence supporting the contrary position upheld by the primary judge, that the term “fire season” incorporated a different statutory term, to which neither contract referred.

9. [92]

   On Coulson’s construction, the 100 day period, running from 5 August 2023 when notice was given in respect of the Richmond Contract, ended on 13 November 2023. This was said to be “comfortably prior to the first date on which [Techfuel] provided services under either Contract, and prior to the first date on which [Techfuel] provided services under the 2020 Contract”. Alternatively, it relied on onus, and Techfuel’s failure to adduce evidence of when the fire season commenced in 2023.

Consideration

1. [93]

   The imprecision of the parties’ contractual language gives rise to this question of construction. It is clear from the exchange of emails prior to contract how cl 6.2 came into existence. Those emails are objective facts known to both sides of the transaction. They are objective surrounding circumstances which are available to inform the process of contractual construction: see Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [1], [64]-[67], [92] and [146]-[148]. But they do not greatly assist the particular issue which arises in this case, namely, the point from which the 100 day period is to be measured.

2. [94]

   The primary judge placed reliance on the statutory regimes, which his Honour found was known to both parties. Coulson did not contend that there was error in taking that course, although it complained about what his Honour took from the statutory regimes.

3. [95]

   The statutes employ the terms “bush fire danger period” and “fire danger period”. The New South Wales statute has been summarised above. Both contracts were governed by New South Wales law (because that was where Techfuel’s nominated address was located). It would not be unnatural for these colloquially and casually drafted contracts to use the language of “fire season” to identify the period of time identified by the statute.

4. [96]

   Coulson’s submissions made the point that the statutory language is different from, and was not referenced in, the Fuel Purchase and Services Contracts. That is so, but it does not greatly advance the argument. If the contracts had referred to the legislation in terms, the issue would probably not arise. Clause 6.2, no differently from much else in the contracts, is not especially well drafted. The fact that it could have been drafted differently, in a way that does not give rise to a dispute, does not greatly assist the resolution of the task at hand, which is to fix a legal meaning to the contractual language the parties have chosen to record their bargain. As was said in Sydney Trains v Argo Syndicate AMA 1200 [2024] NSWCA 101; 422 ALR 189 at [153]:

5. [97]

   Coulson also made the point that there is a clear distinction between bushfire prevention and bushfire fighting, and that the statutes are concerned with the former while the contract is concerned with the latter. As much may be acknowledged. But that does not relieve the Court from affixing some meaning to the words “start of the fire season”. The similar statutory language, of which both parties must have been aware, is at least a candidate. What are the alternatives?

6. [98]

   The construction for which Coulson contends is replete with very substantial difficulties. These were exposed during argument.

7. [99]

   There are two levels of uncertainty inherent in Coulson’s construction. The first is that because the date turns on a decision being made by RFS or CFA, it will not be possible for either party to know at the time the contract is terminated for convenience whether doing so is accompanied by an obligation to pay an amount which may exceed the total amount of daily fees which would have been paid had the contract not been terminated. That is unlikely enough, bearing in mind that the point of an agreed damages clause is to remove the uncertainty inherent in parties having to establish consequential loss.

8. [100]

   The second is worse. On Coulson’s construction, the relevant inquiry is when Coulson, had it not terminated the contract, would have required Techfuel to make its tanker and driver/refueler available. Not only can that not be known at the time, but it is apt to be counter-factual, because the fact that Coulson has terminated for convenience may very well mean that Coulson has chosen not to engage in fire fighting at all in that season.

9. [101]

   There is no reason to prefer a construction which inevitably requires a counter-factual analysis. The premise of the obligation to pay in cl 6.2 is that Coulson has terminated for convenience. It is with respect deeply problematic for the 100 days to be measured by reference to something which, by dint of Coulson’s own act, can never happen, namely, Coulson calling upon Techfuel to make its tanker and driver/refueler available after Coulson has terminated for convenience.

10. [102]

    Contrary to Coulson’s submissions, a consideration of what is commercially sensible points against, rather than in favour of, its construction.

11. [103]

    The commercial reality of the position was that the parties’ bargain involved an obligation to pay if the new power to terminate for convenience was exercised insufficiently ahead of time. The nature of the parties’ bargain was that Techfuel was liable to be called on to make its tankers available shortly after Coulson was called upon to make its helicopters available to the relevant fire fighting agency. That was only likely to happen at a time when there were unusual (for example, especially intense) bushfires. The parties are to be taken to have contemplated that that might happen at any time in the fire season. It may very well be that it was more likely to happen towards the end of the fire season, rather than at the very beginning, and it may very well be that everyone assumed that would be so as a matter of practical likelihood. But that did not alter the fact that the parties had promised, if called upon, to make aerial fire fighting services available at any time in the fire fighting season.

12. [104]

    Those commercial considerations point to the construction upheld by the primary judge.

13. [105]

    Turning to Coulson’s second submission, it is far from clear to me that Mr Bower made admissions as contended. One difficulty is that the cross-examination in 2025 did not clearly distinguish what was in Mr Bower’s mind in 2020 as opposed to what was in his mind in 2021 or 2022 or 2023. Only if the admission reflected his understanding before Techfuel entered into the Fuel Purchase and Services Contracts in 2021 which included cl 6.2 could the admission be used in the process of contractual construction. A second difficulty is that the words “fire season” are quite ambiguous, being equally amenable to describing the period during which Techfuel and Coulson were on call, and when they were actually fighting fires. This is evident from the passage on which Coulson relied:

14. [106]

    But it is not necessary to express concluded views on either of those points. Even taking Coulson’s submissions on the admissions made by Mr Bower at their highest (including what was said in the attachments to his email of 9 June 2021), they fell well short of sustaining a construction whereby, in order to determine whether as the price of Coulson exercising a right to terminate for convenience, the parties must engage in the hypothetical exercise of determining when, had the contract remained on foot, Coulson would have called on Techfuel to make a tanker and a refueller available, and then determine whether the exercise of the power is within 100 days of that event. It is to be borne steadily in mind that the point of an agreed damages clause is to avoid the need and expense of disputation concerning the actual loss sustained by a party in certain circumstances. There is no reason to impute to the parties (when they chose to put in place cl 6.2) an intention that while the amount of agreed damages was readily calculable, the obligation to pay it turned on such a counterfactual and contestable issue such as what would have happened had Coulson not exercised the right.

15. [107]

    To recapitulate the above, it is natural to impute to both parties an intention that it be clear, if and when the exercise of the new right to terminate for convenience occurred, whether Coulson was subject to the obligation to make the payment. Another way of putting this is that it is inherently improbable that both parties would choose to be bound, in respect of an obligation to make a substantial payment, by something which was not known at the time and which was beyond their control, and which, in the event the power to terminate was exercised, would never in fact occur. The only way of construing the clause so that it provided certainty to both parties at the time the power to terminate for convenience was exercised is for the “start of the fire season” to be a fixed date. It is consistent with the casual language employed by the parties in the rest of their bargain for this to refer to the start of the period regulated by the applicable legislation, which used a similar name (“bush fire danger period”). True it is that that requires some straining of the language. But it is much less strained than the alternative proffered by Coulson, requiring a hypothetical determination of what would have occurred but for the exercise of the power, and which left both parties in the position where they did not know at the time the power was exercised whether the obligation to pay was engaged. Coulson’s construction introduces uncertainty into a clause whose self-evident purpose is to remove uncertainty, and means that neither party may know where it stands at the time the power is exercised. There is no good textual or contextual reason to uphold that construction.

16. [108]

    This ground is not made out.

Conclusion and orders

1. [109]

   For those reasons, the appeal must be dismissed. Techfuel sought, in that event, to be heard as to costs. The orders I propose accommodate that request.

2. [110]

   I propose these orders:

3. [111]

   McHUGH JA: I agree with the orders proposed by Leeming JA for the reasons given by his Honour.

4. [112]

   GRIFFITHS AJA: I agree with Leeming JA.