Power Grid Cables Pty Ltd v Endeavour Energy

[2016] NSWSC 34

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Power Grid Cables Pty Ltd v Endeavour Energy [2016] NSWSC 34
Hearing dates:	4 February 2016; 5 February 2016
Decision date:	08 February 2016
Jurisdiction:	Common Law
Before:	Adamson J
Decision:	(1) Refuse the plaintiff’s application for interim relief. (2) Reserve the costs of such application. (3) Confirm the hearing date of 2 March 2016 at 2pm. (4) Grant liberty to restore the matter before me on 24 hours’ notice to my Associate.
Catchwords:	INJUNCTIONS - Interlocutory injunctions – whether status quo can be preserved pending trial – expedited hearing ordered since interim relief not practical ADMINISTRATIVE LAW – whether decision by state-owned corporation to remove items from approved materials list is an administrative decision which attracts requirements of procedural fairness PRACTICE AND PROCEDURE – transfer of proceedings – “special federal matter”
Legislation Cited:	Competition and Consumer Act 2010 (Cth), ss 46, 47 Electricity Supply Act 1995 (NSW), ss 26, 31 Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth), ss 3, 6
Cases Cited:	Australian Broadcasting Corporation v O’Neill [2006] HCA 46; 22 CLR 57
Category:	Procedural and other rulings
Parties:	Power Grid Cables Pty Ltd (Plaintiff) Endeavour Energy (Defendant)
Representation:	Counsel: VM Heath (Plaintiff) KC Morgan (Defendant)     Solicitors: Francis John Simpson (Plaintiff) Minter Ellison (Defendant)
File Number(s):	2016/32288

Judgment

Introduction

1. Power Grid Cables Pty Ltd, the plaintiff, applies by summons filed on 1 February 2016, for interim and final relief against Endeavour Energy, the defendant.

The facts

2. The following narrative of facts is derived from the plaintiff’s evidence, which was neither challenged nor tested for the purposes of the interlocutory hearing for interim relief. The facts are expressed in summary form because of the nature of the claim for interim relief and reflect the plaintiff’s evidence.

3. Since 2003 the plaintiff has supplied electrical lines to third party contractors for the distribution of electricity through the defendant’s network to consumers. The defendant’s network covers a geographical area of 24,500 square kilometres and includes greater western Sydney and midwestern New South Wales. In about 1995 Parliament amended the relevant legislation (including the Electricity Supply Act 1995 (NSW) (the Act)) in order to introduce market competition to works done to provide connections to networks, including the defendant’s. The relevant provisions are referred to in more detail below.

4. For some years, the defendant has published an “Approved Materials List” (AML) which sets out cables and other electrical products it “approves” for use in electrical works that are, or will be, connected to its network. The inclusion of a product on this list means, for present purposes, that the defendant’s customers can use those products to connect to the defendant’s network. The plaintiff’s underground distribution cables have been on the AML since 2003. According to the plaintiff’s evidence, seven out of the eleven cables listed are specifically designed for the defendant’s network and cannot be used anywhere else.

5. As a matter of practical commercial reality, the plaintiff can only sell products that are on the AML since its customers are, understandably, loath to run the risk that the defendant will otherwise refuse to supply electricity through cables that are made of products other than those on the AML. Moreover, the Model Standing Offer for a Standard Connection Service issued by the defendant in June 2015 obliges a developer to use goods which are “approved”, which I take to mean, or at least include, those goods contained on the AML (cl 6.3(b)(iii)).

6. In about 2013 the defendant, together with the other two electricity distributors for New South Wales (Essential Energy and Ausgrid), appointed Network NSW Pty Ltd (NNSW) as its agent, to procure products to be used in their networks throughout New South Wales. These products were to be used by the distributors themselves in carrying out work on their networks and were not, as far as the evidence established, intended to affect the products that could be used by third party contractors to perform such work. To that end NNSW issued a Request for Tender (RFT) on behalf of the three distributors. The plaintiff decided not to submit a tender for that work. In late 2015 Prysmian Aust. Pty Ltd (Prysmian) was appointed as the successful tenderer.

7. When the RFT was announced the plaintiff became concerned that the new specification issued as part of the RFT would affect the approval of its products listed on the AML. According to the plaintiff, the defendant assured it repeatedly that, notwithstanding the tender process, it would not change the status of products on the AML unless and until it amended the relevant specification and given to suppliers such as the plaintiff adequate notice and an opportunity to be heard as to the continued compliance of their products with the specification.

8. A tender briefing published by the defendant (through the NNSW forum on the internet) in July 2013 said in part:

“Approved Products

All products (including those previously approved by one of the organization [sic] will be reassessed in accordance with the requirements of the new NNSW specifications post the tender process. . .”

9. The NNSW internet forum contained the following question and answer as at 24 July 2013:

Could you please advise: 1. Will products currently approved by the three electrical utilities still be approved after this tender has been awarded. 2. If a Respondent is not successful in being awarded a supply contract for a given product but still has a technically compliant product, will their product be given an approval for use on all three electrical networks.

(ANSWER) Vendors will need to pass mandatory and commercial compliance criteria before their submissions will be technically assessed. If Vendors pass this stage and are assessed for technical compliance, the products that pass will be added to the approved products lists. If a suppliers product has been previously been approved and is passed or not assessed in this tender then it will not be removed from the approved list. If a supplier’s product has not been previously approved or is not assessed in this tender, they will need to apply through each organisations product approval process if they wish to have products approved for the ASP market.

[Emphasis added.]

10. The plaintiff’s case is that it understood by these representations that it did not have to participate in the tender process to protect its position with respect to the products it used to connect to the defendant’s network and relied on the representations to continue to order the cables that were listed on the AML.

11. By email sent on 30 December 2015 David Shepherd, the defendant’s Acting Network Mains Manager, wrote to the plaintiff (on behalf of the defendant) in the following terms:

“As Endeavour Energy’s distribution cable tender is now finalized, Endeavour Energy is in the process of updating the Approved Materials List (AML).

This involves removing existing suppliers listed in the same category from the AML. Please refer to the attached letter for more information.”

12. In the letter which was attached to the email, the defendant, by notice dated 30 December 2015 (the Revocation Decision), purported to revoke the existing approvals of the plaintiff’s underground distribution cables. The Revocation Decision read as follows:

“NOTIFICATION OF PRODUCT REMOVAL FROM AML

The control of materials and equipment used on Endeavour Energy’s network is important to safely and reliably manage, maintain and operate the network in accordance with statutory and regulatory obligations, including those under the Electricity Supply Act 1995 (NSW), State Owned Corporations Act 1989 (NSW) and the Service and Installation Rules of New South Wales (2012).

For these reasons, Endeavour Energy has a company policy outlining the process of assessing the suitability of materials and equipment being installed or used on the network and subsequently being included on the Approved Materials List (AML).

The process allows prospective suppliers to apply for materials and equipment to be considered for inclusion in the AML only under the following conditions;

The supplier of the materials and/or equipment was deemed technically compliant through a tender process by Endeavour Energy.

Endeavour Energy has identified a business need or benefits having additional suppliers.

At the conclusion of each tender process, Endeavour Energy evaluates the existing suppliers listed in the same category under the AML for compliance with current specifications and the company policy. Unfortunately, this review has deemed the materials and/or equipment listed in the attached table to be no longer valid for inclusion in the AML. To provide an opportunity for the supplier to implement a transitional arrangement to manage stocks, these materials and/or equipment will continue to be listed in the AML for a period of six months from the date of this letter. After this period, the materials and/or equipment will be removed from the AML and approval revoked.

If you would like to discuss any aspect of this decision further, please contact me via the details below.”

13. The table attached to the letter listed eleven of the cables sold by the plaintiff for the purposes of connecting premises to the defendant’s network. According to the plaintiff, it was not consulted before the Revocation Decision was made and was not given an opportunity to be heard as to why it ought not be made.

14. According to Mark Rukin (the plaintiff’s sole director) Mr Shepherd informed him on 11 January 2016 that the reason for the Revocation Decision was that the defendant “could not support the costs of unlimited suppliers”.

15. Since the Revocation Decision the plaintiff has applied for its products to be approved by reference to the new specification. This further application for approval has not yet been determined.

The legislative framework

16. Of present importance, s 31 of the Act, which is contained in Part 3 (Network operations in a retail market), Division 4 (Requirements relating to customer connection services), provides:

“31 Customer may choose supplier and contractor

(1) For the purpose of complying with any requirement imposed under this Division, a customer may elect:

(a) to have any required electrical or other goods provided by the distributor (in the case of goods that are available from the distributor) or by any other person, and

(b) to have any required electrical or other services provided by the distributor (in the case of services that are available from the distributor) or by any other person.

(2) A person who provides electrical or other services of a kind prescribed by the regulations must be accredited, in accordance with the regulations, to provide those services. The regulations may make provision for or with respect to the payment of fees in connection with an application for accreditation or for renewal of accreditation.”

17. The defendant is, relevantly, “the distributor”. The plaintiff is, for present purposes, “any other person” within the meaning of s 31(1)(a) and contends, in part, that the customer’s right to elect to have goods provided by someone other than the defendant (as provided for in s 31(1)(a)), confers a corresponding right on it to supply such goods to the customer, as long as they comply with the defendant’s specifications.

18. Section 26 relevantly provides:

“Service lines

(1) A distributor may require the installation of such service lines, and provision for their attachment, as it considers necessary to provide a supply of electricity to or from a customer.

(2) The type, construction and route of a service line and its point of connection are to be as determined by the distributor.

. . .”

The plaintiff’s claim

19. The plaintiff claims relief on various bases. First, it contends that the Revocation Decision was an administrative decision and, accordingly, could be set aside as invalid if it was made for an improper purpose or involved the denial of procedural fairness. It alleges that if the decision to remove its products from the AML was made in order to reduce the number of suppliers (as appears from the alleged conversation between Mr Shepherd and Mr Rukin on 11 January 2016), this was an improper purpose, since s 31(1)(a) of the Act requires that a customer be permitted to obtain electrical goods from “any other person” in the context of a legislative intention to preserve market competition for such goods. It alleges that the Revocation Decision attracted the requirements of procedural fairness and therefore ought be set aside since it was given no opportunity to be heard before the decision was made.

20. Secondly, the plaintiff submitted that, as a result of representations the defendant made to it, on which it relied to its detriment, the defendant was estopped from making the Revocation Decision unless and until it had afforded procedural fairness to the plaintiff.

21. Thirdly, it submitted that the conduct of the defendant in effectively requiring customers to obtain cables from a single supplier (Prysmian, whose products already complied with the new specification by reason of its participation in the tender process), it was engaging in abuse of market power or third-line forcing in breach of ss 46 and 47 of the Competition and Consumer Act 2010 (Cth).

Relevant principles

22. Whether interim relief ought be granted depends on whether the plaintiff has shown a sufficient likelihood of success to justify the preservation of the status quo pending the trial: Australian Broadcasting Corporation v O’Neill [2006] HCA 46; 227 CLR 57. The “governing consideration” is “that the requisite strength of the probability of ultimate success depends on the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought”: Australian Broadcasting Corporation v O’Neill at [72] per Gummow and Hayne JJ.

Consideration

23. It is not appropriate for present purposes to say more than that I am satisfied that the plaintiff has shown that there are serious questions to be tried in relation to whether the defendant’s decision to remove its products from its AML:

1. is an administrative decision which is reviewable on the grounds of denial of procedural fairness, or improper purpose; and

2. could form the basis, together with representations made by the defendant to the plaintiff, on which the plaintiff is said to have relied, of a promissory estoppel such as would prevent the defendant acting on the decision in accordance with its terms.

24. In these circumstances, it is unnecessary to form, or express, any view about whether there is a serious question to be tried whether the defendant’s conduct is otherwise unlawful on the ground that it infringes the prohibition on third-line forcing. In any event, it will be necessary to consider whether the proceedings, or some aspect of the proceedings ought be transferred to the Federal Court as it involves a “special federal matter”: ss 3 and 6 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth).

25. The question of how the status quo could be preserved pending the determination of the proceedings is a more difficult one. The orders proposed by the plaintiff in its written submissions do not seem to me to be appropriate since the practical consequences that are likely to flow from them exceed what is required to preserve the status quo. In particular the proposal that I confer some protection with respect to products sold before the determination of the proceedings would tend to create the prejudice that, if the defendant were wholly successful, it would be burdened by equipment in its network that was installed after 30 June 2016 but which did not meet its current specification.

26. Although the plaintiff has established that it is likely to suffer loss arising from the Revocation Decision even if it is set aside or is found to ground an estoppel, and that such loss may be difficult to quantify, even were it compensable, I consider that the early determination of the dispute is the best that can be done to ameliorate the effects of the uncertainty created by the unresolved challenges to the defendant’s decision. To that end I have listed the matter for urgent final hearing before me to commence at 2pm on 2 March 2016 with a view to the hearing concluding by 4 March 2016. It will be necessary for directions to be made for the further conduct of the proceedings to achieve this end.

Costs

27. I have not heard the parties on costs. Although the defendant has successfully resisted the claim for interim relief, at least part of the hearing was necessary in the interests of justice to establish the grounds for the matter to be expedited. In these circumstances, I consider it to be appropriate to reserve the question of costs, which can be determined at the conclusion of the substantive hearing.

Orders

28. I make the following orders:

1. Refuse the plaintiff’s application for interim relief.

2. Reserve the costs of such application.

3. Confirm the hearing date of 2 March 2016 at 2pm.

4. Grant liberty to restore the matter before me on 24 hours’ notice to my Associate.

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Amendments

10 February 2016 - Paragraph 1 2nd line 2015 amended to 2016

Decision last updated: 10 February 2016