Re Application for a Review of a Determination of the Australian Competition and Consumer Commission Made on 27 March 1996 Revoking Authorization No A90424 and Granting a Further Authorization (AGL Cooper Basin
[1997] ACompT 2
•14 OCTOBER 1997
COMMONWEALTH OF AUSTRALIA
TRADE PRACTICES ACT 1974CATCHWORDS
TRADE PRACTICES - authorization of long-term gas supply agreement - review of ACCC determination revoking an earlier authorization and granting a further authorization in substitution - whether material change of circumstances - whether benefit of supply agreement continues to outweigh detriment
Re Queensland Independent Wholesalers Ltd (1995) ATPR 41-438
Alliance Petroleum Limited NL v The Australian Gas Light Company (1995) 64 SASR 346
Australian Gas Light Company (1986) ATPR (Com) 50-114
Media Council of Australia (No 4) (1996) ATPR 41-497
Re Queensland Co-operative Milling Assocation Ltd, Defiance Holdings Ltd (1976) ATPR 40-012
Telecom Corporation of NZ Ltd v Commerce Commission (1991) 3 NZBLC 99-239
Re 7-Eleven Stores (1994) ATPR 41-357
Hatrick Chemicals Pty Ltd (1977) ATPR 40-044
Broken Hill Pty Co Ltd v Koppers Pty Ltd (1981) ATPR 40-203Trade Practices Act 1974
Cooper Basin (Ratification) Act 1975 (SA)ALLIANCE PETROLEUM AUSTRALIA PTY LTD, BASIN OIL N.L., BORAL ENERGY RESOURCES LIMITED, BRIDGE OIL DEVELOPMENTS PTY LTD, CRUSADER RESOURCES N.L., DELHI PETROLEUM PTY LTD, REEF OIL PTY LTD, SANTOS LIMITED, SANTOS (BOL) PTY LTD, SANTOS PETROLEUM PTY LTD, VAMGAS PTY LTD
RE: APPLICATION FOR A REVIEW OF A DETERMINATION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 27 MARCH 1996 REVOKING AUTHORIZATION NO A90424 AND GRANTING A FURTHER AUTHORIZATION (AGL COOPER BASIN NATURAL GAS SUPPLY ARRANGEMENTS)
VG 1 OF 1996
LOCKHART J (President), DR M BRUNT, DR B ALDRICH
SYDNEY
14 OCTOBER 1997
COMMONWEALTH OF AUSTRALIA
TRADE PRACTICES ACT 1974IN THE AUSTRALIAN COMPETITION TRIBUNAL
VG 1 OF 1996
BETWEEN: ALLIANCE PETROLEUM AUSTRALIA PTY LTD
BASIN OIL N.L.
BORAL ENERGY RESOURCES LIMITED
BRIDGE OIL DEVELOPMENTS PTY LTD
CRUSADER RESOURCES N.L.
DELHI PETROLEUM PTY LTD
REEF OIL PTY LTD
SANTOS LIMITED
SANTOS (BOL) PTY LTD
SANTOS PETROLEUM PTY LTD
VAMGAS PTY LTDApplicants
RE APPLICATION FOR A REVIEW OF A DETERMINATION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 27 MARCH 1996 REVOKING AUTHORIZATION NO A90424 AND GRANTING A FURTHER AUTHORIZATION (AGL COOPER BASIN NATURAL GAS SUPPLY ARRANGEMENTS)
TRIBUNAL: LOCKHART J (PRESIDENT), DR M BRUNT, DR B ALDRICH DATE: 14 OCTOBER 1997 WHERE MADE: SYDNEY
THE TRIBUNAL ORDERS THAT: the Determination of the Australian Competition Commission revoking Authorization No A90424 and granting a new authorization be revoked.
COMMONWEALTH OF AUSTRALIA
TRADE PRACTICES ACT 1974IN THE AUSTRALIAN COMPETITION TRIBUNAL
VG 1 OF 1996
BETWEEN: ALLIANCE PETROLEUM AUSTRALIA PTY LTD
BASIN OIL N.L.
BORAL ENERGY RESOURCES LIMITED
BRIDGE OIL DEVELOPMENTS PTY LTD
CRUSADER RESOURCES N.L.
DELHI PETROLEUM PTY LTD
REEF OIL PTY LTD
SANTOS LIMITED
SANTOS (BOL) PTY LTD
SANTOS PETROLEUM PTY LTD
VAMGAS PTY LTDApplicants
RE APPLICATION FOR A REVIEW OF A DETERMINATION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 27 MARCH 1996 REVOKING AUTHORIZATION NO A90424 AND GRANTING A FURTHER AUTHORIZATION (AGL COOPER BASIN NATURAL GAS SUPPLY ARRANGEMENTS)
TRIBUNAL: LOCKHART J (PRESIDENT), DR M BRUNT, DR B ALDRICH DATE: 14 OCTOBER 1997 PLACE: SYDNEY
REASONS FOR DECISION
INTRODUCTION
This is an application for review of a determination of the Australian Competition and Consumer Commission (“the Commission”) made on 27 March 1996 revoking an earlier authorization and granting a further authorization in substitution therefor.
The applicants in this matter (“the Applicants” or “the Producers”) were not the applicants for the authorization which the Commission revoked. Their interest in the matter is as parties, together with the Australian Gaslight Company (“AGL”), to an agreement known as the Letter of Agreement, amendments thereto, and certain associated deeds, that AGL had been authorized to give effect to by a determination of the Commission on 5 May 1986. The Letter of Agreement is critical to the matter before us because giving effect to it constitutes the relevant conduct the subject of the 1986 Authorization and of this review. The authorized conduct concerned primarily the implementation of the terms and conditions of a contract of sale of gas to AGL as the purchaser. The Producers are producers of gas in the South Australian sector of the Cooper Basin, who formed a joint venture known as the South Australian Unit (“SA Unit”) for the purpose of supplying gas to Sydney in accordance with the Letter of Agreement, and for the parallel purpose of supplying gas to Adelaide.
The Cooper Basin is a geological structure of a type known as a sedimentary basin. Such structures can carry reservoirs of petroleum hydrocarbons, viz. oil and natural gas, in certain of their strata; but not all sedimentary basins contain oil or gas, and some basins tend to be rich in one or the other. The Cooper Basin, which is predominantly gas-bearing, lies beneath north-eastern South Australia and south-western Queensland, and is approximately 640 kilometres long and 240 kilometres wide at its widest point. It lies beneath another, geologically younger sedimentary basin, the Eromanga or Great Artesian Basin, which is of far wider extent, and which contains some oil in its strata. The Cooper and Eromanga Basins are among several such structures in Australia and in off-shore waters; and in some of these structures significant reservoirs of gas and oil occur.
Before the connection of natural gas to Australian markets, which began in 1969, many urban centres were supplied with reticulated “town gas” that typically was manufactured from coal. Natural gas has now supplanted town gas in all major cities on the Australian mainland and in many other centres.
Natural gas supply in Australia developed as a series of regional business systems, in each of which a single joint venture typically produced gas that passed through a single transmission pipeline to one buyer that then reticulated gas to end-users. These separate business systems largely persist, and the gas supply systems to the major centres of demand in Australia are not so interconnected that trade in gas between them can readily occur. This form of the Australian gas industry is one consequence of a number of characteristics of the industry that are here listed briefly, and that are described and discussed more fully, later in these reasons.
First, high risks and large capital expenditure are associated with exploration and production. The common use of joint venture structures for exploration and production enterprises is a response to this.
Secondly, gas is most economically transported from the gas fields by high-pressure transmission pipelines, before local distribution to end-users by means of low-pressure gas reticulation pipeline systems.
Thirdly, most users of gas have a choice between gas and other sources of energy, with competition occurring typically when the equipment or appliance that is designed to use one form of energy is chosen or replaced.
Fourthly, other considerations mean that governments are inevitably involved in some sectors of the industry, and have been commonly disposed to extend this involvement, whether by way of direct financial participation or by regulation. We shall say more of this later; but it is sufficient by way of introduction to note, for example, that gas is owned by the Crown until extracted for processing and sale. Hence, governments must determine the terms on which firms explore for and produce gas. Governments have also involved themselves in issues about whether and on what terms gas might be traded between jurisdictions and the purposes for which it is consumed within jurisdictions. The natural monopoly characteristics of gas transmission and distribution create both economic and political rationales for government involvement.
The gas industry is regulated by both the Commonwealth and the State governments. The Commonwealth regulates interstate trade in gas, and exploration and production off-shore, beyond the three-mile limit. The States regulate on-shore exploration, and production, transmission and distribution of gas within their jurisdiction.
The Council of Australian Governments (“COAG”), comprising the governments of the Commonwealth, States and Territories, has in recent years agreed on significant changes in the policy framework governing the gas industry, with the express objective of encouraging “free and fair trade” in natural gas across Australia. This framework of competition policy and its consequences are described more fully, later in these reasons.
PARTICIPANTS AND WITNESSES
The Applicants, together with AGL, are the present parties to the Letter of Agreement of 26 May 1971, as amended from time to time, and to the two deeds of 21 December 1976 and 17 May 1974. Most of the Applicants were original parties to the Letter of Agreement and the two deeds of 17 May 1974 and 21 December 1976; though some of the present parties to these contractual arrangements were not parties to the original agreements - their predecessors were.
The Applicants were represented by senior and junior counsel. AGL was separately represented by counsel. The Commission was also represented by senior and junior counsel.
The Council of the City of Wagga Wagga (“the Council”) applied to the Tribunal pursuant to s 109(2) of the Act for leave to intervene in the proceeding. Leave was granted. Its interest in the matter stemmed primarily from the fact that it is a party to an agreement of 16 February 1988 with AGL to purchase gas from AGL for a term expiring in the year 2006. At present AGL is the only supplier of gas to the Council which is the only supplier of gas to consumers within a 25 kilometre radius of the Wagga Wagga post office. The Council later withdrew from the proceeding.
Statements from 50 witnesses were received into evidence by the Tribunal. Some of these witnesses were cross-examined; others were not. A large body of documentary material was also before the Tribunal. The hearing occupied 16 days and we had the benefit of full submissions both in writing and orally from counsel and solicitors for the parties and for the Commission. The principal witness called by the Applicants was Mr McArdle, the Executive General Manager - Commercial of Santos.
2.1 Role of the experts
Three expert witnesses in the field of economics furnished statements and were examined orally before the Tribunal at the hearing. The Tribunal adopted the same procedure with respect to these witnesses as it has done in other cases.
We gained considerable assistance from the evidence of the experts. The experts submitted written statements prior to the oral proceedings, but after the reception of written non-expert evidence and documentary material. Their oral expositions and examinations occupied a little over one day’s hearing.
The procedure adopted at the hearing was as follows:-
It was explained to the experts before they gave evidence that they should feel free to modify the views expressed by them in their reports as little or as much as they wished, because the Tribunal wanted the benefit of their present views, having had access to all of the evidence.
At the conclusion of all the evidence (other than the evidence of the experts) and before the commencement of addresses, each expert was sworn or affirmed immediately after the other. Each expert in turn gave an oral exposition of his opinion with respect to the relevant issues arising from the evidence. Each expert then in turn expressed his opinion about the opinions expressed by the other experts.
Counsel then cross-examined the experts, being at liberty to cross-examine on the basis:
(a)either that questions could be put to each expert in the customary fashion, one after the other, completing the cross-examination of one before proceeding to the next; or
(b)that questions could be put to all or any of the experts, one after the other, in respect of a particular subject; then proceeding to the next subject.
Re-examination was conducted on the same basis.
Members of the Tribunal sometimes intervened with their questions.
The advantages of this system are as follows:
(a) Experts are required to prepare written submissions which are set down as a connected argument, and when giving oral evidence the same connected thread runs through it, rather than being a series of disconnected responses to questions by counsel.
(b) It achieves the result of the experts defining for their purposes points of agreement and disagreement.
(c) It takes the expert as far away from the adversarial field as possible.
The practice is recorded generally in QIW (re Queensland Independent Wholesalers Ltd (1995) ATPR 41-438 at 40,925) and in other decisions of the Tribunal. In QIW four economists appeared. The total time required for their evidence was only three-and-a-half hours, but their contribution was immensely helpful to the Tribunal.
At the conclusion of the evidence of the experts the President asked them what they thought of the procedure. Two of the experts were distinguished American economists and the third was a distinguished Australian economist. They were unanimous in their support of the system. They said that at the end of their evidence they felt they had said everything they wished to say; and did not have the feeling (that they invariably have when examined in the customary adversarial way) that only a portion of their views had been given, the statement of the remainder being constrained by the adversary system.
Whilst we do not suggest that the new system is free from difficulty or criticism, we think it is an excellent system and works well. The principal benefit derived from it is that at the end of the exercise the Tribunal knows what the economists perceive as being the real issues, and the areas of agreement and disagreement between them. This is very helpful to the Tribunal’s task of refining the real issues and deciding the matter.
The witness box is, of course, too limited a space for all experts to be in at the one time, so they usually sit at one end of the Bar table.
When we use the expression “the adversary system” (and like expressions) we do so in the sense that lawyers understand, namely, the system of litigation in force in Australia, New Zealand, the United Kingdom, the United States of America and other countries as distinct from the inquisitorial system of litigation adopted in European and other countries.
THE LETTER OF AGREEMENT
The Letter of Agreement entered into on 26 May 1971 (“the Letter of Agreement”) is a contract for the sale of gas by the Producers who were parties to that agreement with AGL. By the time of the grant of the authorization in 1986 the Letter of Agreement had been amended a number of times. Through change of name and disposal or acquisition of assets and companies, these parties ultimately became the eleven parties who presently have interests in the Letter of Agreement. The Letter of Agreement was the culmination of discussions and negotiations which commenced in about 1968 between the original Producers and AGL. The Letter of Agreement constituted the agreement between the Producers and AGL whereby the Producers undertook long term obligations to prove up gas reserves, to supply gas and to hold ready capacity to supply contract quantities, whilst AGL undertook to purchase specified quantities and assumed other obligations.
The Letter of Agreement was amended by a number of letters subsequent to 1971.
The Trade Practices Act commenced operation on 10 October 1974. An Act of the South Australian Parliament, namely, the Cooper Basin (Ratification) Act 1975 (SA) (“the Ratification Act”) commenced operation on 11 December 1975. Amongst other things, that latter Act by s 16(b) authorized and approved the Unit Agreement and “all contracts, arrangements, understandings, practices, acts or things made, given effect to, carried on or done thereunder or in relation thereto” for the purposes of the Trade Practices Act. Thus, the Ratification Act in essence exempted arrangements including the Letter of Agreement from the operation of the Trade Practices Act. It is not entirely clear to us that all relevant documents amending the Letter of Agreement of 26 May 1971 are before us; but it seems that the material ones are in evidence and certainly the parties have conducted their cases on the basis that what has been described as a “clean copy” of the Letter of Agreement as it was in force at the time of the authorization in 1986 may be assumed to be the relevant Letter of Agreement. We have acted on this basis.
By reason of the Ratification Act the parties assumed that no question of possible contravention of the Trade Practices Act arose from the critical clauses (that is critical so far as the operation of the Trade Practices Act is concerned), namely, clauses 12, 18, 20 and 24 of the Letter of Agreement, until advice was received concerning the conduct of a price arbitration outside South Australia in 1985. Hence, the application for authorization was initially confined to the price determination clause (clause 24); but extended at the suggestion of the then Producers to the whole of the Letter of Agreement and to the Deed of Covenant and Release of 1976 and the Deed of Covenant and Consent of 1974.
We shall turn first to the Letter of Agreement and then to the two deeds as all three documents were relevant to the Commission’s 1986 authorization.
Although this is the first occasion on which the Letter of Agreement has been considered by the Tribunal, certain of its provisions were considered by the Full Court of the Supreme Court of South Australia in Alliance Petroleum Limited NL v The Australian Gas Light Company (1995) 64 SASR 346 where Olsson J (with whose reasons for judgment Morh and Bollen JJ agreed) described the Letter of Agreement as “a lengthy and, to some extent, complex document” (at 347). Olsson J noted that it was the original intention of the parties to the Letter of Agreement to replace it with a more formal instrument, but this was never done; instead the Letter of Agreement was from time to time varied by other documents.
We shall refer to the interpretation placed upon certain of the clauses of the Letter of Agreement by the Full Court of the Supreme Court of South Australia when we are considering those particular clauses.
The introductory clauses of the Letter of Agreement stated, amongst other things:-
that although AGL contemplated reselling natural gas to other undertakings in the Sydney/Newcastle/Wollongong region, some proportion of the natural gas to be taken by AGL under the agreement proposed in the Letter of Agreement will be purchased by AGL as a principal and as sole buyer under such agreement and no other user or consumer of gas will be a party or privy to such agreements.
After the prefatory statements of a general nature, the Letter of Agreement then recorded the terms of the agreement in 32 clauses and schedules (lettered (A) to (F) inclusive).
Clause 1 required that the Producers establish reserves at a level of 2.8 trillion (US) cubic feet of proven and provable natural gas reserves of sales gas from the Cooper Basin before the agreement took any effect (see also clause 2). Clause 1 is described in its opening words as a condition precedent to the whole of the agreement.
Clause 7 provided that upon the due fulfilment of the condition precedent set out in clause 1 the agreement will become unconditionally binding on AGL and on the Producers; and within a period of two-and-one-half years from 12 September 1973 or such longer period as may be agreed:
(a)AGL would become obliged and would proceed, without cost to the Producers, to construct and complete a pipeline from the Sydney region to the Producers’ treatment plant with sufficient capacity to carry AGL’s requirements so that it will be completed and ready for use before the expiration of the agreed period;
(b)the Producers would become obliged and would proceed, without cost to AGL, to drill and equip production wells and install facilities between wells and a treatment plant sufficient to produce and deliver the sales gas quantities at the rates required for the time being by the terms of the agreement and would deliver such sales gas at a particular defined point.
Clause 8 imposes obligations on the Producers to supply and AGL to take gas at certain annual volumes.
The South Australian Full Court in Alliance Petroleum considered clause 8 and said that it in effect stipulated that, in the events which happened after 20 September 1976, the Producers were obliged to supply natural gas to AGL up to maximum annual volumes specified in Schedule A to the document. AGL was to be entitled to take gas up to those volumes.
Clause 10 provides that, subject to certain other clauses, the title to all sales gas delivered by the Producers shall pass to AGL at the point at which it enters the pipeline provided by AGL and the gas will as from that point be the property of and at the risk of AGL.
Clause 11 provides that the Producers reserve the right (or any of them does) to establish a processing plant or plants at any point or points along the pipeline outside the Sydney region for the recovery to the account of the participants in such plant of LPG and other hydrocarbon fractions.
Clause 12 is an important provision. It provides that AGL will give to the Producers the first right of refusal for supply of its requirements of gas over and above the volume specified in the relevant schedules provided that the Producers’ prices and terms of sale are no less favourable than those upon which AGL could obtain sales gas of the same quality and quantity from some outside supplier. This clause is referred to as the first right of refusal clause. Clause 12 states that the supply of sales gas to AGL shall be on a firm basis and not subject to curtailment or interruption except in the case of force majeure.
Clause 12 reads as follows:
“A.G.L. will give to the Producers the first right of refusal for supply of its requirements of sales gas over and above the volumes contemplated in this Agreement provided the Producers’ price and terms of sale are no less favourable than those upon which A.G.L. could obtain sales gas of the same quality and quantity from some outside supplier. The supply of sales gas from time to time to A.G.L. up to the volumes set out in Schedules A and B and C attached hereto shall be on a firm basis and shall not be subject to curtailment or interruption except that caused by force majeure as described herein or operating conditions beyond the Producers’ control and deliveries of sales gas from time to time up to the volumes set out in Schedules A and B and C attached hereto shall at all times have priority over all other commitments for the sale by the Producers of natural gas through the transmission system installed by A.G.L. referred to in Clause (7)(a).”
Clause 16 provides that the Letter of Agreement shall be initially for a period of 30 years from the commencement of supply. We say “initially” because provision is made by clause 18 for the extension of the Agreement in the circumstances there provided, but for no more than five years.
Clause 18 is important. It was construed by the Full Court of the Supreme Court of South Australian in Alliance Petroleum and Olsson J referred to it as the clause which has “colloquially been referred to as the “take-or-pay” clause”.
Clause 18 reads as follows:
“A.G.L. shall be bound in each contract year after the date upon which the Producers first become bound to supply sales gas under this contract to take or pay for a minimum of eighty per cent (80%) of the total annual volume specified in Schedule A for such contract year provided that any sales gas paid for but not actually taken by A.G.L. in a particular contract year may be taken by A.G.L. without any additional charge or cost in any subsequent contract year (but without counting as part of the sale gas which A.G.L. is otherwise bound to take in that same subsequent contract year) subject to Clause (21) and provided further that any additional contract which A.G.L. may hereafter enter into with the Producers for the sale and purchase of sales gas over and above the sales gas to be supplied under this Agreement shall in the first instance be fulfilled by the supply by the producers without cost of sales gas paid for but not taken by A.G.L. under this Agreement and provided further that if by the end of the thirtieth contract year A.G.L. has not taken (either under this Agreement or under some other agreement) all sales gas which it has paid for under the provision of this Clause the term of this Agreement shall at the option of A.G.L. (to be notified before the beginning of the thirtieth contract year) be extended so that the Producers will be obligated to supply and A.G.L. shall be entitled to take sales gas to the extent of that paid for but not previously taken provided that such sales gas shall be taken at volumes declining at the rate of ten per cent (10%) per annum in each year for a period not exceeding five contract years over and above the thirty year term of this Agreement.”
Mr McArdle gave evidence that he did not believe that clause 18 had been amended at any time during the contract. Yet in the judgment of Olsson J in Alliance Petroleum his Honour said at 348 that clause 18 was by deed dated 24 May 1991 varied by the parties over a limited span of time. The effect of the amendments made by that deed were described by Olsson J at 348-349. They do not appear to us to be material for present purposes. We note that Olsson J’s recital of the relevant provisions of the deed of 24 May 1991 include clause 6 thereof which provides:
“Nothing in this Deed shall change AGL’s obligation under Clause 18 of the Letter of Agreement (as amended by Clause 2 above).”
Clause 2 is not set out in the judgment of Olsson J.
Olsson J summarized the essential structure of clause 18 in these terms at 349:
“. In each contract year AGL was bound to either take or pay for 80 per cent of the prescribed annual volume of gas.
. To the extent that it paid for gas but did not take it, this gas could be taken free of charge in some later year (this, in the jargon of the parties, was known as “banked gas”).
. When banked gas was taken in a particular year it was not to be counted as portion of the 80 per cent for that year.
. Any gas taken by AGL over and above the prescribed annual volume was, in the first instance, to be taken from any current banked gas entitlement.
. Any residual banked gas credit remaining at the end of the 30-year term had to be supplied over the next five years without cost to AGL, subject to a prescribed supply formula.”
We note that in the judgment in Alliance Petroleum in the South Australian Supreme Court at first instance the trial Judge (Lander J) referred to a decision Diamond Shamrock Exploration v Hodel 853 F2d 1159, 5th Cir, 1988 where “take-and-pay” clauses were discussed. His Honour’s recital of the relevant parts of that decision appear at pp. 10 and 11 of his judgment, unreported, 23 December 1994.
Mr McArdle in his statement said that take or pay provisions are not merely a feature of gas supply contracts, but they exist in many businesses. He said that such clauses in long term natural gas contracts are not merely a local phenomenon but are common world wide. Clauses of this kind allocate the risk of revenue fluctuations between parties; they are a means of dividing the risks of demand fluctuations in the market. To satisfy a long term large volume contract the Producers must invest substantial upfront capital in exploration, production and perhaps pipeline investments. Take-or-pay clauses permit the financing of this investment and such a provision is a necessary feature of long term, high volume gas supply.
Clause 19 of the Letter of Agreement gives AGL the right from time to time to reduce the total remaining volume of gas for the term of the contract subject to certain restrictions and conditions.
Clause 20 is important. It reads as follows:
“Notwithstanding the provisions of Clause (18) A.G.L. shall not at any time during the term of this Agreement or any extension thereof take or purchase natural gas from any supplier other than the Producers except to the extent by which its requirements exceed the maximum amount which for the time being it is entitled to take and the Producers are able to supply under this Agreement.”
It was described in the case as the “exclusive dealing” clause.
Clause 24 is also important; it is called the “price and price review” clause. Clause 24 provides as follows:
“(24)(a) The price for sales gas delivered and taken or which should have been taken under this Agreement shall as from and including the first contract year be thirty cents (30c) per MMBtu and that price shall (subject to the provisions of sub-Clauses (b), (c) or (d) of this Clause (24)) prevail during the first four contract years. As from the commencement of the fifth contract year the price for all sales gas delivered and taken or which should have been taken shall be increased during that fifth contract year by one-quarter cent (0.25c) per MMBtu and a further one-quarter cent (0.25c) per MMBtu shall be added to the price in each subsequent contract year until and including the twenty-fifth contract year. Payments shall be made on a monthly basis.
(b) Both the Producers and A.G.L. may at any time and from time to time (but not more than once in any period of three consecutive calendar years) require a review to be made for the purpose of adjusting the prices (which for the time being would be payable thereafter under this Agreement) either upwards or downwards but so that in no case shall any resulting price be less than the price of sixteen cents (16c) per MMBtu plus the increases referred to in sub-Clause (a) of this Clause (24). In carrying out such review regard shall be had to all economic and other relevant factors existing at the time and in particular but without in any way limiting the scope of the review to the effects of inflation and any increases in capital and operating costs. Notwithstanding the foregoing it is hereby agreed that both A.G.L. and the Producers may in any one or more of the first three contract years (but not more than once in any such contract year) require a review of price to be made for the purpose of adjusting the prices and in carrying out any such review regard shall be had to the matters referred to in the preceding sentence of this Clause (24)(b) provided however that in respect to any review held during the first contract year any adjustment to the price by reason thereof shall not take effect until the commencement of the second contract year, and provided further that any review held in the third contract year shall be considered as a review pursuant to the provisions of the two sentences of this Clause (24)(b) immediately preceding this sentence.
(c) In the event of either the Producers or A.G.L. requiring an adjustment of price in accordance with the foregoing provisions of this Clause they shall consult together in good faith and use their best endeavours to reach agreement on an adjustment or on a formula to be applied in establishing such an adjustment.
(d) If the parties fail to agree upon a price or upon a formula for fixing a price within three calendar months from the date of the requirement of the Producers or A.G.L. the matter shall be referred to arbitration by two arbitrators one of whom shall be appointed by A.G.L. and one by the Producers. Such appointments shall be made within one month after expiry of the three calendar month period hereinbefore referred to.”
Clause 24(a) thus establishes the price which AGL has to pay for the gas or make the take or pay payment. The clause has been amended more than once to insert the new prices resulting from agreement or arbitration. The clause has not been changed every time there is a price increase. Mr McArdle gave evidence that it was obvious that following any review of price, settlement of a review or agreement not to proceed with the review, clause 24 would require amendment to reflect any agreement or settlement in any new price which was thereafter to apply.
Clause 24(b) is the price review clause.
Clause 24(c) contemplates that the parties may from time to time agree upon a formula to be applied in the then current or subsequent price adjustments either in lieu of or in addition to the formula mentioned in clause 24(a). Thus clause 24(c) does contemplate additions or modifications to the formula which is prescribed in clause 24(a).
Clause 24(d) is the arbitration clause.
Following the grant of authorization by the Commission in 1986, clause 24 was further amended, specifically on 12 May 1988 and 24 May 1991. It is convenient to consider these two amendments now.
The first amendment was made by deed of 12 May 1988 between the Producers and the then Secretary of AGL. Counsel for the Commission relied on the deed of 12 May 1988 to found the submission that in 1986 the Commission authorized the conduct of the parties to the Letter of Agreement in carrying on arbitration pursuant to clause 24 of that document. As clause 24 was amended by the two later deeds, in particular the deed of 12 May 1988 to which the parties gave effect, then the original clause 24 became a dead letter and since authorization was not sought for the new clause 24, which was substituted by the 1988 deed and indeed the other deed of 24 May 1991, the conduct of the parties pursuant to those two deeds, insofar as it involved clause 24 and the arbitration clause, concerned conduct which was not authorized by the Commission.
Counsel for the Producers made a contrary submission.
In our opinion what was authorized by the 1986 authorization so far as relevant to this point was the “conduct of the parties in carrying on arbitration pursuant to clause 24 of the Letter of Agreement”. Most of the changes made to the Letter of Agreement by the two deeds concerned the new price formula for that originally set. In substance, the amended clause 24 retains the same basic price review mechanisms that were originally prescribed by paragraphs 24(b), (c) and (d). Indeed, those paragraphs are substantially identical to the paragraphs bearing the same letters in the original clause in the Letter of Agreement. We reject this argument of the Commission. The conduct of the parties in carrying on arbitration pursuant to the amended clause 24 is substantially the same conduct as was carried on before the amendments and had the benefit of the protection of the authorization.
No other clauses of the Letter of Agreement are presently material.
The arbitration clause 24 of the Letter of Agreement has been invoked and was the subject of an arbitration conducted by Mr R L Hunter QC and Mr B M Debelle QC (as they then were) in 1985 and the reasons for the award, including a separate volume of confidential reasons, were in evidence before us as exhibit 53 and confidential exhibit 54.
THE 1986 AUTHORIZATION
AGL applied to the Commission for authorization to give effect to the provisions of the Letter of Agreement and the two deeds of 17 May 1974 and 21 December 1976 respectively between AGL and the Producers. The first of the deeds dated 17 May 1974 is between AGL, its then Secretary, the then Producers and the Pipeline Authority, a statutory body formed by Commonwealth legislation. Under that deed the Pipeline Authority covenanted with AGL and the other parties to construct and complete in accordance with AGL’s obligations, expressed in clause 7(a) of the Letter of Agreement, that part of the pipeline referred to in clause 7(a) from the Producers’ plant to Wilton in New South Wales. It also covenanted to receive and transmit through that pipeline “in absolute priority” the natural gas and related products which AGL purchases or receives from the Producers pursuant to the Letter of Agreement. The remaining provisions were of a consequential kind. In substance the Pipeline Authority assumed the obligations of AGL expressed in clause 7(a) of the Letter of Agreement to construct and complete that part of the pipeline referred to in that provision from the Producers’ plant to Wilton in New South Wales. Effectively, by the deed of 1974 the Pipeline Authority undertook to fulfil all the obligations of AGL under the Letter of Agreement for the construction and performance of the pipeline to allow the supply of natural gas from the Cooper Basin to the New South Wales market.
The deed dated 21 December 1976 between AGL, its Secretary, the then Producers, the State of South Australia and the Pipelines Authority of South Australia (“PASA”), recognized that AGL released and discharged the Producers which had interests in the Cooper Basin from their obligations under the Letter of Agreement related to dedication of natural gas reserves to AGL. That is to say, by notice of dedication delivered to AGL pursuant to the Letter of Agreement on 12 September 1973, the Producers dedicated to it certain of their respective reserves of natural gas within the Cooper Basin region. Hence the deed (Recital E) provided that, in order to rationalize the development and production of the natural gas reserves so dedicated to AGL within the Cooper Basin and certain other reserves within that Basin, the Producers and the State of South Australia requested AGL to release and discharge the Producers from their respective obligations relevant to dedication.
In essence the Deed of Release of 1976 freed from dedication the reserves located in the Cooper Basin.
The Commission, in its authorization determination, accepted that there were significant public benefits in making available, by efficient reticulation, natural gas from the Cooper Basin; and that those benefits accrued to the public as a result of the producers being able to negotiate freely about various matters. One of the matters was the price at which the gas would be sold to purchasers, who in this case were AGL (clause 71). It noted in paragraph 72 of its determination, that, although the regulation of the initial sale and distribution of natural gas from Cooper Basin had an anti-competitive effect, that detriment to competition was outweighed by the public benefit which the Commission was satisfied had been demonstrated.
The terms of the Commission’s determination are as follows:
“74. In terms of Application A90424 now before the TPC, the TPC authorizes AGL to give effect to those documents titled:
(a) Letter of Agreement;
(b) Deed of Covenant and Release; and
(c) Deed of Covenant and Consent,as amended up until the date of this Determination and set out at folios 14-112 and 304-318 of the TPC’s public register. This authorization extends to successors and assigns of AGL.
75. The TPC also authorizes the conduct of the parties in carrying on arbitration pursuant to clause 24 of the Letter of Agreement.”
There was discussion before us as to what the Commission did in fact authorize by its 1986 determination. It did not authorize the making of the Letter of Agreement and the two deeds; they had already been made. What it did was to authorize AGL to give effect to those documents. It also authorized the conduct of the parties in carrying on arbitration pursuant to clause 24 of the Letter of Agreement. Thus it was the conduct of AGL in giving effect to the documents and the conduct of the parties in carrying on arbitration pursuant to clause 24 that was authorized. The report of the authorization is Australian Gas Light Company (1986) ATPR (Com) 50-114 at 55,374.
The Commission could not authorize the entry into of the Letter of Agreement and the two deeds as they had been entered into before the Trade Practices Act came into force. It could authorize parties only to give effect to existing contracts (s 88(1)) in the form which it then took (and this is exactly what the Commission did). The reason for the authorization being granted only to AGL to give effect to the Letter of Agreement and the two deeds together with its successors was presumably that the relevant conduct of the Producers was carried on in South Australia and was exempt from the relevant provisions of the Trade Practices Act by virtue of s 51(1)(b) of that Act and the Ratification Act. The authorization granted concerning conduct under clause 24 was granted to all parties because that conduct was not confined to South Australia.
It is of particular relevance for present purposes that, by its 1986 authorization, the Commission authorized AGL to give effect to the first right of refusal clause of the Letter of Agreement (clause 12), the take or pay clause (clause 18), and the exclusive dealing clause (clause 20).
1996 REVOCATION OF THE 1986 AUTHORIZATION
On 21 September 1994 the Commission issued a notice pursuant to s 91(4) of the Trade Practices Act to initiate a review of the 1986 authorization in the light of what appeared to it to be material changes of circumstances since the authorization was granted.
When the notice of review was issued, AGL and other interested parties were invited to make submissions. At the same time, pursuant to a request from the Commission, the Industry Commission commenced a study of changes in the gas industry. The Industry Commission Study was released in March 1995. Following consideration of the Industry Commission’s Report, the Commission released an Issues Paper in June 1995 and invited interested parties to make submissions in the light of the Industry Commission Report.
The Commission in its Determination of 27 March 1996 stated that it was satisfied that three material changes of circumstances had occurred since the 1986 authorization was granted, namely:
Sales of gas under the Letter of Agreement have since 1988 occurred at a price collectively fixed by the parties under a new clause 24 which was substituted for the authorized clause 24 in the Letter of Agreement.
This harks back to the questions which we have already dealt with. The Commission noted on page ii of its Determination that clause 24 as authorized established a price for the sale of gas to AGL and provided for the negotiation of new prices and arbitration of price disputes between AGL and the Producers. In 1988 the authorized clause 24 was deleted and a revised clause 24 inserted. The Commission stated that it had obtained legal advice that sales of gas pursuant to the revised clause 24 are not protected by the authorization on the basis that the revised clause 24 as it now stands was not before the Commission at the time the authorization was granted. In the absence of authorization, protection for the new clause 24 which is the fundamental purpose of the authorization, namely, protection for price reviews and arbitrations conducted in New South Wales, is not being achieved. Hence, the Commission said that the deletion of the authorized clause 24 and the substitution of a new clause 24 must therefore be regarded as a material change of circumstances.
AGL is no longer the sole actual and potential source of metered gas to both domestic and industrial consumers in Sydney, nor in Newcastle, Wollongong and other regional centres.
Since 1986 it has become less difficult for producers from the Gippsland Basin, in particular, to compete in the market for the supply of gas to distributors and end-users in New South Wales.
The Commission said that it was satisfied that the anti-competitive detriments of the authorized agreements now outweigh their public benefits.
The three clauses of the Letter of Agreement identified by the Commission as having anti-competitive effects are the first right of refusal clause (clause 12), the take or pay clause (clause 18) and the exclusive dealing clause (clause 20). The Commission recognized (page iii) that there are public benefits associated with the use of long-term contracts in underwriting significant capital expenditure in production, exploration and transportation infrastructure. However, in the current market circumstances, the Commission said it believed that any positive benefits associated with the long term nature of the Letter of Agreement and the current take or pay provisions are now outweighed by their anti-competitive effects in restricting the entry of a third-party producer to the market in New South Wales.
The Commission was satisfied that the anti-competitive detriments now exceed the public benefits of the authorized arrangements and that there are sufficient grounds to revoke the authorization.
Notwithstanding that decision the Commission said (page iv) that it was satisfied that the new clause 24 in its current form results in public benefits of substance.
The Commission therefore decided to revoke authorization number A90424 and to grant a new authorization in substitution for the revoked authorization. The terms of the new authorization were that authorization was granted in respect of clause 24 of the Letter of Agreement in the form in which that clause appears in the deed of 12 May 1988 between the producers, AGL and the then Secretary of AGL, as amended by the deed of 24 May 1991. The Commission said at page 38 that the authorization was granted to AGL (and to the Producers pursuant to s 88(6) of the Trade Practices Act):
“to give effect to the provisions of the said clause 24 of the Letter of Agreement. The authorization extends to conduct by the parties in reviewing, negotiating and arbitrating prices for gas in accordance with the provisions of the said clause 24.”
The authorization was granted for:
“(a) the period of time until the said clause 24 of the Letter of Agreement ceases to be exempted from the operation of the Trade Practices Act 1974 by the provisions of the Cooper Basin (Ratification) Act 1975 of South Australia; or
(b) the period of three years commencing on the day this authorization comes into force,
whichever period of time is the shorter.”
The Commission said (at p 38) that if no application for review of its determination is made to the Tribunal under s 101 of the Trade Practices Act, then the Commission’s determination will come into force on 18 April 1996; but if an application for review is made to the Tribunal (as it was) the determination would come into force either on (a) the day that the Tribunal makes the determination on the review and grants authorization; or (b) where the application for review is withdrawn - on the day that the application is withdrawn.
In summary, the Commission has revoked the 1986 authorization which authorized AGL to give effect to the provisions of the Letter of Agreement and the two deeds and permitted the parties to conduct arbitration pursuant to clause 24 of the Letter of Agreement. What remains in its place is a limited authorization to the Producers and AGL to give effect to the new clause 24 of the Letter of Agreement (that is the Letter of Agreement as amended by the two deeds).
THE ACT AND THE APPROPRIATE TESTS (ESPECIALLY s 91(4))
In Media Council of Australia (No 4) (1996) ATPR 41-497 the Tribunal analyzed s 91(4) of the Act at 42,238-42,241 and 42,260-42,261.
It is unnecessary to recite here what we said there; but it is useful to refer to the principal findings made by us in Media Council (No 4) especially with particular relevance to the present matter.
Section 91(4) provides as follows:
“91(4) If, at any time after the Commission has granted an authorization, it appears to the Commission that the authorization was granted on the basis of evidence or information that was false or misleading in a material particular, that a condition to which the authorization was expressed to be subject has not been complied with or that there has been a material change of circumstances since the authorisation was granted -
(a) the Commission shall give notice accordingly to the corporation to which the authorization was given and any other persons who appear to the Commission to be interested and afford them a reasonable opportunity of making submissions to the Commission in the matter; and
(b) where, after so notifying the corporation and other persons (if any) and considering any submissions made by those persons, the Commission is satisfied that the authorization was granted on the basis of evidence or information that was false or misleading in a material particular, that the condition has not been complied with or that there has been such a material change of circumstances, the Commission may make a determination revoking the authorization and, if it considers it appropriate to do so, granting a further authorization in substitution for the authorization so revoked.”
As we observed in Media Council (No 4) at 42,238, the Tribunal’s jurisdiction to review the Commission’s determination revoking the earlier authorization is derived from s 101 of the Act, subsection (1) of which requires the Tribunal to review the determination of revocation; and a review by the Tribunal is a rehearing of the matter that was before the Commission (s 101(2)).
We observed at 42,239 that there was no section in the Act which is specifically directed to the functions and powers of the Tribunal when conducting a review of a determination of the Commission revoking authorization, apart from s 101. We found (at 42,239) that to perform its statutory duty to review the Tribunal must, by implication, have the same powers as those specifically vested in the Commission by s 91(4)(b), namely, to revoke the authorization; and if the Tribunal considers it appropriate to do so, grant a further authorization in substitution for the authorization so revoked.
We observed (at 42,239) that questions of public benefit and detriment (including anti-competitive detriment) are at the heart of the Tribunal’s functions and powers; and that it is at the core of the Tribunal’s task (as it is for the Commission) to enable a conclusion to be reached pursuant to s 91(4) that revocation of an authorization is justified on the basis that there has been a material change of circumstances since the authorization was granted. Consideration of matters going to public benefit and detriment to the public are fundamental.
The Tribunal’s task is a three stage process. The first stage is for the Tribunal to ask itself whether there has been a material change of circumstances since the authorization was granted. The second stage, if the first question is answered in the affirmative, is whether the authorization should be revoked. The third stage is whether, if the answer to the second question is yes, should there be granted a further authorization in substitution for the revoked authorization (at 42,239 and 42,240 and 42,261).
To determine whether there has been a material change of circumstances since the authorization was granted, the Tribunal must commence by examining the circumstances as they existed at the time the authorization was granted (at 42,240). From that point the Tribunal then moves forward to the circumstances as they exist on the material before it at the time it conducts the rehearing. Circumstances is a word of wide import which includes all facts, matters and conduct relevant to an authorization and to a revocation.
The Tribunal must examine for itself the circumstances as they existed at the time of the 1986 authorization. It is not limited to the circumstances as found by the Commission at the time of granting the authorization in 1986. The material before the Tribunal at the present time may (although in fact it does not in this case) reveal circumstances that existed in 1986 that are material to the inquiry and yet were not before the Commission at the earlier time. Nevertheless, as a practical matter, the reasons for decision of the Commission in 1986 are the starting point for the Tribunal’s consideration at the present time. It is impermissible for the Tribunal today to go behind the reasoning expressed by the Commission in its 1986 determination and conclude that the authorization should not then have been granted or would not be granted on the same facts today. But that is entirely different from saying that it is for the Tribunal today to consider and assess the facts as they appear to us to have existed in 1986. However, as we observed at 42,241, in the course of examining for itself the circumstances as they appear to have been in 1986, the Tribunal would be fully justified in accepting the Commission’s earlier findings of fact expressed in the 1986 determination if no challenge, reasonably based, is made to them in this review before the Tribunal.
We should add that in fact no party or the Commission has pointed to any circumstances that existed in 1986 beyond those discussed and determined by the Commission in its 1986 determination.
We noted at 42,241 that a material change of circumstances includes a change of circumstances which has a significant impact upon the benefits to the public or upon the detriment, including anti-competitive detriment, arising out of the conduct of the provisions in question.
If the Tribunal is satisfied that there has been a material change of circumstances in the intervening period, then it must determine, in the exercise of its discretion, whether or not such change of circumstances is of a kind or of such magnitude or significance as to warrant the Tribunal revoking the authorization previously granted. The determination of public benefit and detriment is germane to both tasks of the Tribunal, namely, when first determining whether there has been a material change of circumstances and, secondly, if so, whether such change warrants the Tribunal’s revocation of the authorization.
We also observed at 42,241 that in the course of determining relevant public benefit and detriment the Tribunal must compare the position which would or would be likely to exist in the future, on the one hand if the authorization were to continue, and on the hand, if it were absent: The “Future With-and-Without” Test.
If the Tribunal is satisfied that the authorization should be revoked, the third question then arises whether a further authorization should be granted in substitution for the authorization so revoked. That exercise involves the Tribunal in comparing the position which would or would be likely to exist in the future with the previous authorization revoked and no further authorization granted, with the position in the future that would or would be likely to exist if the further authorization were to be granted in substitution for the previous authorization.
The Tribunal now proceeds to apply these principles to the facts and circumstances of the case.
THE CASES OF THE APPLICANTS, AGL AND THE COMMISSION
Counsel for the Applicants first made submissions on the first of the three stages of analysis as to whether there has been a material change of circumstances since the date of the original authorization. Counsel first dealt with the question of market definition and argued that the market had four dimensions: product; functional; geographic and temporal. Whilst they did not contend for a market in which all energy sources compete unfettered against each other in all circumstances, their case was that the market includes at least natural gas, but extends to include energy sources in addition to natural gas.
The relevant functional market was said to be wholesale and retail; the relevant geographic dimension was argued as being south-eastern Australia which includes the southern part of Queensland. As the argument progressed, counsel for the Applicants accepted the view that on the temporal dimension we are dealing here with an unusual situation of a market that expands over time.
Turning to the take or pay clause (clause 18), counsel argued that there were distinct public benefits associated with the clause and no anti-competitive detriments; and the position had not changed since 1986.
As to clause 20 the position was said to be the same; similarly concerning the right of first refusal (clause 12). Counsel argued that there had been a change to clause 24 from its original form as authorized in 1986, the relevant amendment being in the deed of 12 May 1988. It was argued, we think correctly, that the amendment did not alter the basic structure of the pricing clause. The price review process provided for in the new clause 24 remained intact.
Counsel submitted that there had been no material change of circumstances; that there had been no significant decrease in net benefits nor had there been a significant increase in detriments. The argument then proceeded to deal with the future with-and-without test and it was argued that this must be answered in favour of the applicants.
Counsel for AGL maintained a basically neutral stance until he cross-examined the experts towards the conclusion of the evidence. Counsel correctly in our view identified the two provisions of Part IV of the Act mainly in point in this case, namely, s 45 and s 47. Counsel argued that there had been a material change of circumstances since 1986 which he described comprehensively:
“as the progress in opening up the gas market to competition by the action of governments and the commercial responses to that progress, including proposals for new pipelines, third parties seeking access to pipelines, and proposals for supply to AGL’s customers by new entrants. This process is far from exhausted but it is sufficiently advanced to be material.”
Counsel said that AGL faces a very different climate from that which it faced in 1986 when it was the sole, actual and potential source of gas in New South Wales. It faces uncertainty as to its source of gas after 2006; and in the final five years of the Letter of Agreement concerning the quantities it may need above contract quantities, it faces great uncertainty as to demand.
Counsel for AGL joined issue with counsel for the Applicants in the latter’s contention that it is not open to the Tribunal to reassess risks of long-term contracts ex post facto or that to do so creates dangerous precedents. Counsel for AGL submitted that, apart from the obvious rejoinder that business cannot expect to be insulated from risk at the expense of consumer welfare where legislation has been introduced to secure that objective after the risk has been assessed, the argument makes a number of other implicit assumptions which are at least questionable. Counsel said that there is no evidence as to the way in which the 30 year term was arrived at; and it should not be assumed that in the absence of evidence it was the appropriate period for amortization of the parties’ expenditure required to meet their commitments. Also, the Letter of Agreement has not remained in its original form, but has already been amended on several occasions, doubtless to take account of the parties’ perceptions of their respective risks and changes to them caused by intervening events, that is change of circumstances. It was argued that there clearly had been a material change in circumstances going to both benefits and detriments. The nature of competition itself has changed in the relevant market.
Counsel for the Commission relied on the material changes of circumstances identified by the Commission in its determination of 27 March 1996 to which reference has already been made. Additional matters were relied on as constituting material change of circumstances in final argument. They were identified as follows:-
infrastructure reforms including, in particular, legislative provisions for third party access to gas pipelines and the development of access regimes to give effect to the legislation;
the initiation by the South Australian government late in 1996 of a process of review of the Cooper Basin (Ratification) Act 1975 (SA);
actively pursued proposals to interconnect the Victorian and New South Wales gas pipeline systems, namely, the Eastern Gas Pipeline Proposal and the link between Albury and Wagga Wagga. These links potentially extend the geographic scope of the market in which gas is supplied under the Letter of Agreement from New South Wales to south-eastern Australia;
resolution of the resource rent tax dispute between the Victorian Government and the Gippsland producers, thus removing a significant impediment to competitive interstate sale of Gippsland Basin gas.
the agreement between the Applicants and the South Australian Government that there will be no restriction on the ability of the Applicants to sell gas in South Australia or elsewhere, which is significant in allowing the Applicants to sell uncontracted gas in the future without restriction;
However, in this matter, the Tribunal has noted provisions of the Letter of Agreement that could have extended its effect beyond the explicit date of termination. Provisions relating to the supply of “banked” gas in clause 18, could have effectively extended the term of the Agreement, although in the event they will not do so. In other circumstances, these provisions could have proved anti-competitive. Further, clause 12 of the Letter of Agreement, which gives first right of refusal to the Producers in the supply of gas to AGL additional to the annual contract quantities, has been a dead letter hitherto because demand did not exceed the annual contract quantities, but could (if it were applied rigorously) inhibit competition between alternative suppliers of gas to AGL for deliveries of gas subsequent to the term of the Letter of Agreement. In other circumstances, a provision of this character in a contract could well be adjudged highly anti-competitive.
The take-or-pay clause 18 of the Letter of Agreement, and the associated exclusive dealing clause 20, which precludes opportunistic behaviour by AGL, are together accepted by the Tribunal as sufficiently warranted, in that they have served to secure the cash flow required for the original financing of the relevant investments, and hence the benefit that flows from those investments. At the time that the Letter of Agreement was entered into, the use of the simple “take-or-pay” formula for the securing of cash flow was conventional and unexceptionable. However, in today’s more sophisticated financial environment, where preferable contractual devices that serve the same end are available and in common use, provisions such as are typified by clauses 18 and 20 in the Letter of Agreement might well be considered unacceptable.
The Tribunal determines that the Determination of the Australian Competition and Consumer Commission revoking Authorization No A90424 and granting a new authorization in substitution for the revoked authorization be set aside. It follows that the 1986 Authorization of the Commission remains in force.
I certify that this and the preceding one hundred and fifteen (115) pages are a true copy of the Reasons for Decision herein of the Australian Competition Tribunal
Associate:
Dated: 14 October 1997
Counsel for the Applicants: Mr B C Oslington QC
Mr S J RushtonSolicitors for the Applicants: Freehill Hollingdale & Page Counsel for the Australian Competition and Consumer Commission: Mr F M Douglas QC
Mr C P ComansSolicitor for the Australian Competition and Consumer Commission: Australian Goverment Solicitor Counsel for AGL: Mr A I Tonking
Solicitors for AGL: Minter Ellison Date of Hearing: 17-21, 24-27 March,
2-4, 7, 8, 14, 15 April 1997Date of Decision: 14 October 1997
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