United Energy Distribution Pty Ltd v Alinta Asset Management Pty Ltd (No 2)

[2009] VSC 81

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL & EQUITY DIVISION  

No. 2025 of 2008

UNITED ENERGY DISTRIBUTION PTY LTD (ACN 064 651 029)	Plaintiff
v
ALINTA ASSET MANAGEMENT PTY LTD (ACN 104 352 650)	First Defendant
and
ESSENTIAL SERVICES COMMISSION (ABN 71 165 498 668)	Second Defendant

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JUDGE:	Kyrou J
WHERE HELD:	Melbourne
DATE OF HEARING:	13 March 2009
DATE OF JUDGMENT:	13 March 2009
CASE MAY BE CITED AS:	United Energy Distribution Pty Ltd v Alinta Asset Management Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2009] VSC 81

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Specific performance – impossibility of full compliance with contractual obligations – adjournment to enable position to be clarified.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P Bick QC with Mr D Farrands	Norton Gledhill
For the First Defendant	Mr J Delany SC with Mr A Weinstock	Blake Dawson
For the Second Defendant	Mr P Gray	Brand Partners as agents for Gilbert & Tobin

HIS HONOUR:

1. Following the delivery of my reasons for judgment dated 10 February 2009,[1] the parties reached substantial agreement on the declarations and orders I should make to reflect my reasons for judgment, save in relation to whether an order for specific performance should be made. 

   [1]United Energy Distribution Pty Ltd v Alinta Asset Management Pty Ltd [2009] VSC 19 (“UED”).

1. The plaintiff (“UED”) submitted that in view of the Court’s declaration that the first defendant (“AAM”) is required by the operating services agreement dated 23 July 2003 (“OSA”) to prepare regulatory accounting statements for 2006 and 2007 in accordance with the Electricity Industry Guideline No. 3, Regulatory Information Requirements, Issue No. 6, published by the Second Defendant (“ESC”) on 15 December 2006 (“Guideline”), an order for specific performance should be made compelling AAM to comply with its obligations under the OSA.  The ESC agreed with UED. 

1. AAM submitted that in view of the Court’s finding that AAM did not, in 2006 and 2007, keep its records in such a way as to enable it to provide all the costs information required by the Guideline in the form and subject to the verification required by the Guideline, the Court should not make an unqualified order for specific performance, as such an order would place AAM at risk of committing a contempt of court. 

1. AAM has filed affidavit material setting out further steps it proposes to take to perform such of its obligations under the OSA as it is able to, and has sought an adjournment of any further hearing of the question of whether the Court should make an order for specific performance until after it has taken those steps. 

1. In my reasons for judgment, I found, in substance, that AAM is unable to fully comply with the Guideline and thus with the OSA.  I did not accept that AAM cannot provide any information about its costs of operating UED’s distribution business in 2006 and 2007 in compliance with the Guideline over and above the information set out in a report prepared by PricewaterhouseCoopers (“PwC”) for 2006 and a draft report prepared by PwC for 2007.  However, I was not able to conclude precisely what further information could be provided, how readily that information could be obtained (with or without alterations to AAM’s accounting systems), what past periods could be covered, and whether the additional information would be useful and reliable and materially improve what would otherwise be in the PwC reports.[2]     

   [2]UED [2009] VSC 19, [196].

1. I agree with AAM that an unqualified order for specific performance would be inappropriate in circumstances where I have already found that AAM is unable to fully comply with the OSA.  I foreshadowed this in my reasons for judgment, where I said that, if, following the further submissions of the parties, I conclude that an order for specific performance is appropriate, such an order will need to be framed so that it clearly sets out what AAM must do and does not require AAM to do anything that it is legally and practically unable to do.[3]

   [3]UED [2009] VSC 19, [213].

1. It is inappropriate for me to decide, at this stage of the proceeding, what aspects of AAM’s obligations under the OSA it is able to comply with and what aspects AAM is not able to comply with and to make an order for specific performance in relation to the obligations AAM is able to comply with. 

1. I also note that, consistent with my reasons for judgment in both this matter and the related matter of Multinet Gas (DB No 1) Pty Ltd v Alinta Asset Management Pty Ltd,[4] as AAM’s obligations under the OSA depend on the ESC requiring compliance with the Guideline, if at any time the ESC informs the other parties that it does not require UED to provide any further information pursuant to the Guideline for the years 2006 and 2007, an order for specific performance will not be made.

   [4][2009] VSC 18.

1. In these circumstances, I will grant the adjournment sought by AAM.  However, prior to the adjourned hearing, the Court and the other parties will need to know what aspects of AAM’s obligations under the OSA (and, indirectly, under the Guideline) it has been able to comply with and what aspects AAM is not able to comply with, so that the question of whether an order for specific performance should be made can be considered on an informed basis.  Likewise the Court and the other parties will need to know whether there has been any change in the ESC’s position regarding further compliance with the Guideline by UED.

1. Accordingly, I will make the following orders:

The Court declares that:

A.In each of the years ended 31 December 2006 and 31 December 2007 (“Relevant Years”), the First Defendant was a related party of the Plaintiff within the meaning of the Electricity Industry Guideline No. 3, Regulatory Information Requirements, Issue No. 6, published by the Second Defendant on 15 December 2006 (“Guideline”).

B.Under the First Defendant’s agreement with the Plaintiff entitled “Services Agreement – United Energy Distribution Network” and dated 23 July 2003, the First Defendant is obliged to prepare regulatory accounting statements for the Plaintiff’s distribution business for each of the Relevant Years in accordance with the Guideline.

The Court orders that:

1.      The First Defendant’s counterclaim is dismissed.

2.The First Defendant pay the Plaintiff’s and Second Defendant’s costs of the proceeding, including reserved costs.

3.By 29 May 2009, the First Defendant file and serve one or more affidavits setting out:  

(a)which of the obligations set out in the Guideline in relation to the preparation of regulatory accounting statements (“Obligations”) it has complied with for the Relevant Years;

(b)which of the Obligations it has not complied with for the Relevant Years;

(c)in respect of the Obligations it has not complied with:

(i)what steps, if any, it has taken for the purpose of complying with those obligations;

(ii)what further steps, if any, it proposes to take for the purpose of complying with those obligations and within what timeframes;

(iii)if its position is that it is not able to fully comply with those obligations, the reasons for its inability to fully comply; and

(iv)if its position is that some of those obligations are not applicable, the reasons for its position.

4.If the Plaintiff and the Second Defendant wish to respond to the affidavit material referred to in paragraph 3 of this order, they file and serve their affidavits by 26 June 2009.

5.By 10 July 2009, the Second Defendant file and serve a memorandum stating whether, having regard to the affidavits, if any, filed pursuant to paragraphs 3 and 4 of this order and all the other circumstances prevailing as at that date, it requires the Plaintiff to provide any further information pursuant to the Guideline for the Relevant Years.

6.The Plaintiff’s application for an order for specific performance be adjourned for further hearing by Justice Kyrou to a date to be fixed on or after 20 July 2009.

7.The parties have liberty to apply.