NSW Court of Appeal clarifies misleading or deceptive conduct in commercial supply agreements

The New South Wales Court of Appeal has delivered an important decision for commercial parties negotiating complex supply agreements, particularly in regulated and volatile markets. In Weston Energy Pty Ltd (Weston Energy) v National Ceramic Industries Australia Pty Ltd (Ceramics) [2026] NSWCA 7, the Court unanimously allowed Weston Energy's appeal, finding that the gas supplier had not engaged in misleading or deceptive conduct under the Australian Consumer Law (ACL).

Bartier Perry acted for Weston Energy.

Background - gas supply agreement and price cap dispute

The dispute arose from an "Internal Meter Gas Supply Agreement" entered into following a competitive tender process. The agreement adopted a capped spot price model, with gas priced at market rates up to a maximum cap and a small premium payable by the customer.

After dramatic increases in global gas prices in early 2022, particularly driven in part by geopolitical and energy market disruptions, Weston's trading position deteriorated and its market participation was suspended by the Australian Energy Market Operator. The supplier terminated the agreement pursuant to its contractual rights and issued an invoice for gas already supplied.

At first instance, Ceramics successfully argued that Weston had engaged in misleading or deceptive conduct by allegedly representing that it would obtain third-party "price capping insurance". The primary judge awarded substantial damages (in excess of $7,000,000) after finding ambiguity in the contract wording had been exploited.

In September 2025, Weston appealed to the Court of Appeal.

NSW Court of Appeal decision on misleading or deceptive conduct

The Court of Appeal (Bell CJ, McHugh JA and Free JA) overturned the misleading or deceptive conduct findings and entered judgment in Weston's favour.

Key conclusions included:

1. No actionable representations: The alleged representations concerning third-party insurance were not supported by the contract text or surrounding communications. The "price insurance" referred to in the agreement described the contractual price cap itself, not external insurance.
2. Silence is rarely misleading: The Court rejected the argument that Weston's failure to clarify its contractual interpretation amounted to misleading conduct, noting there was no evidence that Weston knew the counterparty held a mistaken assumption.
3. Objective assessment of conduct: Liability under s 18 of the ACL depends on an objective evaluation of the impugned conduct, not subjective intent or allegations of "calculated ambiguity".
4. Fairness in trial process: The Court emphasised that serious findings, such as intentionally misleading conduct, should not be made against witnesses unless those allegations are squarely put in cross-examination, consistent with authorities including Kuhl v Zurich Services Australia Ltd (2011) 243 CLR 361.

The Court also refused Ceramic's application for leave to cross-appeal and ordered payment of the unpaid invoice plus interest and costs.

What this decision means for commercial contracts and risk allocation

This decision reinforces key principles and offers valuable guidance for commercial parties and advisors:

1. Courts will closely examine the natural meaning of contractual terms and commercial context before finding that representations were made.
2. Failure to volunteer an alternative interpretation is unlikely to constitute misleading conduct unless a party knows the counterparty is operating under a specific misapprehension.
3. Clear communications during tender and negotiation processes can reduce the risk of later disputes about alleged representations.
4. Serious allegations against witnesses must be properly put during cross-examination to ensure procedural fairness.

Conclusion

The NSW Court of Appeal's decision reinforces orthodox principles governing misleading or deceptive conduct and provides welcome certainty for businesses negotiating sophisticated commercial arrangements in volatile markets. It also highlights the importance of clear contractual drafting and disciplined litigation practice.

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