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Telecom New Zealand Ltd v Commerce Commission and anor [2006] NZCA 103 (25 May 2006)

Last Updated: 1 June 2006

IN THE COURT OF APPEAL OF NEW ZEALAND

CA75/05

BETWEEN TELECOM NEW ZEALAND LIMITED
Appellant

AND THE COMMERCE COMMISSION
First Respondent

AND TELSTRACLEAR LIMITED
Second Respondent

Hearing: 15 and 16 February 2006

Court: Anderson P, Glazebrook and Hammond JJ

Counsel: J E Hodder and B A Davies for Appellant
R A Dobson QC and G A J Stanish for First Respondent
J A Farmer QC and R G Simpson for Second Respondent

Judgment: 25 May 2006

JUDGMENT OF THE COURT

A Appeal dismissed.

B Appellant to pay costs to each of the respondents of $10,000 with usual disbursements.

____________________________________________________________________

REASONS

(Given by Anderson P)

[1] This is an appeal from a judgment of Harrison J which dismissed an application by Telecom for declarations by the High Court in relation to the Telecommunications Act 2001. The issues concerned aspects of price determinations for certain telecommunication services.
[2] The main purpose of the Act, as explained in s 3(1) is to regulate the supply of telecommunication services. Part 2 and Schedules 1-3, which contain the sections in issue in this proceeding, have a more specific purpose. That is explained in s 18(1) and (2) in the following terms:

18 Purpose
(1) The purpose of this Part and Schedules 1 to 3 is to promote competition in telecommunications markets for the long-term benefit of end-users of telecommunications services within New Zealand by regulating, and providing for the regulation of, the supply of certain telecommunications services between service providers.
(2) In determining whether or not, or the extent to which, any act or omission will result, or will be likely to result, in competition in telecommunications markets for the long-term benefit of end-users of telecommunications services within New Zealand, the efficiencies that will result, or will be likely to result, from that act or omission must be considered.

[3] Section 5 is a glossary of many terms used throughout the Act. These include "designated access service", "specified service", "access provider", and "access seeker". For the purposes of this litigation Telecom is an access provider and TelestraClear is an access seeker in respect of designated access services.
[4] The Commerce Commission has an important role in the regulation of the supply of telecommunication services. One of its functions is to make determinations on applications under s 20 which provides:

20 Application
(1) An access seeker or an access provider of a designated access service or specified service may apply to the Commission for a determination of all or some of the terms on which the service must be supplied during the period of time specified in the application.
(2) For the purposes of subsection (1), the terms on which the service must be supplied--

(a) may, in the case of a designated access service, include the price payable by the access seeker for the service; and
(b) must, in the case of a specified service, exclude the price payable by the access seeker for the service.

[5] The Act’s concern with efficiencies is reflected, for example, in s 22 which demonstrates a preference for outcomes which are negotiated by the parties rather than imposed by the Commission. That section provides:

22 When application may not be made
Despite section 20, no person may apply for a determination if--

(a) the persons who would otherwise be parties to the determination have an agreement for the supply of the service for part or all of the specified period of time; or
(b) those persons have agreed not to have any term for the supply of the service determined by the Commission; or
(c) that person has not made reasonable attempts to negotiate the terms of supply of the service with the person who would otherwise be a party to the determination; or
(d) the applicable conditions in relation to the service (if any) have not been met.

[6] Upon receiving an application the Commission must notify parties (s 24), decide whether to investigate (s 25) and consult with persons, other than the parties, if the Commission considers those persons have a material interest in the matter to be investigated (s 26).
[7] Section 27 provides that after investigating the matter, the Commission must prepare a determination, give a copy to the parties, and give public notice of the determination. A determination must, in the opinion of the Commission, be made in accordance with the principles specified in s 29 and must include the matters stipulated in s 30. The stipulated matters are:
(a) the terms on which the service must be supplied; and
(b) the reasons for the determination; and
(c) the terms and conditions (if any) on which the determination is made; and
(d) the actions (if any) that a party to the determination must do or refrain from doing; and
(e) the expiry date of the determination.
[8] In limited circumstances a s 27 determination may be the subject of review by the Commission. Section 42 provides as follows:

42 Application
(1) If a determination is made under section 27 regarding the price payable for a designated access service, a party to the determination may apply for a review of that part of the determination that relates to the price to be paid for the service.
(2) A determination made under section 27 continues to have effect and is enforceable pending the making of a pricing review determination.
(3) A party to a determination made under section 27 that relates to the price payable for a designated access service may apply for a review of any discount specified in the applicable initial pricing principle for the service.
(4) Subsections (2) and (3) are for the avoidance of doubt.

[9] Upon receiving an application for review the Commission has obligations relating to the notification of parties and the public (s 44) and may require the access provider to calculate the price payable for the designated access service (s 45). Sections 47-50 inclusive require the Commission to prepare, distribute and publish a draft pricing review determination which must include the matters stipulated in s 49. One of those is the proposed expiry date of the determination (s 49(f)).
[10] The purpose of distributing and publishing a draft determination is, obviously, to permit the public and the parties to make representations in respect of it. Section 47(d) requires the public notice to include the closing date for submissions, which must not be later than 30 working days after the date of publication of the draft determination. Section 50 makes provision for consultation or conferences, with persons other than the parties to the determination, before the preparation of a determination.
[11] Sections 51 and 52 are the review process analogues of ss 27 and 30. They provide as follows:

51 Pricing review determination
(1) As soon as practicable after completing any consultation or conferences under section 50, the Commission must--

(a) prepare the pricing review determination; and
(b) give a copy of the determination to the parties to the determination; and
(c) give public notice of the determination.

(2) To avoid doubt, a determination made under section 27 continues to have effect and is enforceable to the extent that it has not been altered by a pricing review determination.

52 Matters to be included in determination
A pricing review determination must include--

(a) the price payable for the designated access service, which, in the opinion of the Commission, is determined in accordance with--

(i) the applicable final pricing principle (as affected, if at all, by clause 2 or clause 3 of Schedule 1); and
(ii) any regulations that relate to the applicable final pricing principle; and

(b) if the Commission has considered any matters that relate to the price payable for the designated access service under section 48(b) and has made a determination in respect of those matters, that determination; and
(c) the reasons for the pricing review determination and the determination referred to in paragraph (b) (if any); and
(d) the terms and conditions (if any) on which the pricing review determination and the determination referred to in paragraph (b) (if any) is made; and
(e) the actions (if any) that a party to the determination must do or refrain from doing; and
(f) the expiry date of the determination.

[12] Section 29(c) requires that a s 27 determination in respect of a designated access service must, in the opinion of the Commission, be made in accordance with the applicable pricing principle and in accordance with any regulations relating to that. On the other hand, s 49(a) requires that a pricing review determination must in the opinion of the Commission be determined in accordance with the applicable final pricing principle and any regulations relating to that.
[13] The expressions "initial pricing principle" and "final pricing principle" are defined in s 5 and subpart 1 of Part 2 of Schedule 1. It is unnecessary to reproduce the definitions, it being sufficient to say that the initial pricing principle involves benchmarking against interconnection prices in comparable countries and the final pricing principle involves either what is known as TSLRIC (defined in Schedule 1, subpart 1, clause 1) or other stipulated methods if in the opinion of the Commission TSLRIC does not best give effect to the s 18 purpose.
[14] By virtue of s 10(1), the Commission’s s 27 determinations may be made by the Telecommunications Commissioner, but s 51 review determinations must be made by the Telecommunications Commissioner and two other members of the Commission.
[15] Whether made under s 27 or s 51, a price determination has the character of a proxy for the most efficient agreed price for a purpose specified in s 18. A s 51 determination does not supplant a s 27 determination because the latter is wrong, but because the former must be regarded as more efficient by reason of its more sophisticated methodology.
[16] By February 2005, when the High Court heard this dispute, the Commission had made three determinations under s 27 and had received pricing review applications by Telecom and TelstraClear on all of them. But it had not made any review determinations, notwithstanding that the terms of two of the s 27 determinations had expired. A third expired on 14 December 2005. Because the review process is complicated and time-consuming, it is likely there will always be an appreciable delay between a s 27 determination and a s 51 determination. In January 2006, as the result of a commercial settlement between them, Telecom and TelstraClear withdrew their respective applications for review. Notwithstanding, determination of the issues will be of value to the parties in respect of future dealings and are therefore still relevant.
[17] The nature of the telecommunication industry is such that any variation of the terms of a s 27 determination by a s 51 review determination may involve considerable extra costs for one party or another. The extent to which that may be the case will depend upon whether a s 51 determination fixes the price only in respect of services provided after the date of that determination or whether it fixes the price for services provided since the date of the s 27 determination which has been reviewed.
[18] Telecom argues that a s 51 determination can fix the price only for services to be provided during the period of a term coming after the date of the determination. Therefore, if the term of a s 27 determination has expired by the date of its s 51 review then the review determination can have no practical effect.
[19] The observation might be made that because the Act requires the Commission to carry out the stipulated procedures to the point of making a determination on a review application, Telecom’s argument envisages a mandatory statutory process involving considerable delay and expense in order to produce a formalised futility. Unlikely though it may be that such a result is within the statutory purpose of Part 2, as explained in s 18, we will of course examine the structure of Telecom’s argument later in this judgment.
[20] One of the matters which must be included in a s 51 determination is "the expiry date of the determination" (s 52(f)). Harrison J considered that the statutory provisions led to two related or subsidiary questions. The first is whether the Commission can set an expiry date for its pricing review determination different from the expiry date of the s 27 determination and, second, whether the Commission has power to make a pricing review determination where the s 27 determination has expired.

The High Court judgment

[21] Harrison J was attracted by the submissions on behalf of TelstraClear that statutory rights of review would be rendered largely inoperative if, as Telecom argued, a pricing review determination commences when it is publicly notified and cannot expire later than the s 27 determination date. It was acknowledged on behalf of the Commission that such a result would substantially frustrate the aims of the statute and work an injustice against a party advantaged by the terms of a pricing review determination where the Commission’s delays were beyond the party’s control. A purposive approach to interpreting legislation, one that is practical and realistic, would lean against such a result. Although s 51(2) does not specify the date from which an alteration to a s 27 determination would become operative, the implication was that the Commission would provide for both determinations, which are effectively merged into one when the second is delivered, to take effect from the same date. That date is set by the s 27 determination which is the foundation authorisation. That conclusion was supported, in the Judge’s view, by the number of other statutory provisions indicating the Commission’s jurisdiction.
[22] Section 20(1) refers to the terms on which the service must be supplied "during the period of time specified in the application". Section 42(1) refers to "the price to be paid for the service" and many other sections used a similar term. Sections 45, 48 and 49 refer to "the price payable for the designated access service".
[23] In the opinion of Harrison J, a review of the price "to be paid", could only relate to the price fixed by the s 27 determination for a defined period. He considered that the Commission is not constrained by the period of time fixed by the applicant but is empowered to determine the terms of supply and expiry date.
[24] The remainder of the judgment is mainly directed to the examination and rejection of arguments advanced on behalf of Telecom. It had argued that there was no appropriate statutory mechanism for giving effect to the varied consequences of review determinations in circumstances where, by virtue of s 61, any determination may be enforced as a judgment of the High Court in its civil jurisdiction. A s 27 determination could be enforced according to its tenor and a s 51 determination on the same matter but with a different tenor could be enforced later.
[25] Harrison J saw no difficulties about that. He considered the fact that monies may have been paid in accordance with the equivalent of a High Court judgment for a certain period would not operate as a bar against the later enforcement of payment of an additional or differential sum as might be required, for example, by a subsequent or replacement judgment for the same period. Harrison J also rejected a submission on behalf of Telecom that there was no mechanism for an access seeker to recover what, in light of a s 51 determination, may have been over-payments for the service supply in accordance with a s 27 determination. Harrison J considered that the Act’s silence on recovery mechanisms may reflect a legislative presumption that common and commercial sense would prevail. In any event, a practical means for resolving the question would be for the Commission, when delivering its pricing review determination, to impose a condition for repayment under s 52(b).
[26] Telecom had argued that a restitutionary remedy would not be available because a determination enforceable as a judgment of the High Court and, in terms of s 42(2) and s 51(2), continuing to have effect and be enforceable pending the making of a review determination could not be regarded as conferring an unjust benefit. Harrison J considered the situation analogous to the setting aside of an earlier determination or judgment by a Court. Orthodox restitutionary principles should apply. An access provider who refuses to repay an overpaid amount is unjustly enriched, not by the original determination, but by retaining the amount which the substitute determination says it is not entitled to retain.
[27] It was submitted on behalf of Telecom that the position contended for by the Commission and TelstraClear would accord the Act retrospective effect contrary to the common law presumption against legislative retrospectivity reflected in s 7 of the Interpretation Act 1999. Harrison J considered the argument on behalf of Telecom to be misconceived.
[28] Telecom also argued that because a party may, pursuant to s 60(1)(b), appeal to the High Court on a question of law, against a s 27 determination, and because pursuant to s 60(3) such an appeal, until finally disposed of, continues to have effect and is enforceable as if the appeal had not been commenced, the appeal process would be rendered redundant if the pricing review determination was to supersede the s 27 determination for the period back to the commencement date. Harrison J rejected this argument. He noted that the right of appeal would apply to all terms and conditions of a s 27 determination and a party may elect both to appeal and to apply for a review on a price term. We observe that the Act obviously intends that a s 27 determination will be applied as soon as it is made and will not be suspended by the bringing of a s 42 application or an appeal or a judicial review proceeding. At the time any appeal or judicial review proceeding is determined, any s 42 application either will or will not have been determined. If it has not, the Court determination will take effect in relation to the s 27 determination (and may inform an inchoate s 51 determination). But if, in the meantime, a s 51 determination has been made, the High Court may regard the proceedings before it, relating to a s 27 determination, as moot and dispose of them in whatever way may be considered appropriate.
[29] Harrison J was also unpersuaded by the argument on behalf of Telecom that retrospective price adjustment would undermine the market with uncertainty. He held that submission to all judicial processes, whether originating or on review, carry an element of uncertainty for the participants. They must adjust their affairs to follow a final result. Further, large corporations employ sophisticated financial mechanisms for reserving against adverse contingencies and a large corporation such as Telecom must itself have the ability and capacity to forecast with accuracy the likely price to be fixed by the Commission on a pricing review determination.
[30] Accordingly, on the primary issue whether a s 51 determination on price relates back to the date of a s 27 determination Harrison J found that it does and consequentially declined to make a declaration sought by Telecom to the contrary.
[31] The second declaration sought by Telecom was that a s 51 determination cannot amend the expiry date or include an expiry date other than that included in the s 27 determination. The argument envisaged a s 27 determination in respect of both price and non-price terms followed by a s 51 determination which relates just to price. If the expiry date of a s 51 determination could be later in time than the expiry date of the s 27 determination the parties would face the situation of having a price for but no terms of service. Harrison J rejected the argument on the grounds that s 49(f) and s 52(5) expressly envisaged an unconditional power to fix an expiry date for the review determination. Moreover, s 52(b) shows that the Commission must have jurisdiction to consider "matters that relate to the price payable" and the expiry date may be such a matter.
[32] The third declaration sought by Telecom was that a pricing review determination cannot be made after the expiry date included in an earlier s 27 determination, this being in effect a subset of and consequence of the position sought by Telecom in its second declaration. Because Harrison J did not uphold the arguments in support of the second declaration he consequentially dismissed the application for the third declaration.

The relating back issue

[33] To a large extent Telecom’s arguments on the appeal reflect those advanced in the High Court, and to a large extent we agree with the reasons given by Harrison J in rejecting them. One example of the submissions is that a relating back of the reviewed price would offend the presumption against retrospectivity. We agree with Harrison J’s conclusion that the Act does not purport to have retrospective effect. It provides for prospective s 27 determinations and prospective s 51 determinations. It is obvious, of course, that the Act does not purport to allow a s 51 determination after the Act came into effect, to bear in any way on conduct or events which may have occurred before the Act came into effect. Section 27 determinations did not exist before the Act came into effect.
[34] It was submitted on behalf of Telecom that Part 2 contemplates a sequential process: attempted agreements; a s 27 determination; and (perhaps) a s 51 determination. Section 51(2) provides that a determination made under s 27 continues to have effect and is enforceable to the extent that it has not been altered by a pricing review determination. It is argued that it makes explicit the obvious point that after the s 51 determination is made public the new and not the old "price payable" is what is enforceable. A s 27 determination is a proxy for a commercial agreement. The usual commercial expectation where services are provided and utilised is that the terms of supply are established in advance. Those terms may be expected to inform the user’s decisions on the quantity of services acquired and on the pricing of its own downstream services to customers. In Telecom’s submission that expectation is properly applied to a s 27 determination, and it would be contrary to that expectation retrospectively to adjust the price for access services already provided. Accordingly, in Telecom’s submission, the sequential or linear nature of the separate s 27 and s 51 determinations of itself support the conclusion that the "new" price applies only prospectively – to services provided after the later determination is made public and enforceable.
[35] We think this argument, in reality, amounts to saying that the Act must envisage prospective application of a reviewed price because it is inefficient to make decisions in respect of supply and to act on those decisions on the basis of an assumption which may ultimately be altered. Of course that is so, but decisions made on contingent assumptions are a common feature of commerce. In relation to the present matter, if a revised price were not to relate back that would in itself result in inefficiencies. That is because the revised price must be more efficient than the initial price. Just as an initial price is more efficient than a disagreement and should therefore dictate the price for supply, so a revised price is more efficient than an initial price and for that reason should dictate the price of supply. A sequence which is said to be significant to interpretation is simply a reflection of the reality that any process of review necessarily involves a sequence.
[36] It was argued on behalf of Telecom that the statutory reference to "initial" rather than, for example, "interim" or "provisional" authorisation is significant. This suggests, it was submitted, that the Act envisages something that is not interim but the first stage in what may become a two-stage process. Counsel pointed out that the Commerce Amendment Act 2001 which predates the Act inserted a new s 71 in Part V of the Commerce Act 1986 empowering the Commission to make "provisional" authorisations pending a "final determination" of price controls. This indicates, submitted counsel, that in a broadly analogous field, the legislature was well conscious of using "provisional" when it meant interim. We are not persuaded. At least equally tenable is the view that "initial" is entirely apt for describing the price applicable for the supply of services pending a final determination of the appropriate price for those services. Analogies of prime costs, or rent payable pending a rent review but later adjustable, are commonplace.
[37] Telecom next argued that, following a s 51 determination, the Act does not provide for any adjustment or recovery mechanism for the access seeker to recover overpayments or, conversely, the access provider to recover underpayments, during the period of the s 27 determination. We reject this argument, essentially for the same reason that Harrison J did. A restitutionary remedy would be available on the basis that it would be unjust for a party to retain the benefit of a superseded determination. In any event, the Act itself allows the final determination to be enforced according to its tenor. Where the tenor indicates that a party has obtained a benefit to which it is ultimately adjudged not to be entitled to, the enforcement remedy will relate to the value of the differential.
[38] Telecom sought to reinforce its argument by reference to the United Kingdom’s Communications Act 2003 which does have an express recovery mechanism. It is a novel and untenable proposition that a New Zealand Act ought be interpreted in the light of a subsequent foreign Act. But counsel also referred to the Commerce Amendment Act 2001 which provides an example of an explicit adjustment power. We do not find the submission persuasive. Under s 70C of the Commerce Act 1986 the Commission may, as part of an authorisation relating to a restricted trade practice, impose provisions providing for remedies and penalties: if prices determined by the Commission in an authorisation are lower than any price charged to any person under a provisional authorisation; or higher prices are charged, or higher revenues are derived, than those allowed for in an authorisation; or if quality standards are breached. Of those matters, only the first relating to provisional authorisations requires consideration, but is not persuasive. We do not see a sufficient analogy between, on the one hand, a power to deprive a party of the profits of a restrictive trade practice and, on the other hand, the absence of a specific power to order an adjustment of accounts between parties carrying out lawful activity on a basis held subsequently to require adjustment.
[39] Counsel for Telecom pointed to the discretionary power of the Court of Appeal under r 54 of its Civil Rules and the High Court under r 718B of its Rules to order repayment of amounts paid to a litigant under a judgment which is subsequently varied on appeal. The expediency of such a provision is obvious. It may avoid the need for new, originating proceedings, for the purpose of giving effect to a judgment already given in the same proceedings. There is no significance in the omission of a specific part on a review determination. However, s 52(d) may well authorise the Commission to impose a term stipulating repayment, as Harrison J held.
[40] Telecom reiterated its submission that the Act’s provisions relating to appeals support the view that backdating was not contemplated. It argued that the effect of s 60(2) is that no party may appeal from a s 27 determination until applications for a s 58 clarification or s 59 reconsideration have been completed. This, it was argued, indicates a legislative intention that the appellate process focuses on a corrected or final version of the relevant determination. It should be noted that s 58(1)(c) and s 59(1)(2) prevent clarification or reconsideration of a decision in respect of which an appeal is pending. Section 60(2) is the obverse, preventing the bringing of an appeal if a s 58 clarification or s 59 reconsideration is pending. We do not see how this helps Telecom’s argument. What the complementary provisions do is to prohibit the pre-emption of a current process before one adjudicator, by a later process before another adjudicator.
[41] Telecom submitted that the s 18 purpose was not promoted by backdating. The consequence of the sequential nature of s 27 and s 51 determinations would be that any backdating over the "initial" period will merely transfer wealth between the provider and the user of a service. We find the argument unpersuasive. If the reviewed price is lower than the initial price the end users will have paid an inefficiently excessive price for the service. But if it is higher the end users would have paid an inefficiently inadequate price for the service. Absent the possibility of the consequences being passed on to the end users in some way, the potential for inefficiencies in relation to end users is unavoidable on either the Telecom position or the respondent’s position. What can be achieved, however, is the establishment of the most efficient price as between the access provider and the access seeker.
[42] Telecom reiterated the argument that the contingent nature of price determinations which may become subject to review determinations that relate back creates inefficiencies in respect of annual financial statements. But as we have already mentioned, contingencies are a commonplace of commercial activity and financial reporting. Even the possibility of an initial price determination is a contingency, as is the existence of any potential or actual litigation.
[43] Finally, Telecom raised the prospect and risk of delays as an indication against a relating back of the review price. It is the case that the review process is lengthy, complex and no doubt expensive, but arguments about efficiency do not point in only one direction. On the one hand, there may be efficiencies of certainty for a long period, but on the other hand there will be inefficiencies implicit in the lengthy operation of a less efficient price.
[44] In our view Harrison J was right to uphold the contention by the Commission and TelstraClear that a price review determination relates back to the date of the initial determination. That is consistent with the substitutionary nature of reviewing or appellate decisions which vary an original decision. The alternative view implies a potential for negativing the efficacy of the review process which the Act has established in order to serve the s 18 purpose. Moreover, the obvious function of the price determination regime is to fix the price for a period of time relevant to the application, not to fix the price for part of that time and another price for another part. We consider that the s 18 purpose is better served by substituting the revised price for the initial price ab initio rather than only after a period of relatively less efficient pricing. None of the arguments advanced on behalf of Telecom has persuaded us to the contrary.

The expiry date issue

[45] We turn now to the issue concerning the Commission’s powers in respect of setting an expiry date for its pricing review determination. It will be recalled that s 49(f) and s 52(f) stipulate that the draft pricing review determination or the pricing review determination, as the case may be, must include the expiry date of the determination. Telecom’s position envisages a conundrum, the Commission having a statutory obligation to do something but having no power to do it.
[46] Section 30(e) similarly requires an initial determination to include the expiry date. On the other hand, s 20(1) refers to a "period of time specified in the application". The requirement of s 30(e) suggests that the period of an initial determination need not necessarily correspond to the period of time specified in the application. That is understandable because the intricacies of the pricing mechanism could mean that the most efficient price requires a different period from that specified by the applicant.
[47] By similar reasoning we are driven to conclude that if the time period was bound to replicate that of the s 27 determination the stipulation in s 52(f) would be superfluous. The conclusion must be that s 52(f) recognises that the greater efficiency of the review price may be achieved by an adjustment to the time period, and the Commission is given a power and an obligation to take that into consideration.
[48] Telecom, by counsel, raised the spectre of a price denuded of other contextual terms. In so doing it overlooked the distinction between the existence of a power and the rationality of its exercise in a certain way under certain conditions. If the Commission were faced with the prospect of making a price determination in a contextual void, it would obviously define the period to coincide with the relevant context. And of course the parties may perhaps have come to an agreement that the other terms and conditions will enure for such period of time as will coincide with the period of a determination, and have informed the Commission accordingly. In those circumstances, by virtue of s 52(f) the Commission would no doubt respond appropriately. It should be borne in mind of course that the parties will have been informed by the draft determination and will have had the opportunity to respond as they consider appropriate.
[49] Telecom’s submissions reflected a concern with a perceived implication in Harrison J’s judgment that the reference to "related matters" in s 42 allows the Commission, on a review, to address all non-price terms. But we perceive no such implication in the judgment. Harrison J found that the Commission has jurisdiction to consider matters in a s 27 determination that relate to the price payable for a designated service, and that the expiry date may be such a matter. We agree with that. The Judge did not find, and could not properly have found, that all non-price terms were open to review.
[50] In the result we uphold Harrison J’s refusal to grant the Second Declaration and his consequential dismissal of the application for the Third Declaration.

Result

[51] For the above reasons we dismiss the appeal. The appellant is ordered to pay costs to each of the respondents in the sum of $10,000 together with usual disbursements.

Solicitors:
Chapman Tripp, Wellington for Appellant
Crown Law Office, Wellington for First Respondent
Bell Gully, Auckland for Second Respondent

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[1]	This is an appeal from a judgment of Harrison J which dismissed an application by Telecom for declarations by the High Court in relation to the Telecommunications Act 2001. The issues concerned aspects of price determinations for certain telecommunication services.
[2]	The main purpose of the Act, as explained in s 3(1) is to regulate the supply of telecommunication services. Part 2 and Schedules 1-3, which contain the sections in issue in this proceeding, have a more specific purpose. That is explained in s 18(1) and (2) in the following terms:

[3]	Section 5 is a glossary of many terms used throughout the Act. These include "designated access service", "specified service", "access provider", and "access seeker". For the purposes of this litigation Telecom is an access provider and TelestraClear is an access seeker in respect of designated access services.
[4]	The Commerce Commission has an important role in the regulation of the supply of telecommunication services. One of its functions is to make determinations on applications under s 20 which provides:

[6]	Upon receiving an application the Commission must notify parties (s 24), decide whether to investigate (s 25) and consult with persons, other than the parties, if the Commission considers those persons have a material interest in the matter to be investigated (s 26).
[7]	Section 27 provides that after investigating the matter, the Commission must prepare a determination, give a copy to the parties, and give public notice of the determination. A determination must, in the opinion of the Commission, be made in accordance with the principles specified in s 29 and must include the matters stipulated in s 30. The stipulated matters are:
(a)	the terms on which the service must be supplied; and
(b)	the reasons for the determination; and
(c)	the terms and conditions (if any) on which the determination is made; and
(d)	the actions (if any) that a party to the determination must do or refrain from doing; and
(e)	the expiry date of the determination.
[8]	In limited circumstances a s 27 determination may be the subject of review by the Commission. Section 42 provides as follows:

[9]	Upon receiving an application for review the Commission has obligations relating to the notification of parties and the public (s 44) and may require the access provider to calculate the price payable for the designated access service (s 45). Sections 47-50 inclusive require the Commission to prepare, distribute and publish a draft pricing review determination which must include the matters stipulated in s 49. One of those is the proposed expiry date of the determination (s 49(f)).
[10]	The purpose of distributing and publishing a draft determination is, obviously, to permit the public and the parties to make representations in respect of it. Section 47(d) requires the public notice to include the closing date for submissions, which must not be later than 30 working days after the date of publication of the draft determination. Section 50 makes provision for consultation or conferences, with persons other than the parties to the determination, before the preparation of a determination.
[11]	Sections 51 and 52 are the review process analogues of ss 27 and 30. They provide as follows:

[12]	Section 29(c) requires that a s 27 determination in respect of a designated access service must, in the opinion of the Commission, be made in accordance with the applicable pricing principle and in accordance with any regulations relating to that. On the other hand, s 49(a) requires that a pricing review determination must in the opinion of the Commission be determined in accordance with the applicable final pricing principle and any regulations relating to that.
[13]	The expressions "initial pricing principle" and "final pricing principle" are defined in s 5 and subpart 1 of Part 2 of Schedule 1. It is unnecessary to reproduce the definitions, it being sufficient to say that the initial pricing principle involves benchmarking against interconnection prices in comparable countries and the final pricing principle involves either what is known as TSLRIC (defined in Schedule 1, subpart 1, clause 1) or other stipulated methods if in the opinion of the Commission TSLRIC does not best give effect to the s 18 purpose.
[14]	By virtue of s 10(1), the Commission’s s 27 determinations may be made by the Telecommunications Commissioner, but s 51 review determinations must be made by the Telecommunications Commissioner and two other members of the Commission.
[15]	Whether made under s 27 or s 51, a price determination has the character of a proxy for the most efficient agreed price for a purpose specified in s 18. A s 51 determination does not supplant a s 27 determination because the latter is wrong, but because the former must be regarded as more efficient by reason of its more sophisticated methodology.
[16]	By February 2005, when the High Court heard this dispute, the Commission had made three determinations under s 27 and had received pricing review applications by Telecom and TelstraClear on all of them. But it had not made any review determinations, notwithstanding that the terms of two of the s 27 determinations had expired. A third expired on 14 December 2005. Because the review process is complicated and time-consuming, it is likely there will always be an appreciable delay between a s 27 determination and a s 51 determination. In January 2006, as the result of a commercial settlement between them, Telecom and TelstraClear withdrew their respective applications for review. Notwithstanding, determination of the issues will be of value to the parties in respect of future dealings and are therefore still relevant.
[17]	The nature of the telecommunication industry is such that any variation of the terms of a s 27 determination by a s 51 review determination may involve considerable extra costs for one party or another. The extent to which that may be the case will depend upon whether a s 51 determination fixes the price only in respect of services provided after the date of that determination or whether it fixes the price for services provided since the date of the s 27 determination which has been reviewed.
[18]	Telecom argues that a s 51 determination can fix the price only for services to be provided during the period of a term coming after the date of the determination. Therefore, if the term of a s 27 determination has expired by the date of its s 51 review then the review determination can have no practical effect.
[19]	The observation might be made that because the Act requires the Commission to carry out the stipulated procedures to the point of making a determination on a review application, Telecom’s argument envisages a mandatory statutory process involving considerable delay and expense in order to produce a formalised futility. Unlikely though it may be that such a result is within the statutory purpose of Part 2, as explained in s 18, we will of course examine the structure of Telecom’s argument later in this judgment.
[20]	One of the matters which must be included in a s 51 determination is "the expiry date of the determination" (s 52(f)). Harrison J considered that the statutory provisions led to two related or subsidiary questions. The first is whether the Commission can set an expiry date for its pricing review determination different from the expiry date of the s 27 determination and, second, whether the Commission has power to make a pricing review determination where the s 27 determination has expired.

[21]	Harrison J was attracted by the submissions on behalf of TelstraClear that statutory rights of review would be rendered largely inoperative if, as Telecom argued, a pricing review determination commences when it is publicly notified and cannot expire later than the s 27 determination date. It was acknowledged on behalf of the Commission that such a result would substantially frustrate the aims of the statute and work an injustice against a party advantaged by the terms of a pricing review determination where the Commission’s delays were beyond the party’s control. A purposive approach to interpreting legislation, one that is practical and realistic, would lean against such a result. Although s 51(2) does not specify the date from which an alteration to a s 27 determination would become operative, the implication was that the Commission would provide for both determinations, which are effectively merged into one when the second is delivered, to take effect from the same date. That date is set by the s 27 determination which is the foundation authorisation. That conclusion was supported, in the Judge’s view, by the number of other statutory provisions indicating the Commission’s jurisdiction.
[22]	Section 20(1) refers to the terms on which the service must be supplied "during the period of time specified in the application". Section 42(1) refers to "the price to be paid for the service" and many other sections used a similar term. Sections 45, 48 and 49 refer to "the price payable for the designated access service".
[23]	In the opinion of Harrison J, a review of the price "to be paid", could only relate to the price fixed by the s 27 determination for a defined period. He considered that the Commission is not constrained by the period of time fixed by the applicant but is empowered to determine the terms of supply and expiry date.
[24]	The remainder of the judgment is mainly directed to the examination and rejection of arguments advanced on behalf of Telecom. It had argued that there was no appropriate statutory mechanism for giving effect to the varied consequences of review determinations in circumstances where, by virtue of s 61, any determination may be enforced as a judgment of the High Court in its civil jurisdiction. A s 27 determination could be enforced according to its tenor and a s 51 determination on the same matter but with a different tenor could be enforced later.
[25]	Harrison J saw no difficulties about that. He considered the fact that monies may have been paid in accordance with the equivalent of a High Court judgment for a certain period would not operate as a bar against the later enforcement of payment of an additional or differential sum as might be required, for example, by a subsequent or replacement judgment for the same period. Harrison J also rejected a submission on behalf of Telecom that there was no mechanism for an access seeker to recover what, in light of a s 51 determination, may have been over-payments for the service supply in accordance with a s 27 determination. Harrison J considered that the Act’s silence on recovery mechanisms may reflect a legislative presumption that common and commercial sense would prevail. In any event, a practical means for resolving the question would be for the Commission, when delivering its pricing review determination, to impose a condition for repayment under s 52(b).
[26]	Telecom had argued that a restitutionary remedy would not be available because a determination enforceable as a judgment of the High Court and, in terms of s 42(2) and s 51(2), continuing to have effect and be enforceable pending the making of a review determination could not be regarded as conferring an unjust benefit. Harrison J considered the situation analogous to the setting aside of an earlier determination or judgment by a Court. Orthodox restitutionary principles should apply. An access provider who refuses to repay an overpaid amount is unjustly enriched, not by the original determination, but by retaining the amount which the substitute determination says it is not entitled to retain.
[27]	It was submitted on behalf of Telecom that the position contended for by the Commission and TelstraClear would accord the Act retrospective effect contrary to the common law presumption against legislative retrospectivity reflected in s 7 of the Interpretation Act 1999. Harrison J considered the argument on behalf of Telecom to be misconceived.
[28]	Telecom also argued that because a party may, pursuant to s 60(1)(b), appeal to the High Court on a question of law, against a s 27 determination, and because pursuant to s 60(3) such an appeal, until finally disposed of, continues to have effect and is enforceable as if the appeal had not been commenced, the appeal process would be rendered redundant if the pricing review determination was to supersede the s 27 determination for the period back to the commencement date. Harrison J rejected this argument. He noted that the right of appeal would apply to all terms and conditions of a s 27 determination and a party may elect both to appeal and to apply for a review on a price term. We observe that the Act obviously intends that a s 27 determination will be applied as soon as it is made and will not be suspended by the bringing of a s 42 application or an appeal or a judicial review proceeding. At the time any appeal or judicial review proceeding is determined, any s 42 application either will or will not have been determined. If it has not, the Court determination will take effect in relation to the s 27 determination (and may inform an inchoate s 51 determination). But if, in the meantime, a s 51 determination has been made, the High Court may regard the proceedings before it, relating to a s 27 determination, as moot and dispose of them in whatever way may be considered appropriate.
[29]	Harrison J was also unpersuaded by the argument on behalf of Telecom that retrospective price adjustment would undermine the market with uncertainty. He held that submission to all judicial processes, whether originating or on review, carry an element of uncertainty for the participants. They must adjust their affairs to follow a final result. Further, large corporations employ sophisticated financial mechanisms for reserving against adverse contingencies and a large corporation such as Telecom must itself have the ability and capacity to forecast with accuracy the likely price to be fixed by the Commission on a pricing review determination.
[30]	Accordingly, on the primary issue whether a s 51 determination on price relates back to the date of a s 27 determination Harrison J found that it does and consequentially declined to make a declaration sought by Telecom to the contrary.
[31]	The second declaration sought by Telecom was that a s 51 determination cannot amend the expiry date or include an expiry date other than that included in the s 27 determination. The argument envisaged a s 27 determination in respect of both price and non-price terms followed by a s 51 determination which relates just to price. If the expiry date of a s 51 determination could be later in time than the expiry date of the s 27 determination the parties would face the situation of having a price for but no terms of service. Harrison J rejected the argument on the grounds that s 49(f) and s 52(5) expressly envisaged an unconditional power to fix an expiry date for the review determination. Moreover, s 52(b) shows that the Commission must have jurisdiction to consider "matters that relate to the price payable" and the expiry date may be such a matter.
[32]	The third declaration sought by Telecom was that a pricing review determination cannot be made after the expiry date included in an earlier s 27 determination, this being in effect a subset of and consequence of the position sought by Telecom in its second declaration. Because Harrison J did not uphold the arguments in support of the second declaration he consequentially dismissed the application for the third declaration.

[33]	To a large extent Telecom’s arguments on the appeal reflect those advanced in the High Court, and to a large extent we agree with the reasons given by Harrison J in rejecting them. One example of the submissions is that a relating back of the reviewed price would offend the presumption against retrospectivity. We agree with Harrison J’s conclusion that the Act does not purport to have retrospective effect. It provides for prospective s 27 determinations and prospective s 51 determinations. It is obvious, of course, that the Act does not purport to allow a s 51 determination after the Act came into effect, to bear in any way on conduct or events which may have occurred before the Act came into effect. Section 27 determinations did not exist before the Act came into effect.
[34]	It was submitted on behalf of Telecom that Part 2 contemplates a sequential process: attempted agreements; a s 27 determination; and (perhaps) a s 51 determination. Section 51(2) provides that a determination made under s 27 continues to have effect and is enforceable to the extent that it has not been altered by a pricing review determination. It is argued that it makes explicit the obvious point that after the s 51 determination is made public the new and not the old "price payable" is what is enforceable. A s 27 determination is a proxy for a commercial agreement. The usual commercial expectation where services are provided and utilised is that the terms of supply are established in advance. Those terms may be expected to inform the user’s decisions on the quantity of services acquired and on the pricing of its own downstream services to customers. In Telecom’s submission that expectation is properly applied to a s 27 determination, and it would be contrary to that expectation retrospectively to adjust the price for access services already provided. Accordingly, in Telecom’s submission, the sequential or linear nature of the separate s 27 and s 51 determinations of itself support the conclusion that the "new" price applies only prospectively – to services provided after the later determination is made public and enforceable.
[35]	We think this argument, in reality, amounts to saying that the Act must envisage prospective application of a reviewed price because it is inefficient to make decisions in respect of supply and to act on those decisions on the basis of an assumption which may ultimately be altered. Of course that is so, but decisions made on contingent assumptions are a common feature of commerce. In relation to the present matter, if a revised price were not to relate back that would in itself result in inefficiencies. That is because the revised price must be more efficient than the initial price. Just as an initial price is more efficient than a disagreement and should therefore dictate the price for supply, so a revised price is more efficient than an initial price and for that reason should dictate the price of supply. A sequence which is said to be significant to interpretation is simply a reflection of the reality that any process of review necessarily involves a sequence.
[36]	It was argued on behalf of Telecom that the statutory reference to "initial" rather than, for example, "interim" or "provisional" authorisation is significant. This suggests, it was submitted, that the Act envisages something that is not interim but the first stage in what may become a two-stage process. Counsel pointed out that the Commerce Amendment Act 2001 which predates the Act inserted a new s 71 in Part V of the Commerce Act 1986 empowering the Commission to make "provisional" authorisations pending a "final determination" of price controls. This indicates, submitted counsel, that in a broadly analogous field, the legislature was well conscious of using "provisional" when it meant interim. We are not persuaded. At least equally tenable is the view that "initial" is entirely apt for describing the price applicable for the supply of services pending a final determination of the appropriate price for those services. Analogies of prime costs, or rent payable pending a rent review but later adjustable, are commonplace.
[37]	Telecom next argued that, following a s 51 determination, the Act does not provide for any adjustment or recovery mechanism for the access seeker to recover overpayments or, conversely, the access provider to recover underpayments, during the period of the s 27 determination. We reject this argument, essentially for the same reason that Harrison J did. A restitutionary remedy would be available on the basis that it would be unjust for a party to retain the benefit of a superseded determination. In any event, the Act itself allows the final determination to be enforced according to its tenor. Where the tenor indicates that a party has obtained a benefit to which it is ultimately adjudged not to be entitled to, the enforcement remedy will relate to the value of the differential.
[38]	Telecom sought to reinforce its argument by reference to the United Kingdom’s Communications Act 2003 which does have an express recovery mechanism. It is a novel and untenable proposition that a New Zealand Act ought be interpreted in the light of a subsequent foreign Act. But counsel also referred to the Commerce Amendment Act 2001 which provides an example of an explicit adjustment power. We do not find the submission persuasive. Under s 70C of the Commerce Act 1986 the Commission may, as part of an authorisation relating to a restricted trade practice, impose provisions providing for remedies and penalties: if prices determined by the Commission in an authorisation are lower than any price charged to any person under a provisional authorisation; or higher prices are charged, or higher revenues are derived, than those allowed for in an authorisation; or if quality standards are breached. Of those matters, only the first relating to provisional authorisations requires consideration, but is not persuasive. We do not see a sufficient analogy between, on the one hand, a power to deprive a party of the profits of a restrictive trade practice and, on the other hand, the absence of a specific power to order an adjustment of accounts between parties carrying out lawful activity on a basis held subsequently to require adjustment.
[39]	Counsel for Telecom pointed to the discretionary power of the Court of Appeal under r 54 of its Civil Rules and the High Court under r 718B of its Rules to order repayment of amounts paid to a litigant under a judgment which is subsequently varied on appeal. The expediency of such a provision is obvious. It may avoid the need for new, originating proceedings, for the purpose of giving effect to a judgment already given in the same proceedings. There is no significance in the omission of a specific part on a review determination. However, s 52(d) may well authorise the Commission to impose a term stipulating repayment, as Harrison J held.
[40]	Telecom reiterated its submission that the Act’s provisions relating to appeals support the view that backdating was not contemplated. It argued that the effect of s 60(2) is that no party may appeal from a s 27 determination until applications for a s 58 clarification or s 59 reconsideration have been completed. This, it was argued, indicates a legislative intention that the appellate process focuses on a corrected or final version of the relevant determination. It should be noted that s 58(1)(c) and s 59(1)(2) prevent clarification or reconsideration of a decision in respect of which an appeal is pending. Section 60(2) is the obverse, preventing the bringing of an appeal if a s 58 clarification or s 59 reconsideration is pending. We do not see how this helps Telecom’s argument. What the complementary provisions do is to prohibit the pre-emption of a current process before one adjudicator, by a later process before another adjudicator.
[41]	Telecom submitted that the s 18 purpose was not promoted by backdating. The consequence of the sequential nature of s 27 and s 51 determinations would be that any backdating over the "initial" period will merely transfer wealth between the provider and the user of a service. We find the argument unpersuasive. If the reviewed price is lower than the initial price the end users will have paid an inefficiently excessive price for the service. But if it is higher the end users would have paid an inefficiently inadequate price for the service. Absent the possibility of the consequences being passed on to the end users in some way, the potential for inefficiencies in relation to end users is unavoidable on either the Telecom position or the respondent’s position. What can be achieved, however, is the establishment of the most efficient price as between the access provider and the access seeker.
[42]	Telecom reiterated the argument that the contingent nature of price determinations which may become subject to review determinations that relate back creates inefficiencies in respect of annual financial statements. But as we have already mentioned, contingencies are a commonplace of commercial activity and financial reporting. Even the possibility of an initial price determination is a contingency, as is the existence of any potential or actual litigation.
[43]	Finally, Telecom raised the prospect and risk of delays as an indication against a relating back of the review price. It is the case that the review process is lengthy, complex and no doubt expensive, but arguments about efficiency do not point in only one direction. On the one hand, there may be efficiencies of certainty for a long period, but on the other hand there will be inefficiencies implicit in the lengthy operation of a less efficient price.
[44]	In our view Harrison J was right to uphold the contention by the Commission and TelstraClear that a price review determination relates back to the date of the initial determination. That is consistent with the substitutionary nature of reviewing or appellate decisions which vary an original decision. The alternative view implies a potential for negativing the efficacy of the review process which the Act has established in order to serve the s 18 purpose. Moreover, the obvious function of the price determination regime is to fix the price for a period of time relevant to the application, not to fix the price for part of that time and another price for another part. We consider that the s 18 purpose is better served by substituting the revised price for the initial price ab initio rather than only after a period of relatively less efficient pricing. None of the arguments advanced on behalf of Telecom has persuaded us to the contrary.

[45]	We turn now to the issue concerning the Commission’s powers in respect of setting an expiry date for its pricing review determination. It will be recalled that s 49(f) and s 52(f) stipulate that the draft pricing review determination or the pricing review determination, as the case may be, must include the expiry date of the determination. Telecom’s position envisages a conundrum, the Commission having a statutory obligation to do something but having no power to do it.
[46]	Section 30(e) similarly requires an initial determination to include the expiry date. On the other hand, s 20(1) refers to a "period of time specified in the application". The requirement of s 30(e) suggests that the period of an initial determination need not necessarily correspond to the period of time specified in the application. That is understandable because the intricacies of the pricing mechanism could mean that the most efficient price requires a different period from that specified by the applicant.
[47]	By similar reasoning we are driven to conclude that if the time period was bound to replicate that of the s 27 determination the stipulation in s 52(f) would be superfluous. The conclusion must be that s 52(f) recognises that the greater efficiency of the review price may be achieved by an adjustment to the time period, and the Commission is given a power and an obligation to take that into consideration.
[48]	Telecom, by counsel, raised the spectre of a price denuded of other contextual terms. In so doing it overlooked the distinction between the existence of a power and the rationality of its exercise in a certain way under certain conditions. If the Commission were faced with the prospect of making a price determination in a contextual void, it would obviously define the period to coincide with the relevant context. And of course the parties may perhaps have come to an agreement that the other terms and conditions will enure for such period of time as will coincide with the period of a determination, and have informed the Commission accordingly. In those circumstances, by virtue of s 52(f) the Commission would no doubt respond appropriately. It should be borne in mind of course that the parties will have been informed by the draft determination and will have had the opportunity to respond as they consider appropriate.
[49]	Telecom’s submissions reflected a concern with a perceived implication in Harrison J’s judgment that the reference to "related matters" in s 42 allows the Commission, on a review, to address all non-price terms. But we perceive no such implication in the judgment. Harrison J found that the Commission has jurisdiction to consider matters in a s 27 determination that relate to the price payable for a designated service, and that the expiry date may be such a matter. We agree with that. The Judge did not find, and could not properly have found, that all non-price terms were open to review.
[50]	In the result we uphold Harrison J’s refusal to grant the Second Declaration and his consequential dismissal of the application for the Third Declaration.