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Case of AGL Energy Limited v Jemena Gas Networks (NSW) Ltd
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Added on 2020-05-11
Case of AGL Energy Limited v Jemena Gas Networks (NSW) Ltd
Added on 2020-05-11
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Case 9AGL Energy Limited v Jemena Gas Networks (NSW) Ltd1Background This case was decided by the Supreme Court of New South Wales where they denied the referring of an action which initiated in the Court to the process of arbitration, on the basis of Commercial Arbitration Act, 20102 particularly its section 8(1)3. This case was initiated with regards to the Reference Service Agreements which took place between Jemma Gas Networks and AGL Energy Limited. The resultant and the nearly identical agreements were imposed basedon the basis of an Access Agreement which had been authorized by the Australian Energy Regulator based on the legislation, i.e., the National Gas Act, 20084. Based on these agreements, Jemena was under the obligation of providing the details of gas meter readings to AGL so that they could bill their retail customers5. The key dispute in this case was between the parties with regards to the claims of AGL for the losses which were alleged to be rising from the failure on part of Jemena in failing to finish the meter reading on time and from the failure of Jemena for advising AGL of the has quantity which was taken at every point of delivery within the time period which had been covered under the agreement. On March 28th, 2017, after a period of negotiations, the dispute was purported by Jemena to be referred to arbitration based on clause 30.5(a) of this agreement. On May 12th, 2017, the legal claim was initiated by AGL in the Supreme Court of NSW against Jemena. After 1 [2017] NSWSC 7652 Commercial Arbitration Act, 2010 (NSW)3 Commercial Arbitration Act 2010, s8(1)4 National Gas Act, 2008 (NSW)5 George Mallis and Adrian Fourie, Case note: AGL Energy Limited v Jemena Gas Networks (NSW) Ltd [2017] NSWSC 765 (September 2017) <https://disputescentre.com.au/wp-content/uploads/2017/09/AGL-Case-Note.pdf>
ten days of this, a motion was filed by Jemena based on section 8(1) of the Commercial Arbitration Act and asked for referring the matter to arbitration. Clause 30.5(a) provided that: "Inthe event that discussions under clause 30.4 fail to resolve the Dispute, each Party expressly agrees to endeavour to settle the Dispute by mediation administered by the Australian Commercial Disputes Centre (ACDC) before having recourse to arbitration or litigation"6.In order to give the decision of this case, reliance was made on PMT Partners Pty Ltd v Australian National Parks & Wildlife Service7 and stated that as per section 7 of this act, there was a need of binding provision to enforce compulsory arbitration be it as a result of the election of the parties, or otherwise. Reliance was also made to the case of Manningham City Council v Dura (Australia) Constructions Pty Ltd8 and Mulgrave Central Mill Company Ltd v Hagglunds Drives PtyLtd9. Both of these cases were related to the contracts where the dispute provisions were covered and a requirement was stated to refer the matter to arbitration or litigation. In these cases, the judges held that the contracts covered an election for arbitration or litigation. A distinction was made from these cases was regarding the broader context of these agreements which promoted a finding that there had been certain agreements to arbitrate upon. As a result of this, His Honour concluded that the clause claimed upon in this case would be troublesome in operation as an arbitration clause since the same had to be read as permitted the “first past the post” system for starting either arbitration or litigation; or an in alternative manner, to permit the party to initiate arbitration after the initiation of litigation and for the process of arbitration to triumph. Both of these outcomes were deemed as unsatisfactory. 6Molino Cahill Lawyers, Arbitration agreements – does your contract require compulsory arbitration? (2017) <http://www.molinocahill.com.au/_blog/news/post/arbitration-agreements---does-your-contract-require-compulsory-arbitration/>7 (1995) 184 CLR 301, 325-3268 [1999] 3 VR 139 [2002] 2 Qd R 514
Question 1Whether the clause 30.5(a) was enough to refer the matter to arbitration?Answer 1The court was of the view that this clause could not be deemed as an arbitration agreement for the purpose of the quoted sections of the Commercial Arbitration Act. In this regard, the approach of a reasonable person was applied. As a result of this, it was held that a reasonable person would not understand this from the language of the clause that there was a need to commit to arbitration in a compulsory manner. Question 2What is the difference between arbitration and litigation? Answer 2Arbitration is a process where the matter of dispute is referred to an arbitrator, or an arbitration panel, which consists of an odd number of members. Litigation on the other hand refers to the process of making a legal case before the court of law, which is decided by the judges10.Question 3What are the advantages and disadvantages of arbitration and litigation?Answer 3Arbitration is a cost effective matter, whereas litigation is a costly process. This is both in terms of time and resources involved in both these processes. The matters in arbitration remain private but the court cases are a matter of public and can be accessed by the general public, save for the matters in specific courts, like family court or children’s court. The arbitration award is not 10 Alex Baykitch, Arbitration Law of Australia: Practice and Procedure (Juris Publishing, Inc., 2013)
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