Cases to be heard this week in the High Court of Australia

This week the High Court will hear argument in two cases.

The first is the Commonwealth’s challenge to the ACT’s Marriage Equality (Same Sex) Act 2013.  My summary of the Commonwealth’s argument is here.

The second is the hearing of two related appeals from the Western Australia Court of Appeal:  Electricity Generation Corporation t/asVerve Energy v Woodside Energy Ltd, and Woodside Energy Ltd v ElectricityGeneration Corporation t/as Verve Energy.  Woodside and Verve were parties to a long term gas supply agreement (“GSA”).  Verve purchased gas under the GSA for use in its electricity generation facilities.  Under the GSA, Woodside had firm obligations to supply up to the maximum daily quantity of gas (“MDQ”) nominated by Verve, within a specified tolerance.  Verve was also entitled to nominate up to the supplemental maximum daily quantity (“SMDQ”). Woodside was obligated to use reasonable endeavours to make SMDQ Gas available for delivery.  In determining whether they were able to supply SMDQ on a day, Woodside could take into account all relevant commercial, economic and operational matters.  Without limiting those matters, there were certain specified instances where it was acknowledged by Verve that Woodside was not obliged to make SMDQ Gas available.

On 3 June 2008, a fire at a gas production facility owned by Apache (the other principal supplier of gas into the Western Australian market) shut down the supply of gas from that plant.  This event reduced gas supply to the market by some 30%-35%.  Demand for gas then exceeded supply and prices for short term supply increased considerably.  These circumstances prevailed until late September 2008. On 4 June 2008, Woodside informed Verve that they would not be able to supply SMDQ Gas but they could however supply the equivalent quantity of gas at a greater price than the price prescribed under the contract.  Under protest, Verve entered into a series of short term agreements with Woodside for additional gas at this higher price.

Verve sued Woodside for damages for breach of the contract.  Verve contended that the overall effect of the contract was that if Woodside had the requisite volume of gas available (in a practical, operational sense), they were obliged to supply it.  Verve did not contend, however, that Woodside had acted unreasonably in the way in which they had taken into account commercial and economic matters in determining their capacity to supply SMDQ Gas. The trial judge upheld the construction of the contract contended for by Woodside and dismissed Verve’s claim for damages.

The Court of Appeal (McLure P, Newnes and Murphy JJA) found that Woodside was in breach of contract notwithstanding its commercial decision that they could not supply and also that Woodside had applied illegitimate pressure amounting to economic duress in causing Verve to enter into the short term contracts.  Verve however did not ultimately succeed on this issue because the Court of Appeal also held that it was necessary for Verve to seek rescission of the short term agreements to obtain restitution of money paid under them.

Both parties have appealed to the High Court challenging the respective adverse findings made by the Court of Appeal.