Yallourn v Enron Australia (in Liq)

This case concerned an appeal to the Court of Appeal of New South Wales regarding the interpretation of an ISDA Master Agreement between Yallourn Electricity Ltd ("Yallourn") and Enron Australia Finance Pty Limited ("Enron"). The dispute arose after an administrator and liquidator were appointed to Enron, leading to the occurrence of an event of default under the agreement. The central issue was the calculation of amounts payable and receivable between the parties upon the occurrence of an early termination date, specifically whether outstanding amounts and interest on those amounts were to be included in certain payment obligations.

The court was required to determine three primary legal issues. Firstly, whether the amount Enron was required to pay to satisfy its payment obligations under section 2(a)(i) of the agreement, and to avoid a future payment obligation, included interest on those outstanding amounts. Secondly, the court had to determine the amount Yallourn was required to pay to avoid the occurrence of an additional termination event, after Enron had satisfied its obligations. This involved considering whether such payment by Yallourn should include interest. Thirdly, the court considered the calculation of "Unpaid Amounts" owing to Enron upon the designation of an Early Termination Date, specifically the period over which interest should be calculated.

The Court of Appeal allowed the appeal in part. It declared that for the purposes of satisfying Enron's payment obligations under Part 1(g) of the Schedule to the Contract, the amount required was each unpaid specified payment, and did not include interest. Conversely, the court declared that the amount Yallourn was required to pay to avoid an additional termination event was each amount that would have become payable but for the operation of section 2(a)(iii), and which remained unpaid, also excluding interest. Regarding the third issue, the court affirmed the primary judge's determination concerning the calculation of Unpaid Amounts owing to Enron, which included interest calculated from the date amounts were or would have been required to be paid to the Early Termination Date at a rate reflecting Yallourn's funding cost. Consequently, the court ordered that each party bear its own costs of the proceedings.