Bay of Plenty Energy Ltd v The Electricity Authority HC Wellington CIV-2010-485-2328 [2011] NZHC 1303 (4 July 2011)

Last Updated: 3 November 2011

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

_{CIV-2010-485-2328}

BETWEEN BAY OF PLENTY ENERGY LTD Plaintiff

AND THE ELECTRICITY AUTHORITY & ORS

Respondents

Hearing: 27 June 2011

Counsel: A M Stevens and R G Cahn for Plaintiff

L A O'Gorman for The Electricity Authority

R Brown for NZX and Energy Clearing House Ltd

A J Horne and O J Meech for TrustPower

L M Hansen and H Evans for Contact Energy

Judgment: 4 July 2011

_{JUDGMENT OF WILLIAMS J}

In accordance with r 11.5, I direct the Registrar to endorse this judgment with the delivery time of 4:30pm on the 4th July 2011.

Solicitors: Izard Weston Bell Gully

Minter Ellison Rudd Watts

Contact Energy Limited

BAY OF PLENTY ENERGY LTD V THE ELECTRICITY AUTHORITY & ORS HC WN CIV-2010-485-2328

4 July 2011

[1] The background to this matter is fully set out in my interim injunction judgment of 20 December 2010. There is no need to repeat it here.

[2] Since that date the parties have made considerable progress in the areas of discovery and pleadings. A fixture has been pencilled in for one week beginning

21 November this year, and there are now a number of matters that need to be addressed to ensure that there is orderly progress to trial.

[3] The lead respondent in terms of the current issues to be addressed is the second respondent TrustPower Ltd (TrustPower). The third respondent Contact Energy Ltd (Contact) supports TrustPower’s stance. The regulator, The Electricity Authority, and the fourth and fifth respondents NZX Ltd and Energy Clearing House Ltd are taking a neutral stance.

[4] TrustPower has responded to these proceedings by arguing first that the (then) Electricity Commission’s exemption decision was valid (contrary to the contentions in this appeal and judicial review). The second argument by way of affirmative defence is that even if the exemption was not valid, this court should use its discretion to refuse to grant the plaintiff, Bay of Plenty Energy Ltd (BOPE) the relief it seeks. The argument is essentially that the exemption was unnecessary anyway and the overpayment errors could have been corrected by various alternative “routes” under the three chronologically applicable regimes. In those circumstances TrustPower argues that it would be both unfair and contrary to the public interest to grant BOPE the relief it seeks. The third argument is by way of counterclaim. This is an equitable argument in restitution for unjust enrichment. It posits that any remedy BOPE may be entitled to in law should be returned because it would leave BOPE unjustly enriched at TrustPower’s (and Contact’s) expense.

[5] BOPE argues that these unfairness and unjust enrichment based defences, affirmative defences and counterclaims should be heard separately and after the hearing relating to the validity of the exemption notice. BOPE argues that the judicial review proceeding and the counterclaim in restitution are conceptually different things with the former generally dealt with by affidavit evidence and the latter viva voce. BOPE also argues that its appeal and judicial review are essentially

exercises in statutory interpretation while TrustPower’s affirmative defences and counterclaim (and the counter allegations put by Contact) involve extensive factual inquiries into hypothetical pathways for correction available under the three applicable regimes. This, BOPE argues, will involve extensive interlocutory and evidential steps. BOPE’s third (and probably best) argument is if BOPE fails in its appeal and review application, then that would be an end to the matter and there will be no need to hear any of the fairness/restitution arguments advanced by TrustPower and Contact.

[6] Both TrustPower and Contact oppose separation. They argue essentially that the facts pleaded in respect of the affirmative defences and counterclaims are directly relevant in the appeal and judicial review themselves.

[7] There is jurisdiction to separate a counterclaim in circumstances where it “appears to the court that a counterclaim and a statement of claim can more fairly or more conveniently be tried separately”.[1] The rules are otherwise couched in terms that presume claims and counterclaims are to be heard together, for obvious reasons. The court also has the power under HCR 10.4 and s 10 of the Judicature Amendment Act 1972 to separate any question in the proceeding to be dealt with separately.

[8] Fisher J in Clear Communications v Telecom Corporation of New Zealand cautioned firmly against splitting trials unless there is very good reason to do so. He said:[2]

Split trials risk a number of difficulties. It is often difficult to define with sufficient precision the demarcation between those issues to be addressed at the first trial and those left for the second (see, for example, the Arklow litigation). It is not always easy to see what matters have become the subject of issues estoppels. It may be necessary to prepare issue estoppel schedules and hear argument as to their scope. A Judge may inadvertently disqualify himself or herself by expressing views on matters yet to be fully addressed at the second hearing (Winton). Findings might be inadvertently made without the benefit of evidence and argument envisaged by a party as appropriate only for the second hearing. The second hearing can require the recalling of the same witnesses with needless extra time and cost to the parties and the public. There is duplication of time spent by counsel and the Court in reacquainting themselves with issues imperfectly remembered from an earlier trial and the time spent retraversing those matters in Court. There can

be multiple appeals (in extreme cases taking the matter to the Privy Council as in Ryde v Sorenson) before returning to the Court of first instance to embark upon the second phase of the case. Even without appeals, there can be delay in embarking upon a second round of discovery and other interlocutory matters and amended pleadings following the first trial and then the delay of obtaining a fixture for the second hearing. There can be difficulties in ensuring that the same Judge is available for the second hearing, bearing in mind the usual commitments, sabbaticals, retirements and deaths which are the unhappy lot of the judiciary. If a different Judge has to preside at the second hearing there can be difficulties over earlier views as to credibility and the status of the notes of evidence from the first hearing. In my view these and other difficulties together place a heavy onus on any party seeking split trials.

In the end, however, every case must be considered individually and the possibility of a split trial should never be dismissed out of hand. The most important single question is usually the interaction between the issues intended to be traversed at the first hearing and those for the second. The very difficulty in defining the division in the present case immediately puts one on guard against difficulties which could arise.

[9] The foregoing appears to me to neatly traverse the factors that I must consider.

[10] In the present case, I do not see how a clean division can be made between invalidity on the one hand and, on the other, the question of relief in both the appeal and the judicial review application, as well as the counterclaim in restitution.

[11] As counsel advised, the evidence that goes to these issues in defence and counterclaim is core narrative in the argument in relation to validity of the exemption. That is not to say that the conduct of the parties or the perceptions they then held in relation to the legality of the paths open to them will be decisive in any exercise in statutory interpretation. But it will be difficult for any court to address the interpretation issues without a full appreciation of the factual matrix that led to the use of the exemption procedure in the first place. It would be wrong to attempt to construe the statute, rules and code in a vacuum.

[12] The possibility that if the plaintiff fails on the invalidity point, there will be no need to address relief is, I admit, tempting. But the countervailing risks are too great and the pay off too small. Once it is accepted that even at stage one, the narrative evidence Contact and TrustPower want to adduce will be relevant, it is obvious that there will be no real saving in time. On the other hand, there is a real

risk of multiple appeals up and down the chain both at the validity and relief stages of the proposed two part trial. And the evidence at relief and counterclaim stage will, as I have said, overlap considerably with that adduced in the validity inquiry. There is a real likelihood that severance will in fact elongate the proceeding.

[13] Finally, it is true that the judicial review/appeal processes are very distinct from the counterclaim in restitution. That does not mean however that the parties cannot agree, or indeed a Judge decide, that the counterclaim should also be dealt with in the same evidential format as the judicial review and appeal. Neither process is set in stone.

[14] It is in the end, far better both practically and conceptually that the issues in this case are addressed once and in once place.

[15] I dismiss the application for severance accordingly.

[16] It was accepted that no extensive timetabling orders should be made until after the parties have had an opportunity to consider the implications of my judgment on the severance question. In the meantime, the following directions are made to tide the parties over until a later judicial conference this month. Those directions are as follows:

(a) the plaintiff will replead by 1 July;

(b) Transpower and Contact will respond with their own pleadings by

8 July;

(c) any applications for discovery or better discovery to be filed by

8 July; and

(d) any applications for further particulars can be timetabled if necessary at the July judicial conference, along with such further and other interlocutory steps as may remain to be completed.

[17] Leave is granted to BOPE to amend its notice of appeal.

[18] Despite Mr Stevens’ application for costs in respect of Contact’s discontinuance of its counterclaim, all costs in that and the severance application are reserved.

[19] The Registrar is to schedule a further judicial conference at some point this month before me for further timetabling. The conference should take no more than

_{an hour.}

Williams J

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[1] _{See HCR 5.58(2).}
[2] (1998) 12 PRNZ 333 at [335].