North Queensland Pipeline No 1 Pty Ltd v QNI Resources Pty Ltd

North Queensland Pipeline No 1 Pty Ltd brought an action against QNI Resources Pty Ltd, seeking payment under a gas transportation agreement (GTA) and a gas supply agreement (GSA). The parties had entered into a series of agreements that provided for the transportation and supply of natural gas. The dispute centred on whether QNI was obliged to pay for gas transported but not used, under the "take or pay" clauses of the GTA and GSA. QNI argued that it was not required to make payments due to force majeure events that prevented it from using the gas, and because the plaintiffs had not acted in good faith.

The court was required to determine whether the force majeure clause exempted QNI from its obligations under the take or pay clauses, and whether the plaintiffs were required to act in good faith when exercising their rights under the agreements. The court also needed to decide whether the parties' conduct was consistent with the operation of the good faith obligation, and if so, whether that conduct breached the obligation.

The court held that the force majeure clause did not exempt QNI from its take or pay obligations, as the events relied upon did not constitute a force majeure event. The court also found that the parties were subject to an implied obligation to act in good faith when exercising their rights under the agreements. However, the plaintiffs had not breached this obligation as their conduct was consistent with the operation of the good faith obligation. The court awarded judgment to the plaintiffs in the proportions specified by the GTA, and dismissed the counterclaim. The parties were to make further submissions on the calculation of the debt, interest, and costs.

The court's judgment provides important guidance on the interpretation and operation of take or pay and force majeure clauses in gas transportation and supply agreements. The decision also confirms that an implied obligation of good faith may apply to commercial contracts, and that parties must act consistently with that obligation when exercising their rights under the agreement.