SANTOS PTY LTD, BHP PETROLEUM PTY LTD AND BHP PETROLEUM (BASS STRAIT) PTY LTD v PIPELINES AUTHORITY OF SOUTH AUSTRALIA No. SCGRG 95/2276 Judgment No. 5578 Number of pages - 22 Arbitration - [1996] SASC 5578 - SASC 1996 case summary

SANTOS PTY LTD, BHP PETROLEUM PTY LTD AND BHP PETROLEUM (BASS STRAIT) PTY LTD v PIPELINES AUTHORITY OF SOUTH AUSTRALIA No. SCGRG 95/2276 Judgment No. 5578 Number of pages - 22 Arbitration - [1996] SASC 5578 - SASC 1996 case summary — Zoe

[30]

A DISPUTE EXISTS 14. The parties to the agreement each seek to review the price for the next pricing period. They are unable to agree upon the new price. There is, as the trial judge said, a difference of opinion between them. That disagreement or difference of opinion is a dispute as that word is ordinarily understood. The noun "dispute" has a relatively wide denotation. It means an agreement, debate, controversy, or quarrel: see Macquarie Dictionary and Oxford English Dictionary. Its meaning ranges from a mere difference of opinion through a logical argument to a heated contention or quarrel. A difference or dispute is none the less so because the divergence of view as to law or fact has been indicated by phrases of courtesy rather than the language of vehemence: Selby v Whitbread and Co (1917) 1 KB 736, 745. The law has not departed from the meaning adopted in ordinary usage. A dispute, therefore, exists where a claim has been made and rejected: Concrete Developments Pty Ltd v Queensland Housing Commission (1961) Qd R 356; Comalco Aluminium Ltd v Howmet Resources Pty Ltd (Queensland Supreme Court, 14 May 1993, unreported) at 20; Commonwealth v Jennings Construction Ltd (1985) 1 BCL 252, 257. A dispute will also exist where a party has advanced a claim which has been denied or simply ignored: John Grant and Sons Ltd v Trocadero Building and Investment Co. Ltd [1938] HCA 20; (1938) 60 CLR 1, 15; Tradax Internacional SA v Cerrahogullari TAS, The M. Eregli (1981) 3 All ER 344; Ellerine Bros (Pty) Ltd v Klinger (1982) 1 WLR 1375, 1383. The view expressed by Lord Dunedin in May and Butcher v The King (1934) 2 KB 17n, at 22 that a failure to agree is a very different thing from a dispute was decided in respect of an agreement to purchase goods where the price had not been agreed. Although applied by Danckwerts LJ in F and G Sykes (Wessex) Ltd against Fine Fare Ltd (1967) 1 Lloyds Rep 53 at 60, the view is not consistent with the decisions just cited and has been doubted extra-judicially: see Mustill and Boyd, Commercial Arbitration, p.97 note 4. PASA and the Producers are unable to agree the price. The effect of their disagreement is similar to a disagreement where one party advances a claim which is rejected. In ordinary parlance as well as in legal terminology, the disagreement as to price is a dispute within the meaning of the Commercial Arbitration Act. There is a present controversy, namely, the price for gas in the pricing period commencing 1 July 1996 and that dispute has been referred to arbitration for determination. In short, the process which Clause 11.3 establishes is designed to resolve the present dispute as to price.

[33]

The existence of a precisely formulated claim is not necessary to create a dispute. In Arenson v Casson Beckman Rutley and Co (1977) AC 405, Lord Simon and Lord Wheatley decided that an essential prerequisite for an arbitration was that there should be a formulated dispute which is submitted to the arbitrator. The other members of the House of Lords did not find it necessary to express a view. What their Lordships meant by the expression "a formulated dispute" is not clear. In that case, their Lordships were concerned with the question whether a valuer was able to avail himself of the immunity from suit which is afforded to an arbitrator conducting an arbitration. That issue was determined by examining the function being performed by the valuer and it was held that the valuer was not deciding a dispute or difference but avoiding a dispute or difference: see Lord Wheatley at 428. The question whether the decision maker is resolving or deciding a dispute on the one hand or avoiding a dispute or difference on the other has been frequently applied as a test by which to determine whether the decision maker is an arbitrator or a valuer: see, for example, re Carus-Wilson v Greene (1886) 18 QBD7; re Hammond and Waterton (1890) 62 LT (NS) 808; A.M.P Society v Overseas Telecommunications Commission (Australia) (1972) 2 NSWLR 806. It is in this context that the necessity for a formulated dispute must be understood. As I understand the speeches of the Lords Simon and Wheatley, the emphasis was on the requirement of a dispute and not upon the formulation of the claim arising out of that dispute. Their Lordships were concerned that there existed a dispute about an identifiable subject matter. They were not concerned with the necessity for the parties to have precisely formulated their respective positions concerning the dispute, a view which is reinforced by reference to the speeches in Sutcliffe v Thackrah (1974) A.C.727, where the emphasis was upon the existence of a dispute. This conclusion is consistent with the decisions mentioned earlier as to what constitutes a dispute.

[54]

The fact that the arbitrators are fixing the price for the next pricing period does not, of itself, mean that they are legislating the price for the future. There are several reasons for that conclusion. First, there is a dispute. The arbitrators are not acting of their own volition but only after they have been called upon by the parties to decide the dispute. Next, the arbitrators are required to determine the price in accordance with the criteria specified in clause 11.3.10. This is quite unlike the legislative process or even the valuation process. Both a legislator and a valuer are not necessarily bound by specified criteria. In this respect, it is to be noted that the price review clause being considered by Zelling J did not require the arbitrators to have regard to all of the criteria specified in clause 11.3.10. The price review clause in that case required the parties to negotiate and in doing so to have regard "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." If they failed to agree a price, the matter was referred to arbitration by two arbitrators. The contract was silent as to the matters which should be considered by the arbitrators. Although it is reasonable to infer that the arbitrators should have regard to the same factors as the parties, the position, nevertheless, remains that the factors to be considered by the arbitrators were not spelled out in the same detail as in clause 11.3.10. Finally, courts as well as arbitrators make decisions which in a sense declare the rights of the parties for the future. Even awards of damages and decisions granting compensation are in a sense declarations of rights for the future. What is relevant in this context is that these declarations are made to resolve a dispute. The Court is declaring the obligations of one party to the other for the purpose of resolving the dispute. The arbitrators are being required to undertake a like task.

[55]

It has long been recognised that issues such as the price of land or a commodity, a fair rent, and compensation may be determined in an arbitration properly so-called. Decisions to this effect include re Hopper (supra); re Carus-Wilson and Greene (supra) 7; AMP Society v Overseas Telecommunications Commission (Australia) (supra); Edmund Barton Chambers (Level 44) Co-operative Ltd v Mutual Life and Citizens Assurance Co Ltd (supra). When determining issues such as the market price for land or fixing rent, arbitrators will have regard, among other things, to sales of comparable land or to rents for comparable premises: Edmund Barton Chambers (Level 44) Co-operative Ltd v Mutual Life and Citizens Assurance Co Ltd (1986) 6 NSW LR 322. It is possible also to determine the market price of a commodity by reference to prices prevailing elsewhere. Courts determine similar issues in a like manner. The task is not far removed from assessment of claims for damages. A task more closely related to that before the arbitrators in this case is the determination of claims for compensation following the compulsory acquisition of land or the determination of appeals against assessment of the value of land for rating and taxing purposes. This task is undertaken by the Land and Valuation Division of this Court and by courts in other jurisdictions. In proceedings of this kind, courts are called upon to determine the value of the relevant parcel of land, an issue determined in part by reference to sales of comparable land: Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418. The arbitrators in this case will in all likelihood apply a like process and have regard to prices for comparable gas elsewhere in Australia as well as to other relevant factors. When determining such matters, arbitrators like Courts declare the rights of parties in the sense that they declare what the price, the rent, or the compensation shall be. But, if in doing so, they are acting in a judicial manner and the subject matter of the dispute is capable of judicial inquiry, the process is an arbitration as distinct from a valuation or other dispute resolution process.

SANTOS PTY LTD, BHP PETROLEUM PTY LTD AND BHP PETROLEUM (BASS STRAIT) PTY LTD v PIPELINES AUTHORITY OF SOUTH AUSTRALIA No. SCGRG 95/2276 Judgment No. 5578 Number of pages - 22 Arbitration

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Judgment (95 paragraphs)

SANTOS PTY LTD, BHP PETROLEUM PTY LTD AND BHP PETROLEUM (BASS STRAIT) PTY LTD v PIPELINES AUTHORITY OF SOUTH AUSTRALIA No. SCGRG 95/2276 Judgment No. 5578 Number of pages - 22 Arbitration (1996) 66 SASR 38 [1996] SASC 5578 (24 April 1996)

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Legislation Cited (6)

Cases Cited (18)