The Supreme Court of Queensland recently dismissed Wilmar Sugar Australia Limited’s (Wilmar) claim against Queensland Sugar Limited (QSL) relating to losses associated with the 2010 sugar production season. Wilmar, which owns sugar mills in North Queensland, sued QSL for damages of $60.86 million plus interest and costs for what it claimed was breach of contract and negligence by QSL in its management of pricing activities associated with the 2010 season.
The operation of the contract meant that Wilmar (as sugar producer) was required to provide estimates in advance to QSL of the sugar it expected to produce each year. On the basis of those estimates, QSL marketed the sugar for sale. Under the contract, QSL was entitled to pass any loss it incurred onto Wilmar.
Due to poor weather in 2010, the production of sugar fell dramatically and Wilmar could not provide the previously estimated amounts of sugar. Wilmar was exposed to cover the loss. In seeking damages, Wilmar claimed it was “vulnerable” if QSL acted in certain ways i.e. by QSL committing to the sale of the sugar and that the vulnerability gave rise to a duty owed by QSL. In essence, Wilmar was aggrieved that it had been exposed to such huge losses on the basis of QSL’s decision to enter into certain contracts for the sale of sugar and was vulnerable to those decisions. QSL counterclaimed for declarations that the losses were a ‘cost’ and could be passed back to Wilmar.
His Honour Justice Peter Davis of the Queensland Supreme Court found against Wilmar. Davis J held that, in cases where the parties have agreed on a mechanism and contractual terms to allocate the economic risk, the courts will not supplement or modify the contract. The case serves as a warning to contractual parties to carefully consider exposures where liable for a counter-party\’s losses in circumstances where they cannot control risks.
The full case can be read here. It remains to be seen if the decision is appealed.
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