Intellihub Limited v Genesis Energy Limited [2020] NZHC 1135 (27 May 2020)

Last Updated: 7 October 2020

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-471 [2020] NZHC 1135

BETWEEN	INTELLIHUB LIMITED Plaintiff
AND	GENESIS ENERGY LIMITED First Defendant ADVANCED METERING SERVICES LIMITED TRADING AS VECTOR AMS Second Defendant

Hearing:	22 May 2020
Counsel:	J McBride, M Heard and A McDonald for applicant S J P Ladd and B A Keown for first respondent S Hunter QC and I Rosic for second respondent
Judgment:	27 May 2020

JUDGMENT OF KATZ J

[Application for leave to appeal]

This judgment was delivered by me on 27 May 2020 at 1:00pm pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors: LeeSalmonLong, Auckland

Bell Gully, Auckland Gilbert Walker, Auckland

Counsel: J McBride, Richmond Chambers, Auckland

S M Hunter, QC, Shortland Chambers, Auckland

INTELLIHUB LIMITED v GENESIS ENERGY LIMITED & ANOR [2020] NZHC 1135 [27 May 2020]

Introduction

• [1] On 24 April 2020, I dismissed Intellihub Limited’s application for an interim injunction preventing Genesis Energy Limited and Advanced Metering Services Limited (trading as Vector AMS) from removing approximately 45,000 electricity meters owned and operated by Intellihub.¹

• [2] Intellihub now seeks leave to appeal that decision.

Leave criteria

• [3] Section 56 of the Senior Courts Act 2016 introduced a significant change to civil procedure by introducing a leave requirement for interlocutory appeals. The requirement for leave serves as a “filtering mechanism”² to ensure that valuable court time is not consumed with unmeritorious appeals. A high threshold therefore exists for granting leave to appeal, namely:³

(a) The applicant should raise an arguable error of law or fact.

(b) The alleged error should be of such general or public importance that it warrants determination, or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential importance.

(c) Leave should only be granted where the circumstances warrant incurring further delay.

(d) Ultimately, the Court on an application for leave should stand back and assess, in a pragmatic and realistic way, whether the interests of justice are served by granting leave.

• [4] In Ngai Te Hapu Inc v Bay of Plenty Regional Council, the Court of Appeal confirmed that leave to appeal should only be granted where the significance or implications of an arguable error of fact or law, either for the particular case or for the

¹ Intellihub Ltd v Genesis Energy Ltd & Anor [2020] NZHC 807.

2. Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13]; McLaren v McLaren [2018] NZCA 570 at [3]; Ngai Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291.

³ Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [9]- [14].

applicant or as a matter of precedent, warrants the further delay which the appeal process would involve.⁴

Overview of Intellihub’s submissions

• [5] In summary, Intellihub submitted that:

(a) The wrong test for ascertaining whether a “serious issue to be tried” had been established was applied, namely whether there was a “tenable resolution of the issues of facts and law on which the plaintiff may be able to succeed at trial”. Mr McBride submitted that the “serious issue” requirement simply describes a claim that is not frivolous or vexatious.

(b) The Court erred in finding that there was no serious issue to be tried in respect of the first cause of action (the tort of causing loss by unlawful means).

(c) The Court incorrectly assessed the balance of convenience. Specifically, if the Court had found that there was a serious question to be tried on the first cause of action, as well as the second cause of action, this may have altered the Court’s assessment of the balance of convenience.

The serious issue to be tried test and the unlawful means tort

• [6] The formulation of the serious issue to be tried test that I adopted in the injunction judgment has been applied in numerous decisions of this Court (including by the current Chief Justice) over a period of at least 35 years. The test originates from the decision of Davison CJ at first instance in Harvest Bakeries Ltd v Klissers Farmhouse Bakeries Ltd.⁵ I therefore give little weight to this alleged error of law in assessing whether leave should be granted. I focus instead on whether it is arguable that I erred in determining that there was no serious issue to be tried in respect of the first cause of action (the unlawful means tort).

⁴ Ngai Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291.

5. Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd (No 2) [1985] 2 NZLR 143, [1989] RPC 27, (1985) 1 TCLR 294 (HC).

• [7] It is fair to say that the current state of Intellihub’s pleading of the tort is both confused and confusing. In its initial pleading, Intellihub did not allege unlawful conduct directed against a third party, as required by the tort. Instead it alleged that Genesis had failed to enter into an “arrangement” in relation to Intellihub’s metering installations with Intellihub, in breach of the Electricity Industry Participation Code (this was the relevant unlawful act relied upon).⁶

• [8] Genesis and Vector AMS strenuously disputed any breach of the Code. They also pointed out in their written submissions that even if such a breach had occurred, it did not fall within the scope of the unlawful means tort. That is because the tort requires that the relevant unlawful act be directed at a third party. Intellihub’s original pleading, however, did not allege any unlawful act by Genesis against Vector AMS (the relevant third party). Intellihub’s original pleading of the tort was therefore fatally flawed.

• [9] Presumably in response to these criticisms, shortly before the injunction hearing Intellihub filed an amended pleading. The amended pleading lacks clarity, however, in part because it contains many seemingly irrelevant legacy elements from the original pleading. The key new allegations have been added as “particulars” of the original (deficient) pleading. Unfortunately, Intellihub’s submissions did little to dispel the confusion. In fairness to counsel, however, that is not entirely surprising given the time constraints counsel were no doubt under, and the fact that the unlawful means tort has perplexed both Judges and academic commentators for several hundred years.

• [10] The judgment outlines the history and modern development of the tort, with particular reference to the House of Lords decision of OBG Ltd v Allan.⁷ In OBG, the House of Lords sought to resolve confusion over the scope of the economic torts, including the unlawful means tort. Some 350 decisions and academic writings were placed before their Lordships.⁸

6. Clause 11.16 of the Electricity Industry Participation Code provides that, before it can assume responsibility for a new customer switching from another retailer, a retailer must have entered into an “arrangement” with the metering equipment provider for the metering installation at that customer’s ICP.

⁷ OBG Ltd v Allan [2007] UKHL 21, [2008] 1 AC 1.

⁸ OBG Ltd v Allan [2007] UKHL 21, [2008] 1 AC 1 at [139] per Lord Nicholls.

• [11] In New Zealand, in Diver v Loktronic Industries Ltd the Court of Appeal accepted that the correct approach to the tort was that of Lord Hoffmann (for the majority) in OBG.⁹ (I note, however, that in Loktronic there was no dispute between the parties as to the correct approach).

• [12] On the basis that New Zealand law follows Lord Hoffman’s approach to the tort, I concluded that the first cause of action was misconceived and that Intellihub was attempting “to apply the unlawful means tort to a fact scenario that is far-removed from those it was designed to meet.” Specifically, it was my view that Intellihub’s claim does not raise a serious issue to be tried because Intellihub does not plead and/or cannot establish that:

(a) Genesis wrongfully interfered with the actions of a third party (Vector AMS) in which Intellihub has an economic interest; and

(b) the ‘wrongful act’ against Vector AMS (being the alleged misrepresentation by Genesis) restricted Vector AMS’s freedom or liberty to deal with Intellihub.

• [13] With the benefit of more time to consider the issue, Mr McBride was able to more fully articulate Intellihub’s argument regarding the unlawful means tort at the leave hearing and explain why, he says, it is arguable that it applies in this case. He submitted that OBG lacks clarity and is open to differing interpretations. It is arguable, he submitted, whether anti-competitive conduct is required at all, let alone the specific elements set out at [12](a) and (b) above.

• [14] As I noted in the judgment, in AI Enterprises Ltd v Bram Enterprises Ltd the Supreme Court of Canada, while generally approving Lord Hoffmann’s narrow approach to the unlawful means tort, rejected the requirement that the unlawful means employed must interfere with the third party’s freedom to deal with the plaintiff ((a) above).¹⁰ Mr McBride submitted that it is possible that a New Zealand court could take the same approach, if the matter were fully argued. He further submitted that a

⁹ Diver v Loktronic Industries Ltd [2012] NZCA 131.

¹⁰ AI Enterprises Ltd v Bram Enterprises Ltd 2014 SCC 12, [2014] 1 SCR 177 at [87].

New Zealand court may also be persuaded to reject any requirement that the relevant wrongful act restrict the third party’s freedom or liberty to deal with the plaintiff ((b) above). Finally, he submitted that if the requirements set out at [10](a) and (b) above do indeed form part of the tort (contrary to Intellihub’s primary submission) it is arguable that those requirements are met in this case.

• [15] As Mr Ladd pointed out, these submissions are a significant departure from Intellihub’s submissions at the injunction hearing, which stated that:

Intentionally causing loss by unlawful means, by which a trader uses unlawful weapons against a rival and causes him injury, is a recognised tort in New Zealand.

• [16] It appears to me that Mr McBride’s arguments are likely to face some formidable obstacles. It is possible, however, that Intellihub may be able to persuade an appellate court that there is at least a serious issue to be tried, now that its arguments are more fully developed. Obviously, this would be particularly so if the Court of Appeal were to accept Mr McBride’s submission that the test of “serious issue to be tried” that I adopted was too high. For these reasons, I accept that there is an arguable error of law or fact for the purposes of assessing Intellihub’s leave application.

The balance of convenience

• [17] Genesis and Vector AMS submitted that, even if it is arguable that I erred in concluding that there was no serious issue to be tried on the first cause of action, this cannot have impacted on the subsequent assessment of the balance of convenience, given that I found there was a serious issue to be tried in respect of the second cause of action. The outcome of the application did not therefore depend on whether there was a serious issue to be tried, but on the (discretionary) balance of convenience assessment.

• [18] The weighing of the balance of convenience is a matter for the Judge and an appeal is not an opportunity to re-litigate this.¹¹ The Judge’s assessment is only amenable to appeal if “the judge has erred in law, taken account of an irrelevant matter,

¹¹ NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90 (2013) 13 TCLR 531 at [13].

failed to take account of a relevant matter or is plainly wrong.”¹² The respondents submitted that Intellihub is simply seeking to challenge the weight given to various factors in the balance of convenience assessment, which is not properly a matter for appeal.

• [19] Although there is considerable force in these submissions, I accept Mr McBride’s submission that if there is a serious issue to be tried on the first cause of action (contrary to my finding) then this could potentially impact on the balance of convenience assessment, for reasons I explain below.

• [20] In relation to the second cause of action (breach of contract) Intellihub pleads an implied term that its meters cannot be displaced “absent either reasonable notice or compensation, in accordance with standard industry practice”. As I note at [65] of the Judgment, Intellihub’s pleaded case is therefore that its agreement with Genesis provides for either reasonable notice or compensation. It follows that on Intellihub’s case the parties themselves envisaged that monetary compensation would be an adequate remedy for insufficient notice. This was not determinative, however, as I accepted that damages may nevertheless be an insufficient remedy if Intellihub’s network was significantly compromised by the displacement of some of its meters. I concluded, however, that the risk of damage occurring to Intellihub’s network was speculative.

• [21] The first cause of action differs from the second cause of action, however, in that Intellihub’s case is that Genesis has no entitlement to remove its meters, even with reasonable notice. It seeks a permanent injunction restraining Genesis from displacing its meters. I accept Mr McBride’s submission that if the argument is not simply about what is a reasonable period of notice for removal of the meters, but whether Genesis is entitled to remove the meters at all, then this could impact the balance of convenience assessment, including whether damages would be an adequate remedy for Intellihub.

¹² NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90 (2013) 13 TCLR 531 at [13].

Conclusion

• [22] Intellihub has raised an arguable error of law and/or fact, namely whether I erred in finding that there was no serious question to be tried on the first cause of action. The alleged error is not one of general or public importance. Nevertheless, I am satisfied that it is of sufficient importance to Intellihub (given that it relates to the displacement of 45,000 electricity meters) to outweigh the lack of general or precedential importance.

• [23] I accept Intellihub’s submission that the alleged error is one that could potentially impact on the assessment of the balance of convenience.

• [24] Obviously, any delay to the displacement project is a matter of considerable concern to Genesis and Vector. Staff have been hired, planning has been undertaken, and the project is apparently “shovel ready”. At this stage, however, no stay has been sought and the likelihood of delay (or the extent of it) cannot be assessed. Any stay application will need to be assessed on its merits, if such an application is made.

• [25] In conclusion, I am satisfied that the overall interests of justice favour granting leave to appeal.

Result

• [26] The application for leave to appeal is granted.

• [27] The parties are encouraged to resolve any costs issues between counsel if possible. If agreement cannot be reached, then Intellihub is to file any costs memorandum within 10 working days of this judgment. Any costs memoranda on behalf of Genesis or Vector AMS are to be filed within a further 10 working days.

Katz J