Enernoc Australia Pty Ltd v Minister for Energy for the State of Western Australia [No 2] - [2017] WASC 113

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: ENERNOC AUSTRALIA PTY LTD -v- MINISTER FOR ENERGY FOR THE STATE OF WESTERN AUSTRALIA [No 2] [2017] WASC 113

CORAM: MARTINO J

HEARD: 24 MARCH 2017

DELIVERED : 24 APRIL 2017

FILE NO/S: CIV 2979 of 2016

BETWEEN: ENERNOC AUSTRALIA PTY LTD
First Applicant
ENERNOC PTY LTD
Second Applicant
AND
MINISTER FOR ENERGY FOR THE STATE OF WESTERN AUSTRALIA
Respondent

Catchwords:

Statutory construction - Delegated legislation - Validity - Questions answered

Legislation:

Electricity Industry (Wholesale Electricity Market) Regulations 2004 (WA)
Electricity Industry Act 2004 (WA)
Interpretation Act 1984 (WA)

Result:

Questions answered

Category: B

Representation:

Counsel:

First Applicant               :     Mr C G Colvin SC & Mr B C Gauntlett
Second Applicant          :     Mr C G Colvin SC & Mr B C Gauntlett
Respondent:     Mr G Tannin SC & Ms A B Preston-Samson

Solicitors:

First Applicant               :     Grondal Bruining Pty Ltd
Second Applicant          :     Grondal Bruining Pty Ltd
Respondent:     State Solicitor for Western Australia

Case(s) referred to in judgment(s):

Enernoc Australia Pty Ltd v Minister for Energy for The State of Western Australia [2017] WASC 29
Swan Hill Corporation v Bradbury (1937) 56 CLR 746
Taylor v The Owners Strata Plan No 11564 [2014] HCA 9; (2014) 253 CLR 531
The Pilbara Infrastructure Pty Ltd v Brockman Iron Pty Ltd [2016] WASCA 36
The State of South Australia v Tanner (1989) 166 CLR 161
Wentworth Securities Ltd v Jones [1980] AC 74

MARTINO J: The applicants seek judicial review of the decision of the respondent made on 26 May 2016 'to make, purportedly under regulation 7(4) of the Electricity Industry (Wholesale Electricity Market) Regulations 2004 (WA) the Amending Rules 2016'. The applicants applied for the preliminary hearing of issues raised in the application. On 10 February 2017, for reasons which I published on that day,[1] I did not order the preliminary hearing which the applicants sought, but gave liberty to apply for the preliminary determination of reformulated issues. On 24 February 2017 I heard further submissions as to the determination of preliminary issues. The applicants proposed that eight questions be determined as preliminary questions. The questions proposed by the applicants were:
1.Does the Electricity Industry Act 2004 (WA) ('the EIA') require the market in relation to the wholesale supply of electricity in the South West interconnected system to be established by regulation (and not by market rules) ('the Requirement')?
2.If yes to 1, was the Requirement met by the Electricity Industry (Wholesale Electricity Market) Regulations 2004 (WA) as gazetted on 30 September 2004 ('the Regulations')?
3.If yes to 1 and no to 2, was the Requirement met by the Regulations together with the market rules gazetted on 5 October 2004 ('the Initial Market Rules')?
4.If yes to 3, can the Initial Market Rules be amended by a statutory instrument that is not a regulation made under the EIA in a manner that alters those provisions of the Initial Market Rules which together with the Regulations satisfied the Requirement?
5.If no to 4, did the further amendments to the Initial Market Rules (as amended) that were gazetted on 31 May 2016 ('the Minister's Amendments') alter the provisions of the Initial Market Rules which together with the Regulations satisfied the Requirement?
6.If yes to 1, no to 2 and no to 3 then are the Regulations void or otherwise of no effect?
7.If yes to 1, no to 2, yes to 3, no to 4 and yes to 5 then are the Minister's Amendments void or otherwise of no effect?
8.If yes to 6 or 7, what, if any, relief should be granted to the applicants?
[1] Enernoc Australia Pty Ltd v Minister for Energy for The State of Western Australia [2017] WASC 29.
The parties agreed that the first question should be determined as a preliminary question. At the hearing on 24 February 2017 Senior Counsel for the respondent submitted that it was necessary to determine the first question to determine the application, describing it as an essential part of the consideration of the true issues and a question that was essential to be determined (ts 53). Senior Counsel for the respondent submitted that only the first question should be determined as a preliminary question. I ordered that all eight questions be determined as preliminary questions.
My answer to Question 1 is no. If my answer to Question 1 had been yes my answer to Questions 2 and 3 would have been no and my answer to Question 6 would have been that the regulations are invalid. As I answered Question 1 no I do not find the regulations invalid.
I set out in my reasons published on 10 February 2017 some background to the application for judicial review and some of the provisions of the Electricity Industry Act 2004 (WA), the regulations and the market rules. I will not repeat in these reasons what I said in those reasons.

The two types of statutory instruments provided for in Part 9 of the Electricity Industry Act

The long title to the Electricity Industry Act states that it is an Act to govern the operation and regulation of the Western Australian electricity industry and for related purposes. Different aspects of the electricity industry are dealt with in different Parts of the Act. In some of the Parts which deal with aspects of the electricity industry there is specific provision for making of regulations that relate to the aspect of the industry with which the Part is concerned. The provisions concerning the making of regulations in those Parts vary. The provisions in each of those Parts appear to be designed to address the aspect of the industry with which the Part is concerned. There is also a general regulation making power contained in s 131.
Part 9, which deals with the wholesale electricity market, provides for two types of statutory instruments - regulations and market rules. Section 121(1) provides that 'market' has the meaning given to that term in s 122. Section 122(1) provides that regulations are to be made for the purpose of establishing a market in relation to the wholesale supply of electricity in the South West interconnected system (the SWIS):
122.Regulations for a wholesale electricity market
(1)Regulations are to be made for the purpose of establishing a market (the market) in relation to the wholesale supply of electricity in the South West interconnected system.
The terms 'supply' and 'South West interconnected system' are defined in s 3. The definition of supply is:
supply means to do any one or more of the following -
(a)generate;
(b)transport through a transmission system;
(c)transport through a distribution system;
(d)sell.
Section 123(1) provides that without limiting s 122, the regulations are to provide for there to be market rules relating to the market and to the operation of the SWIS setting out or dealing with such matters as are prescribed by the regulations.
The market rules are not subsidiary legislation for the purposes of the Interpretation Act 1984 (WA) and s 42 of the Interpretation Act does not apply to them or to rules amending, repealing or replacing them - s 123(2). Sections 43 (other than sub‑section 43(6)), 44, 48, 48A, 50(1), 53, 55, 56, 58, 59, 75 and 76 and pt VIII of the Interpretation Act apply to the market rules as if they were subsidiary legislation - s 123(3).
As a consequence of s 123(2) of the Electricity Industry Act the market rules do not have to be laid before Parliament and they are not subject to disallowance by a House of Parliament. However some of the other provisions of the Interpretation Act that apply to subsidiary legislation do apply to the market rules. The market rules are not to be inconsistent with provisions of the written law under which they are made - s 43(1) and words and expressions in the market rules have the same meanings as in the written law under which they are made - s 44(1).
Although the market rules are not required to be laid before Parliament the regulations may provide for the laying before Parliament of the initial market rules and rules amending, repealing or replacing the market rules - s 123(4)(c). Section 123 does not expressly provide that if laid before a House of Parliament the market rules may be subject to disallowance.
The first regulations made under pt 9 of the Electricity Industry Act were the Electricity Industry (Wholesale Electricity Market) Regulations 2004 (WA) which were gazetted on 30 September 2004. The regulations provided, in reg 6(2), that subject to reg 7, the market rules were to be made by the Minister and in reg 6(6) that market rules made by the Minister were to be published in the Gazette and to be laid before each House of Parliament. Regulation 7 dealt with amending the market rules. It provided, in reg 7(1), the market rules could provide for matters relating to the initiation, development, making, approval, publication and commencement of amending rules and, in reg 7(3), that rules replacing the market rules in whole were to be made by the Minister and reg 6(6) applied to them.
Regulation 7 was amended by the Electricity Industry (Wholesale Electricity Market) Amendment Regulations (No 3) 2015 (WA) and the Electricity Industry (Wholesale Electricity Market) Amendment Regulations (No 2) 2016 (WA). The 2015 amendment was by reg 5 of those amendment regulations. It added reg 7(4) which provides that the Minister may make amending rules during the period beginning on the day on which reg 5 of those amendment regulations came into operation and ending on 1 July 2017.
The 2016 amendment was to amend sub‑reg (3) by adding par (b) which provides that rules amending, repealing or replacing market rules dealing with the matters referred to in reg 12B(2) must be approved by the Minister before they are made.
Regulation 12B was added to the regulations by the 2016 amendment. It provides in reg 12B(1) that the market rules may confer functions on the Rule Change Panel to the extent that those functions relate to the matters referred to in reg 7(1). Regulation 12B(2) provides that the market rules may make provision for governance matters, including financial management, relating to the performance of the functions of the Rule Change Panel under the regulations and the market rules. The Rule Change Panel was established by the Electricity Industry (Rule Change Panel) Regulations 2016 (WA).
The first market rules were the Wholesale Electricity Market Rules (WA) which were gazetted on 5 October 2004. There have been several amendments to those rules since they came into force. The amendments to the market rules which are challenged in this application are the Wholesale Electricity Market Amending Rules 2016 (WA) which were gazetted on 31 May 2016. The applicants contend that those amendments alter the market and so exceed the Minister's jurisdiction.

Question 1

In deciding whether impugned delegated legislation is valid the court has three steps to take: it construes the terms in which the Parliament has conferred the power to make the delegated legislation, it ascertains the scope and effect of the impugned delegated legislation and it determines whether the delegated legislation having that scope and effect is within the ambit of that power: The State of South Australia v Tanner (1989) 166 CLR 161, 173. Question 1 addresses the first of these steps.
Question 1is framed in terms of whether the Electricity Industry Act requires the market in relation to the wholesale supply of electricity in the SWIS to be established by regulations and not the market rules. The written outline of submissions of the applicants on this question commenced with a submission that there is another requirement in the Act concerning the wholesale supply of electricity - that s 122(1) requires the making of regulations to establish the market. Senior counsel for the applicants clarified that submission in the course of his oral submissions - the applicants' position is that the obligation to make regulations was not amenable to judicial review, but s 122(1) is a statement by the Parliament that the regulations are to be made (ts 88 ‑ 89).
The general regulation making power contained in s 131 of the Electricity Industry Act is in a form often found in legislation:
131.Regulations
The Governor may make regulations prescribing all matters that are required or permitted by this Act to be prescribed or are necessary or convenient to be prescribed for giving effect to the purposes of this Act.
Section 122(1) provides that 'regulations are to be made' for the purpose of establishing a market in relation to the wholesale supply of electricity in the SWIS. In my view the sub section is an expression by the Parliament that it intended that the executive arm of government would make regulations for that purpose.
Section 123(1) provides that, without limiting s 122, the regulations are to provide for there to be market rules relating to the market and to the operation of the SWIS setting out or dealing with such matters as are prescribed by the regulations. It is clear from its context and from the reference to s 122 that the regulations referred to in s 123(1) are the regulations provided for in s 122(1). Section 123(1) contains the words 'the regulations are to provide for there to be rules'. This is an expression that Parliament intended that the rules would be made.
'Without limiting section 122' s 123(1) provides that the regulations are to provide for there to be market rules. It follows that the provision of s 123(1) do not qualify the Parliament's intention that there would be regulations made for the purpose of establishing that market nor the objectives of that market provided for in s 122(2).
Section 122 does not expressly provide that the market must be established by the regulations. It provides that the regulations are to be made for the purpose of establishing a market. Nor does s 123(1) expressly provide that the market rules cannot establish the market to which the rules are to relate. Section 124 expressly provides for the matters that may be prescribed by the regulations and what the regulations may regulate and provide for. It does not expressly require that the regulations establish the market.
The principles of statutory construction were explained by Buss JA, as his Honour then was, in ThePilbara Infrastructure Pty Ltd v Brockman Iron Pty Ltd [2016] WASCA 36 [121] ‑ [129].
The modern approach to statutory construction is purposive. The statutory text is the surest guide to Parliament's intention. A decision as to the meaning of the text requires consideration of the context, in its widest sense, including the general purpose and policy of the provision. The context includes the existing state of the law, the history of the legislative scheme and the mischief to which the statute is directed. The purpose of legislation must be derived from the statutory text and not from any assumption about the desired or desirable reach or operation of the relevant provisions. The intended reach of a legislative provision is to be discerned from the words of the provision and not by making an a priori assumption about its purpose.
On the question of construing legislation as if it contained additional words or omitted words Buss JA referred to the three conditions specified by Lord Diplock in Wentworth Securities Ltd v Jones [1980] AC 74 as being conditions that must be fulfilled in order to justify reading into a statute words which are not expressly included in it. Those conditions are that it must be possible to determine from a consideration of the statute what the mischief was that it was the purpose of the Act to remedy, it must be apparent that the draftsperson and Parliament had by inadvertence overlooked an eventuality that required to be dealt with if the purpose of the Act was to be achieved and it must be possible to state with certainty what were the additional words that would have been inserted by the draftsperson and approved by Parliament had their attention been drawn to the omission before the Bill passed into law. Buss JA also referred to Taylor v The Owners Strata Plan No 11564 [2014] HCA 9; (2014) 253 CLR 531 where French CJ, Crennan and Bell JJ said that it was unnecessary to decide whether Lord Diplock's three conditions are always, or even usually, necessary and sufficient because the court's task is to construe the words the legislature has enacted and that even when the three conditions are met the court may be inhibited from interpreting a provision in accordance with what it is satisfied was Parliament's underlying intention because the alteration to the statutory text in such a case may be too far reaching.
It is my view that the Electricity Industry Act does not require that the market in relation to the wholesale supply of electricity in the SWIS be established by the regulations for the following reasons.
There is no express requirement in the Act that the market be established by the regulations.
Section 122(1) provides that regulations are to be made for the purpose of establishing a market in relation to the wholesale supply of electricity in the SWIS. It is not inconsistent with the wording of the sub‑section that regulations be made for that purpose without those regulations establishing the market. An action can be taken for the purpose of establishing something without establishing that thing.
There is no express prohibition against the market being established by the market rules.
Section 124 expressly provides for the matters that may be prescribed by the regulations and what the regulations may regulate and provide for. It does not expressly require that the regulations establish the market.
The provision in s 123(1) that the regulations are to provide for there to be market rules relating to the market is not inconsistent with the rules establishing that market. Rules can relate to something that they establish.
The provision in s 123(1) that 'without limiting' s 122 the regulations are to provide for market rules makes clear that the provision in s 123(1) does not limit s 122. The term 'without limiting' does not mandate that the regulations must provide for the establishment of a market when s 122 does not expressly so provide.
The facts that the regulations must be laid before Parliament and can be subject to disallowance but the rules are not required to be laid before Parliament unless the regulations so provide does not mean that the Act must be interpreted as requiring that the market be established by the regulations. Nor does interpreting the Act as allowing the market rules to establish the market make redundant the distinction between the regulations and the market rules. The market rules cannot exist unless the regulations provide for them. The regulations that provide for them must be laid before Parliament and can be disallowed. A House of Parliament could disallow regulations that provide for market rules that relate to the market but which regulations do not establish the market.
Other provisions in the Act that deal with instruments and delegation, such as s 79 which deals with a code of conduct for the supply of electricity to small use customers, s 104 which provides for a code dealing with access to services of network infrastructure facilities and s 129J which deals with delegation of powers conferred on the Treasurer do not indicate that pt 9 of the Electricity Industry Act should not be interpreted as permitting the market to be established by the market rules because they are dealing with different aspects of the electricity industry. They are not dealing with the establishment of a market.
The Act governs the operation and regulation of the Western Australian electricity industry and for related purposes. Part 9 deals with the establishment and operation of a wholesale electricity market by regulations and market rules. It would not defeat Parliament's intention to provide for those matters to interpret the Act as not requiring that the wholesale electricity market be established by regulations.

My answer to Question 1 is no. The questions that follow Question 1 only arise if the answer to Question 1 is yes. However as I have heard argument on the following questions it is appropriate to consider what my answers would be if I had answered the first question yes.

Question 2

The Electricity Industry (Wholesale Electricity Market) Regulations which were gazetted on 30 September 2004 contained four parts. Part 1 was preliminary, pt 2 dealt with the market rules, pt 3 dealt with registration of participants in the wholesale electricity market and pt 4 dealt with the allocation of market costs.
Regulations 5 to 18 were in pt 2. The regulations provided in reg 5 for there to be market rules. Regulations 6, 7 and 8 provided for the making and amendment of those rules and for the availability of those rules for inspection.
Regulation 9 provided that the market rules may provide for matters relating to the initiation, development, formulation, approval, publication and commencement of market procedures and amendment of market procedures. Regulation 9 also provided that until market rules provided for those matters the Minister could develop, formulate and publish market procedures and amendments of market procedures.
Regulations 10, 11 and 12 provided that the market rules could confer functions on the Minister, the Minister administering the Electricity Corporation Act 1994 (WA), the Economic Regulation Authority and the Independent Market Operator.
Regulation 13 provided that the market rules were to confer on an entity the function of operating the SWIS in a secure and reliable manner and contained other provisions about what the market rules could provide for concerning that entity. Regulation 13 also required the entity to act in a manner consistent with the objectives set out in s 122(2) of the Electricity Industry Act.
Regulation 14 provided that the market rules could provide for the registration by the Independent Market Operator of persons engaged or intending to be engaged in five listed activities associated with the generation, transmission, sale and purchase of electricity. Regulation 15 provided that the market rules could confer functions and impose requirements on registered participants and could authorise the giving of directions to registered participants. Regulation 16 provided for certificates evidencing registration and exemption from the requirement to be registered.
Regulation 17 was a broad provision dealing with matters that the market rules could provide for which included matters relating to participation in the market, the trading of electricity, matters relating to the market generally and any other matters that were necessary or convenient to be dealt with for the purposes set out in s 122(1) of the Act and to achieve the objectives set out in s 122(2).
Regulation 18 provided authorisation for the purposes of the Trade Practices Act 1974 (Cth) and the Competition Code of arrangements, acts, matters or things done in accordance with the market rules.
Regulations 19 and 20 were in pt 3 of the regulations. They provided that a person must not participate in the activities specified in reg 14 unless that person was registered or had an exemption from registration and for the giving of notices of contravention of the requirement to be registered.
Regulation 21 in pt 4 provided for the identification and allocation of costs of participants performing functions.
The regulations did not establish a particular market for the wholesale supply of electricity. They provided broad functions and powers that could be specified in the market rules. If I had answered Question 1 yes then my answer to Question 2 would have been no.

Question 3

The Electricity Industry (Wholesale Electricity Market) Regulations were gazetted on 30 September 2004 and the Wholesale Electricity Market Rules were gazetted on 5 October 2004. The applicants submit that as the market rules were gazetted a few days after the regulations it may be inferred that the substantial form of the market rules was known at the time of the gazettal of the regulations. I do not accept that submission. It is impossible to draw any inference as to how much of the form of the market rules was known on 30 September 2004 from that time line. It may be that at that date the full content of the market rules was known, or it may be that very little of the market rules was known and a great deal of urgent work was to be undertaken to finalise the market rules. It is not possible to infer what the position was as there is no indication one way or the other.
I also do not accept the applicants' submission that the regulations could be construed as providing for the establishment of a market of the kind set out in the market rules so that they clothed the market rules with character of regulations. As it is not possible to infer that the market rules were substantially known at the time that the regulations were gazetted it is not possible to construe the regulations as including within them provisions in the market rules establishing the market when those provisions may not have been known at the time that the regulations were made.
I would have reached the same conclusion on this question even if I had concluded that the substantial form of the market rules was known when the regulations were gazetted. The regulations do not provide that they incorporate the market rules. To construe the regulations as providing that they incorporate the market rules would require the addition of words to them.
I have referred earlier in these reasons to the judgment of Buss JA in The Pilbara Infrastructure Pty Ltd v Brockman Iron Pty Ltd on the question of construing legislation as if it contained additional words. In my view it cannot be said that the omission of words providing that the market rules were incorporated into the regulations was due to inadvertence. On the contrary, it seems to me that the regulations specified in considerable detail what could be provided for in the market rules. Further, it is apparent from the regulations that the intention was that the market rules and not the regulations provide for the matters that the regulations provided could be dealt with in the rules. It is my view that the regulations should not be construed as incorporating the market rules.
If I had answered Question 1 yes then my answer to Question 3 would have been no.

Question 6

The regulations gazetted on 30 September 2004 do not establish the market in relation to the wholesale supply of electricity in the SWIS. If the Electricity Industry Act had required the market to be established by regulation and not by market rules the regulations would not comply with that requirement. The regulations do not provide for market rules that relate to a market established by the regulations. The regulations provide for market rules which, in their terms, are to apply even though the market is not established by the regulations.
The result is that if I had answered Question 1 yes then I would have concluded that the regulations which provide for those market rules would be beyond the power to make regulations contained in the Electricity Industry Act. The consequence of a finding that regulations are beyond power is that the regulations are invalid: Swan Hill Corporation v Bradbury (1937) 56 CLR 746.

If I had answered Question 1 yes then my answer to Question 6 would have been that the regulations are invalid. However as I answered Question 1 no I do not find the regulations invalid.