Haast Energy Trading Limited v The Electricity Authority
[2023] NZHC 408
•6 March 2023
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2022-485-381
[2023] NZHC 408
UNDER section 64 of the Electricity Act 2010 IN THE MATTER OF
appeals against decisions of the Electricity Authority
BETWEEN
HAAST ENERGY TRADING LIMITED and ELECTRIC KIWI LIMITED
Appellants
AND
THE ELECTRICITY AUTHORITY
Respondent
On the Papers Counsel:
R Butler and S Jeffs for the Appellants
R S May and T G Bain for the Respondent
Judgment:
6 March 2023
JUDGMENT OF GWYN J
(Costs on interim relief application)
[1] The appellants have appealed a decision of the Electricity Authority (the Authority) of 1 September 2021 relating to the Authority’s dismissal of a pricing error claim made by Haast Energy Trading Limited (Haast). The substantive appeal was heard in this Court on 27 and 28 February 2023.
Background
[2] On 9 August 2021 at 11.54 pm, Transpower, the System Operator for the electricity industry issued an Island Shortage Situation Notice (ISS Notice).
HAAST ENERGY TRADING LIMITED and ELECTRIC KIWI LIMITED v THE ELECTRICITY AUTHORITY [2023] NZHC 408 [6 March 2023]
[3] The ISS Notice caused the Pricing Manager to apply scarcity pricing when calculating interim pricing for electricity on the wholesale market for trading periods 39-42 on 9 August 2021. The price for electricity for those trading periods was about
$130 million more than if scarcity pricing had not been applied.
[4] On 10 August 2021 the appellants made a pricing error claim to the Authority in relation to the events of 9 August 2021. On 1 September 2021 the Authority dismissed the claim (the Original Decision).
[5] The appellants subsequently learned that Transpower had acknowledged it had wrongly issued the ISS Notice. On 20 December 2021 the appellants invited the Authority to reconsider the Original Decision. On 1 February 2022 the Authority declined the appellants’ invitation and said that, in any event, it would have declined the claim (the Subsequent Decision).
[6] The Authority had also been investigating whether the events of 9 August 2021 constituted an undesirable trading situation. On 28 June 2022 the Authority issued its final decision, which concluded that there had not been an undesirable trading situation on 9 August 2021 (the UTS Decision).
[7] The appellants appealed questions of law in the Original Decision, the Subsequent Decision and the UTS Decision, under s 64 of the Electricity Industry Act 2010. The appellants say the Authority erred in concluding that the application of scarcity pricing to trading periods 39-42 on 9 August 2021 did not constitute a pricing error or an undesirable trading situation.
[8] Prices for the Trading Periods in question remained interim while the Authority completed its investigation into the underlying events of 9 August 2021. On 28 June 2022, having completed its investigation, the Authority announced that it would finalise wholesale prices for the relevant Trading Periods.
[9] Before the appellants filed their appeals they invited the Authority to continue interim pricing for the four affected trading periods, but the Authority declined to do so.
[10] The appellants therefore sought interim relief - specifically, that the prices for electricity for Trading Periods 39-42 on 9 August 2021 remain interim and not be made final, until further order of the Court.
[11] By minute of 23 August 2022, I directed that the application for interim relief should be considered separately from the application for special leave to appeal and the substantive appeal. The application for interim relief was set down for a full day hearing on Wednesday 19 October 2022.
[12] On 12 October 2022 counsel for the Authority advised the Court that it had reconsidered the appropriateness of proceeding to a hearing on interim relief. The Authority did not consent to interim orders but did not wish to make submissions in opposition and indicated it would abide the Court’s decision.
[13] On that basis I made orders including that the hearing on 19 October 2022 be vacated and directing that costs memoranda on the application for interim relief be filed.
[14] The chronology of events is relevant to this costs application. The key points are:
(a)5 July 2022 – application for interim relief filed.
(b)1 August 2022 – Authority’s notice of opposition to application for interim relief and affidavit of Grant Benvenuti filed.
(c)23 August 2022 – minute directing that application for interim relief be considered separately. Timetable for evidence and submissions set and the directions included that Nova Energy Ltd (Nova) be served with all documents filed. Leave was reserved to Nova to apply for leave to be heard.
(d)26 August 2022 – Nova advised the Court it wished to be heard.
(e)21 September 2022 – Nova filed a memorandum of counsel seeking leave to be heard as an interested party and to file an affidavit in relation to the interim relief hearing. Nova’s application was opposed by the appellants.
(f)30 September 2022 – Churchman J declines Nova’s application to file affidavit evidence.
(g)2 October 2022 – Authority writes to appellants inquiring after the appellants’ submissions.
(h)3 October 2022 – appellants file and serve their submissions, bundles of documents and authorities for the interim relief hearing.
(i)12 October 2022 – Counsel for the Authority file a memorandum advising that, while the Authority did not consent to interim orders, it did not wish to make submissions in opposition and would abide the Court’s decision.
(j)13 October 2022 – directions made vacating the 19 October 2022 interim relief hearing and directing that the wholesale prices for electricity in respect of Trading Periods 39-42 on 9 August 2021 are to remain interim until the determination of the current appeals or pending further order of the Court.
Appellant’s submissions
[15] The appellants now seek costs following the Authority’s withdrawal of its opposition to interim relief.
[16] The appellants say that the Authority had statutory power to continue interim prices pending the substantive appeal, in the absence of evidence of other market participants being prejudiced by interim prices. The Authority itself had imposed interim prices, of its on motion, so as to enable it to conclude its UTS investigation. Notwithstanding that, the Authority filed extensive documents in opposition to the
application for interim relief, including an affidavit from Mr Benvenuti in which he addressed the Authority’s own interests:
… if… interim relief is granted, the Authority will be required to make new contractual arrangements with NZX to maintain its capacity to carry out the mechanics of finalising prices. There is likely to be some cost to this…
[17] Mr Benvenuti also indicated that the Authority was undertaking inquiries to determine what financial impact the situation was having on affected participants.
[18] On 26 August 2022 Nova indicated a wish to be heard and on 21 September 2022 it sought to file an affidavit opposing interim relief. That was the first indication of any prejudice to a third party. It was filed almost a month after the appellants’ affidavit in reply. Due to its lateness and the potential for Nova’s evidence to derail the allocated hearing for interim relief, Churchman J declined to admit Nova’s evidence.1
[19] The appellants point out that, by this time interim prices had been in place for more than a year, during which time the Authority had been able to determine whether there was any market prejudice. The appellants say it was at this point that the Court might have expected the Authority to clearly indicate to the Court and parties that it merely abided the Court’s decision on interim relief.
[20] The appellants say that the Authority did not forewarn them of its change in position at any point prior to 12 October 2022, which was the date on which the Authority’s submissions were due, when it indicated it would abide the Court’s decision. By that time the appellants had taken all necessary preparatory steps for the interim relief hearing. The only costs saved was the hearing time itself.
[21] The appellants say the position should be recognised in costs. They rely on the general principle that the party who fails with respect to an interlocutory application should pay costs to the party who succeeds.2
1 Minute of Churchman J 30 September 2022.
2 High Court Rules 2016 (Rules), r 14.2(1)(a.
[22] The appellant seeks scale costs of $10,994. They also seek an uplift of 50 per cent for the steps taken since the Authority’s documents in opposition were filed on 1 August 2022. Increased costs on that basis would amount to $15,774, plus disbursements of $917.
[23] The appellants submit that after 1 August 2022 all steps were wasted because no evidence of prejudice existed. For costs purposes, the Authority pursued unnecessary steps and adopted a position which lacked an evidential basis. An order of increased costs under r 14.6(3)(b)(ii) is therefore merited.
[24] The appellants note that they have made two offers to resolve costs and seek costs for preparing their costs memorandum.
Authority’s submissions
[25] The Authority submits that a party who abides a decision is not an unsuccessful party in the usual sense. The Court may refuse to make an order for costs, or reduce costs otherwise payable, where the proceeding concerns a matter of public interest, and the party opposing costs acted reasonably in the conduct of the proceeding.3
[26] The Authority says that principle is relevant in a case such as this involving a statutory body defending an appeal against its decisions. Entities such as the Authority have statutorily-defined roles to advocate for the public interest, and are different from a purely adjudicative body. Exposure to costs awards risks creating a disincentive to a body such as the Authority assisting the Court. On that basis, the Authority says the appellants need to establish unreasonableness in order to receive any costs.
[27] The Authority says its conduct was not unreasonable, having regard to the sequence of events. It did not oppose interim relief for its own sake. At the time the application was served it was unclear when the appeals might be heard, and therefore how consequential the delay in finalising prices would be. In addition, the Court timetable meant that the Authority had to take a position on the application before other interested parties had had a real opportunity to consider the implication for them
3 Rule 14.7(e).
of interim relief. For that reason the Authority served copies of its notice of opposition on all industry participants who had made submissions on the decisions under appeal.
[28] Once the Nova decision was issued on 30 September 2022, it was clear that no directly affected parties would be involved and that continuing to the interim relief hearing would mean the Authority was in effect advocating for industry participants who had not (successfully) objected. The Authority considered its position with its next Board meeting scheduled for 11 October 2022 and filed its memorandum advising the change in position on 12 October 2022. At that point, the Authority properly abided the interim relief application. The Authority’s ultimate decision to abide does not imply any concession that it ought to have consented to the application from the outset.
[29] The Authority also says that the appellants’ costs (and disbursements) would have been incurred even if the Authority had abided the application for interim relief from the outset. The appellants would still have needed to persuade the Court that interim relief is appropriate. That would have required submissions. Counsel says the appellants had previously noted that they had in fact drafted their submissions by 21 September 2022.
[30] The Authority resists the claim for costs on costs and says the appellants abandoned discussion while their offer was still being put to the Authority’s Board. In those circumstances it was the appellants, not the Authority, who behaved unreasonably.
[31] The Authority also disputes specific aspects of the costs claimed by the appellants.
[32]The Authority submits that costs ought to lie where they fall.
Discussion
[33] The principles and authorities relating to the costs position of a party who abides the decision of the Court, do not assist the Authority in this case. The Authority notified the appellants and the Court that it would abide only at the eleventh hour - the
first indication was in its memorandum of 12 October 2022. Until that point it had maintained its opposition to the interim relief application. The decision of Vector Ltd v Utilities Disputes Commissioner,4cited by the Authority, involved a rather different situation where the Commissioner took active steps at the outset of the proceeding but subsequently indicated her intention to abide. Although the exact timing is not clear from the judgment, it is implicit that the Commissioner’s indication was made earlier in the course of the proceedings than in this case.
[34] The Authority’s second submission is that, as a statutory body it is best-placed to assist the Court and it is appropriate to take an active role for that purpose. It ought not to be penalised by costs for doing so. I accept that will generally be the case where there would otherwise be no opposition to the substantive appeal.5
[35] However, the question is somewhat different in relation to the interim relief application. I have considered the Authority’s notice of opposition and the affidavit of Mr Benvenuti in support. At the point it was filed it was useful for the Court, to explain the electricity wholesale market and then imminent reforms and the potential impacts of maintaining interim prices on the public interest. But, as the appellants submit, Mr Benvenuti’s evidence does appear to go further, to advance the Authority’s own position. It appears that the Authority saw its role not simply as acting as a contradictor but actively opposing the interim relief sought. In those circumstances, r 14.7(e) does not assist the Authority, as it appears to have acted in its own, rather than the public interest.
[36] I accept that, as the appellants submit, the Authority did act unilaterally – it opposed interim relief in the absence of any evidence of specific prejudice to third parties, despite the Authority having had more than a year to assess the position, and when there was no suggestion the appellants were not prosecuting the appeals promptly.
[37] The Authority says the appellants’ preparation, and therefore its ordinary costs, would have been necessary in any event, even if it had abided from the outset, because
4 Vector Ltd v Utilities Disputes Commissioner [2019] NZHC 862.
5 Commerce Commission v Southern Cross Medical Care Society [2004] 1 NZLR 491 (CA) at [17].
the appellants had to persuade the Court that interim relief is appropriate. I do not accept that submission. If the Authority had indicated earlier that it would abide the application, and there was no other opposition, the Court could have granted interim relief (as it did) on the papers. The Authority’s own memorandum of 12 October 2022 consented to the decision being made on the papers.
[38]The appellants are entitled to scale costs for their application for interim relief.
Increased costs
[39] The appellants also seek increased costs. Rule 14.6(3)(b)(ii) provides the statutory basis for an award of increased costs against a party taking or pursuing an unnecessary step or an argument that lacks merit. I agree that from 30 September 2022 at the very latest it must have been apparent to the Authority that the appropriate course was for it to abide. Counsel for the Authority point to the need to get Board authorisation, with the next Board meeting not occurring until 11 October 2022. However, this was significant litigation. The possibility of the Authority abiding the decision of the Court must inevitably have been considered by the Authority and its counsel before this point.
[40] I conclude that the appellants are entitled to a 50 per cent increase on scale costs, plus disbursements, from 30 September 2022 when Churchman J’s decision on the Nova application was issued. That approach might be seen as generous to the Authority, but it seems to me to be the clearest point at which to draw a line.
Specific aspects of costs claim
[41] The Authority disputes some specific aspects of the costs claim. I accept the Authority’s submission that an award of costs for the case management conference and filing the case management memorandum is not appropriate. That conference was required for a number of matters including directions for service and was attended by two additional industry participants.
[42] I accept that the appellants can claim for filing their memorandum of 13 October 2023. As that memorandum makes clear, although the Authority had
advised it would abide, there were still consequential steps to be dealt with by the Court.
[43] The costs on costs claim is not allowed as the factual background to the costs discussion between the parties is disputed and not sufficiently clear.
[44] The Authority points to an apparent discrepancy of $117 in the appellants’ disbursements claim. I have no doubt that counsel can resolve that apparent discrepancy by discussion.
Conclusion
[45] The appellants are entitled to scale costs with a 50 per cent increase of costs from 30 September 2022.
Gwyn J
Solicitors:
Mackenzie Elvin Law, Tauranga Luke Cunningham Clere, Wellington
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