22 The construction issue raised in the proceedings requires some significant adjectival knowledge as to the genesis of the so-called ISDA 'umbrella agreement' because that agreement had been in operation for approximately seven years before the ISDA (Australia) was executed. Hence the matrix of fact legitimate to be taken into account in construing the umbrella agreement in this case may, depending upon the evidence, require to include the manner in which, to the knowledge of both parties, the umbrella agreement had been utilised as a working document for some time before the 1999 agreement was entered into. If it be that on the evidence there was to the knowledge of the parties operating in the Australian context, real precision in the manner in which the umbrella agreement had been treated or construed or utilised in the working out of disputes four square with the instant dispute, that matter is capable of being taken into account by the court in construing the subject clause of relevance. The matter is not however foreclosed because the ISDA (Australia) departed from the umbrella agreement in a number of respects, the most significant of which concerns the identity of the Reference Market-makers. The ISDA required the appointment of four leading dealers as Reference Market-makers. The ISDA (Australia) required the appointment of experts as such Reference Market-makers. Additionally and probably explaining why this was so, is the fact that on the evidence the electricity derivative markets in overseas countries where the ISDA is used as the umbrella agreement, is a liquid market whereas at all material times the Australian market was illiquid. As will be seen these are important matters to keep in mind when the proper construction of the ISDA (Australia) falls for determination.
23 Questions of whether or not, and if so for what particular reason and on what particular basis, expert evidence as to the proper construction of the umbrella agreement was admissible arose for determination. The matter was explained in the course of the interlocutory judgment when examining relevance of certain evidence sought to be put forward in this regard (and the qualifications within section 79 of, in particular, the expert put forward by the defendant to express opinions) as raising the following aspects which fall for consideration:
Whether the term " market quotation " is a technical term or term of art or a term explicable by reference to custom or usage and/or whether for other reasons, the parties are to be permitted to seek to prove that they intended to use the word by reference to a specialised meaning. The matter may arise in a number of ways:
· In the case of custom it is well established that the custom must be notorious, certain, legal and reasonable.
· Where a word has a particular meaning among a particular class of person, evidence is admissible to show that the parties intended to give the word that meaning, so that upon proof of that intention, the word should be construed accordingly.
This principle complements, and to some extent, overlaps with the principle that the court will interpret non-legal technical terms in their technical sense, if it appears from the circumstances that the parties intended the words to be so construed. It is difficult to distinguish, if distinction is needed, between cases in which the court is construing a technical term, and cases where the court is recognising a trade usage.
· Where parties have previously dealt with each other on a regular basis, so that there is a course of dealing, evidence of this may also be used to incorporate terms into the contract or to negative the implication of a term which may otherwise be implied. If the course of dealing has the effect of placing a particular meaning on the terms of a document, the parties may be bound by that course of dealing, arguably even if it involves the admission of subsequent conduct as evidence.
· Where a word has both an ordinary meaning and a specialised meaning, evidence is not admitted of the specialised meaning unless it is proved first, that the parties intended to use the word in the latter sense.
· Where both parties are aware of a secondary meaning and that fact is proved by evidence, the secondary meaning will be given effect, even though it may not amount to a technical term or trade custom. In Scragg v U.K. Temperance & General Provident Institution [1976] 2 Lloyds Rep 227 a question arose as to whether a sprint event was within the words "motor racing" in an insurance policy. The holding was that as a matter of ordinary English it was, but that both the insured and the insurer had been aware that the words were used in a special sense by those interested in motor sports, and admitted evidence as to that special meaning. Many words, however, do not have a recognised "ordinary" or "primary" meaning. In such a case the court selects the meaning to be given to the word from an examination of the context in which it is used and of the facts to which the word is to be applied.
24 The case also concerns the difficulty which arises where in the absence of any direct evidence that Enron and Integral prior to entering into the ISDA (Australia) were aware of the manner in which the ISDA has generally been treated for the purposes of the closeout/early determination mechanism in those overseas countries where the ISDA was the regulating contractual document. An attempt was made by the defendant to suggest that on the evidence the court ought to hold that such mutual knowledge was indeed held by both parties. But as will appear from what follows, the evidence is by no means of any strength in this regard and the court, notwithstanding what would seemingly be a fairly simple inference to draw, is as always, bound hand and foot by the actual evidence adduced. The matter is one requiring a relevant finding of fact.
25 Likewise because of the necessity to construe the 1999 agreement it is plainly necessary for the court to take into account the context in which that agreement was entered into. That context requires the court to examine aspects of the market for electricity swap contracts.
ISDA
26 ISDA is the global trade association representing leading participants in the privately negotiated derivatives industry, a business which includes interest rate, currency, fixed income, equity, commodity, and credit swaps, caps, collars, floors, swaptions and other options. ISDA was chartered in 1985 and today includes more than 575 member institutions from 42 countries on six continents. These members include most of the world's major institutions that are dealers in, or are leading end-users of, privately negotiated derivatives, as well as governmental entities, associated service providers, brokers, law firms and consultants.
27 ISDA devotes significant on-going effort to, among other things, preparing and developing standardized documentation for derivatives transactions. ISDA publishes all of its documentation globally, making it available to ISDA's members but also to all interested parties. ISDA documentation may be purchased, for example, through its Internet Website, at www.ISDA.org.