Case: Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales [1982] HCA 24 ; (1982) 149 CLR 337
Outcome: referred to
It is alleged by Orrcon that it was a term and condition of the contract that Capital Steel was not entitled to make a claim for payment under the letter of credit unless all of the pipe delivered complied with the specification and AS1579 in all respects. Orrcon alleges that such a term and condition arises as a matter of construction from the description and specification of the pipe to be delivered and the requirement that payment was not due unless the pipe was delivered. In the alternative, Orrcon alleges that such a term arises by implication and pleads the well-known factors for the implication of a contractual term (see Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales [1982] HCA 24 ; (1982) 149 CLR 337 (" Codelfa "). 18 In December 2006 and in accordance with the specification, a pre-production meeting was convened at Dongbu's manufacturing plant in Korea for the purpose of reviewing the quality plan and manufacturing procedures to be followed during production of the pipe. The meeting was attended by representatives of Capital Steel, Dongbu and Orrcon. It is said that during the meeting the representatives of Orrcon were told of certain aspects of the manufacturing process which bore upon the minimum yield strength of the pipe and that Pohang Iron and Steel Company (otherwise referred to as "Posco") was to provide the raw material, hot rolled coil. There was discussion about the minimum yield strength of similar sized water pipes manufactured by Dongbu. There then followed communications between Capital Steel and Orrcon, and the upshot of those communications for present purposes was that Orrcon agreed to what it alleges were reduced minimum mechanical properties, the most important one of which was the proposed minimum for yield strength of the steel pipe of 270 MPa (aim 290 MPa). I note that Capital Steel asserts that a figure of 250 MPa was agreed, but it accepts that question is one for trial. 19 On 11 December 2006 Orrcon entered into a formal contract with the State of Queensland for the supply of pipe for the SEQ Water Grid Projects. It alleges that it did so relying on the November conduct and the representations at or about the time of the pre-production meeting. Also relying on those matters it alleges that it instructed Westpac to issue an irrevocable import documentary credit number SD3BM872029 in the amount of AUD19,337,670 in favour of Capital Steel. That was done on 21 December 2006 and the letter of credit was said to contain the following terms: 1. Partial shipments were permitted. 2. Credit was payable within 120 days from the bill of lading date. 3. The latest date of shipment was 20 June 2007. 4. The date of expiry was 11 July 2007. 5. The documents required to be presented to Westpac were a full duplicate set of clean "on board" or "shipped", negotiable marine bill of lading to order blank endorsed marked "freight pre-paid" and commercial invoices. 6. The payment documents must be presented to Westpac within 21 days after issue of the transport document but within the validity of the letter of credit. 97 Before leaving the issue of whether there is a serious question to be tried, I should mention that in the course of submissions Orrcon suggested that the breach of a negative stipulation exception to the autonomy principle may be relevant. Orrcon alleged in its statement of claim that it was a term and condition of the contract that Capital Steel was not entitled to make a claim for payment under the Westpac letter of credit unless all of the pipe delivered complied with the specification and AS1579 in all respects. The Westpac letter of credit refers only to AS1579 and that Australian Standard does not refer to the minimum yield strength alleged by Orrcon. I agree with the submission of Capital Steel that none of the documents which are alleged to form the steel contract contain the words pleaded and, accordingly, there is no express term to the effect alleged. Nor do I think it can be said that there is a serious question to be tried that there was an implied term to that effect, having regard to the factors referred to in Codelfa . 98 There was also a suggestion in Orrcon's written submissions that the presentation of mill test certificates to Westpac was misleading or deceptive conduct and that a contravention of s 52 of the TPA may be sufficient to found interlocutory relief. That submission was not developed in any detail by Orrcon and it is difficult to see how it could succeed in light of the fact that, among other things, mill test certificates are not necessary documents under the Westpac letter of credit. 99 I will consider first the balance of convenience having regard to the interlocutory orders as sought in the application. I will then consider the balance of convenience having regard to the reformulated orders.