James Netzler Gladwin and Penelope Bright v Metrowater Limited

[2000] NZCA 110

IN THE COURT OF APPEAL OF NEW ZEALAND CA 11/00

BETWEEN	JAMES NETZLER GLADWIN and PENELOPE BRIGHT
Appellants

AND	METROWATER LIMITED
Respondent

Hearing:	29 June 2000
Coram:	Richardson P Henry J Blanchard J
Appearances:	R J Hooker for Appellants R J Beech and N D Wright for Respondent
Judgment:	4 July 2000

JUDGMENT OF THE COURT DELIVERED BY RICHARDSON P

1. This appeal against the decision of Salmon J reported at (2000) 6 NZBLC 102,966 turns on the answer to the narrow question, whether water and waste water services supplied by Metrowater Limited to the appellant household customers of Metrowater are goods or services under the Commerce Act 1986 and so subject to the price control provisions of Part IV of that Act.   If so, and for the reasons given in Vector Ltd v Transpower New Zealand Ltd [1999] 3 NZLR 646 paras [61]‑[66] and [69], judicial price fixing under the common law doctrine of prime necessity requiring monopoly suppliers of essential services to charge no more than a reasonable price, on which the appellants rely, would be incompatible with the scheme and purpose of that legislation.

Background

1. Metrowater is a local authority trading enterprise to which the Auckland City Council transferred its undertaking in relation to the supply of water and the removal of waste water (through the sewerage pipe system, and so not including storm water drainage) from properties in the Council's district.

2. By s594Q of the Local Government Act 1974, "The principal objective of every local authority trading enterprise shall be to operate as a successful business";  and that commercial focus is reinforced by s594B(1) which defines local authority trading enterprise as meaning "(ii) An organisation that--(A) Operates a trading undertaking with the intention or purpose of making a profit; and (B) Is subject to significant control, directly or indirectly, by 1 or more local authorities".

3. Metrowater obtains its water supplies from Watercare Services Limited at commercial rates and charges its customers at its published prices for water consumed and for the removal of waste water, in each case with a fixed service charge and a variable charge according to metered usage.

4. The substantive proceedings raise various questions as to the nature and extent of Metrowater's obligations to supply the appellants with water and provide for the removal of their waste water.   On a pre‑trial application Salmon J concluded that water arguably fell within the meaning of "goods" for the purposes of the Act and that there was no doubt that both those related activities of Metrowater came within the definition of "services".

The statutory provisions

1. Section 53 of the Commerce Act provides for the control of "the prices for goods or services specified in the [Order in Council]".   "Goods" and "services" are defined in s2, in each case as including matters listed, and not exhaustively.

   "Goods" includes--

   (a) Ships, aircraft, and vehicles:

   (b) Animals, including fish:

   (c) Minerals, trees, and crops, whether on, under, or attached to land or not:

   (d) Gas and electricity:

The relevant part of the definition of "services" reads:

"Services" includes any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges, or facilities that are or are to be provided, granted, or conferred in trade;  ...

And "trade" is defined as meaning "any trade, business, industry, profession, occupation, activity of commerce, or undertaking relating to the supply or acquisition of goods or services".

Discussion

1. Paragraphs (a) to (d) of the definition of "goods" were no doubt specified to remove any arguments that might otherwise arise as to whether those items were intended to be within the reach of the Commerce Act.   In general usage, the word "goods" itself is employed in different senses and the precise content of the expression may differ according to the context in which it is used.   In a statute directed to the promotion of competition in markets and in the context of the control of prices for goods and services, the expression must encompass the standard, broad dictionary meaning of merchandise, commodities, moveable property.   The water in question clearly answers that description.   And it was purchased in bulk by Metrowater from Watercare and distributed to Metrowater's customers.   Waste water, including sewerage, also comes within that description.   In Sweetway Sanitary Cleansers Ltd v Bradley [1962] 2 QB 108, 113, the Court of Appeal had no difficulty in concluding that effluent from a septic tank pumped out and carried away by a carrier constituted goods for the purposes of the Road and Rail Traffic Act 1933, the statutory definition there including within that term "goods or burden of any description".

2. Again, both elements, the supply of water and the removal of waste water, come squarely within the definition of "services" as "benefits ... or facilities ... provided ... in trade" where that latter term "trade" is in turn defined as including "activity of commerce or undertaking relating to the supply or acquisition of goods or services".   Clearly, they are commercial activities conducted by a local authority trading enterprise which is charged to operate as a successful business (s594Q).

Result

1. The appeal is dismissed with costs to Metrowater of $5,000 together with all reasonable disbursements including the travel and any accommodation expenses of one counsel.

Solicitors
Vallant Hooker & Partners, Auckland, for appellants
Chapman Tripp, Auckland, for respondent