Telecom New Zealand Limited v Commerce Commission HC Auckland Civ-2004-404-5417
[2005] NZHC 1669
•8 April 2005
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2004-404-005417
UNDER
AND UNDER
the Judicature Act 1908
the Declaratory Judgments Act 1908
IN THE MATTER OF
the Telecommunications Act 2001
BETWEEN
TELECOM NEW ZEALAND LTD
Plaintiff
AND
THE COMMERCE COMMISSION
First Defendant
AND
TELSTRACLEAR LTD
Second Defendant
Hearing:
16 February 2005
Appearances: Jack Hodder and Briony Davies for Plaintiff
Robert Dobson QC and Jason McHerron for First Defendant James Farmer QC and Ralph Simpson for Second Defendant
Judgment: 8 April 2005
JUDGMENT OF HARRISON J
In accordance with R540(4) I direct that the Registrar endorse this judgment with the delivery time of 4.30 p.m. on 8 April 2005
SOLICITORS
Chapman Tripp (Wellington) for Plaintiff
Crown Law Office (Wellington) for First Defendant Bell Gully (Auckland) for Second Defendant
COUNSEL
James Farmer QC (Auckland); Robert Dobson QC (Wellington)
TELECOM NEW ZEALAND LTD V THE COMMERCE COMMISSION And Anor HC AK CIV-2004-404- 005417 []
Introduction
[1] The Telecommunications Act 2001 regulates the supply of telecommunications services in New Zealand. Principally it provides a regime for the Commerce Commission to determine the terms on which a designated access service, one that enables or facilitates a telecommunication, must be supplied. The Commission’s determination on all terms other than price is final, subject to rights of appeal; but its determination on price is subject if requested to its own review mechanism, and then to appeal.
[2] The primary question here is whether what is known as the Commission’s pricing review determination takes effect from its date of delivery or preparation, or from the earlier date of its first or initial determination (the s 27 determination). Telecom’s application for declaratory relief is generated by the Act’s silence on this point. The question’s jurisdictional and practical importance is reflected by events since May 2002. The Commission has made three s 27 determinations, the first in November 2002. Telecom and TelstraClear have sought pricing review determinations of all three. However, the Commission has yet to deliver any determinations. In the interim, the terms of two s 27 determinations have expired and the term of the third is due to expire on 14 December 2005.
[3] Telecom asserts that the three pricing review determinations when made will only take effect from the dates of delivery. As an inevitable consequence, they will be ineffective and of academic interest only for the two terms of supply which have already expired and of limited effect for the one remaining alive. That result may be startling, even heretical, to Parliament and those like the Commission and TelstraClear who adhere to the purposive school of statutory interpretation. However, Telecom submits that judicial endorsement of the contrary proposition, namely that a pricing review determination may take effect from the same date as the s 27 determination (what it describes as backdating) and thus through an expired term, is equally repugnant in that it is contrary to the terms of the statute and offends the prohibition on retrospectivity. These two extremes set the parameters for argument.
[4] Two related or subsidiary questions are, first, whether the Commission can set an expiry date for its pricing review determination different from the s 27 determination on all non price terms and, second, whether the Commission has power to make a pricing review determination where the s 27 determination has expired.
[5] All counsel agreed that an application for declaratory relief was the appropriate means of resolving these questions rather than by seeking for judicial review or stating a case. The material facts are not in dispute. The essential issues are of statutory interpretation. Any declarations will be of practical and not academic effect, will be just and expedient, and will assist the Commission and the parties in future dealings. I sense, though, on this last point, that my decision will serve simply as the requisite first stepping stone for further challenge by the disaffected party.
[6] I shall start by reviewing the statutory background and framework before considering each of the three declarations sought by Telecom.
Background
[7] Telecom is a telecommunications network operator, and a wholesaler and retailer of telecommunications services – that is, of goods, services, equipment and facilities that enable or facilitate telecommunication. TelstraClear provides telecommunications services. Their competitive status in that industry does not require elaboration. The Commission is the body charged with making determinations under the Act.
[8] The Telecommunications Act was introduced following publication of the final report of a Ministerial Inquiry into Telecommunications dated 27 September 2000, known as the Fletcher Report. That report was followed by a report on the Telecommunications Bill prepared by the Commerce Committee of the House of Representatives and by its Explanatory Note on the Bill. All three documents provide an informative backdrop for consideration of these issues.
[9] The Committee’s general policy statement in its Explanatory Note described the main object of Part 2 of the Bill as “to promote efficient telecommunications markets for the long term benefit of end users of telecommunication services”. It then outlined the three ways in which this object was to be achieved:
Firstly, the telecommunications industry is encouraged to reach commercially negotiated agreements where possible.
Secondly, the supply of certain telecommunication services to service providers is regulated where regulation will result, or is most likely to result, in net economic benefits to New Zealand. Certain telecommunication services may be classified as either designated services (which includes designated access services and designated multi network services) or specified services. The access provider of any of those kinds of services must provide the service to an access seeker. An access seeker or an access provider may apply, in certain circumstances, to the Commission for a determination on terms and conditions of access to that service. The determination procedure has the effect of providing a regulatory backstop that will enable disputes over access to those regulated services to be quickly resolved in the event that agreement over key terms cannot be reached.
Thirdly, the position of a new specialist telecommunications commissioner is established within the Commission. The telecommunications commissioner’s main functions will be to make determinations on disputes over designated services and on specified services in accordance with the processes set out in part 2…
[10] The Fletcher Committee recommended inclusion of a dispute resolution procedure within the regulatory regime, to be initiated after the Commission’s facilitation of commercial negotiations wherever possible. The Committee recommended that the Commission’s determination procedure include a right to review price only, noting (47):
It is important that services be priced efficiently so that an access seeker can make appropriate decisions about whether to purchase a service or build its own network to provide the service. While efficient prices are best delivered through a highly competitive market, for a number of electronic communication services this degree of competition may not exist. Where this is the case, and where there may be rational incentives for service providers to price services above efficient levels, pricing principles, with a regulatory backstop, can play a key role in achieving efficient use of, and the efficient investment in, the infrastructure by which electronic communication services are supplied.
The initial determination and (if required) the pricing review determination may require different pricing principles, because it may not be possible to apply a certain type of pricing principle within the timeframe that the initial determination has to be made. This is not a shortcoming of the regime, but rather a design feature to ensure that an
appropriate pricing principle can be applied in the first instance to disputes to be resolved expeditiously. The initial determination would ideally get sufficiently close to the ‘efficient’ price so that both parties accept the determination and decide not to progress to the (longer and more costly) pricing review determination.
[My emphasis]
[11] Later the Fletcher Committee recommended that the Commission apply different pricing principles at both the initial and pricing review determination stages. At the initial determination stage it proposed (68):
Using benchmarking [against] … OECD countries that regulate such services using a TSLRIC type methodology and that do not have a state owned encumbent… A benchmarking approach would give a range of prices that could be ranked from lowest to highest by country, or as in the United States, by operator/state. A judgment would then be required as to where New Zealand should, at any time, fit within the ranking. The inquiry recommends that this judgment be made by the Commissioner on the basis of his/her best estimate of where New Zealand would fall if a full TSLRIC assessment were undertaken. This is consistent with the earlier expressed view that the Initial Pricing Principle should be a proxy for the pricing principle to be used in the pricing review determination. This is to minimise the difference in result and prices, both to achieve efficient pricing and to reduce the likelihood of a party seeking a pricing review determination.
At the pricing review determination stage the Committee recommended that (68):
… the appropriate pricing principle would be a full TSLRIC assessment of the efficient costs incurred by an operator using the most efficient means at any point in time to provide a service…
[12] The recommendations made by both the Fletcher and Commerce Committees were incorporated in the Act. Its stated purpose (s 18):
(1)… is to promote competition in telecommunications markets for the long term benefit of end users of telecommunication services within New Zealand by regulating, and providing for the regulation of, the supply of certain telecommunication services between service providers.
(2)In determining whether or not, or the extent to which, any act or omission will result, or will be likely to result, in competition in telecommunications markets for the long term benefit of end users of telecommunication services within New Zealand, the efficiencies that will result, or will be likely to result, from that act or omission must be considered.
[13] The Act then allows either an access seeker or access provider of a designated access service to apply to the Commission to determine terms on which the service must be supplied including the price payable (s 20(1)). A party is prohibited from applying for a determination if, among other things, it is a party to an agreement for supply of the service, has agreed not to have any term of supply determined by the Commission, or has not made reasonable attempts to negotiate terms of supply with the other party (s 22(2)). The Commission must give notice of receipt of an application (s 24) and then decide whether or not to investigate (s 25), and is obliged to prepare a determination after investigation (s 27) within certain timeframes (s 28). The determination must be made in accordance with “the applicable access principles” and, where it relates to a designated access service, must be made in accordance with “the applicable initial pricing principle” (s 29). Those initial pricing principles are fully set out in Part 2, Schedule 1, depending on the type of designated access service under consideration. Finally, the Act prescribes certain matters which must be included within a determination such as the terms on which the service must be supplied and the expiry date of the determination (s 30).
[14] A party’s right of review of “the price payable for a designated access service” made pursuant to a s 27 determination is set out separately (s 42). Certain requirements for the application (s 43) and for the Commission (s 44) are provided. The Commission is bound “as soon as practicable” after receiving an application to prepare a draft pricing review determination (ss 47 and 48). The matters for inclusion in the draft (s 49) and final determinations are also set out (ss 51 and 52). Specifically the price payable according to the review determination is to be fixed in accordance with the applicable final pricing principle which is also specifically defined in Part 2, Schedule 1.
[15] The Act empowers the Commission to amend a determination for the purposes of making a clarification (s 58) or to reconsider a determination (s 59). Parties have rights of appeal to the High Court against a determination on a question of law (s 60) but the determination continues to have effect and is enforceable until disposal of the appeal (s 60(3)). A party is entitled to enforce a determination by filing it in the High Court where it becomes enforceable as a judgment (s 61). A determination is enforceable from the date of public notice until expiry (s 61(3)).
[16] I agree with Messrs Jim Farmer QC and Ralph Simpson for TelstraClear that the initial determination process allows an access seeker to gain access to a designated access service within a comparatively short timeframe. It provides a fast track for the Commission to determine price and non price terms in accordance with fixed methodologies. It avoids the delays associated with application of the more complex, although presumably more reliable and authoritative, pricing principles invoked at the later stage of the pricing review determination. As Messrs Robert Dobson QC and Jason McHerron for the Commission pointed out, that second exercise requires careful analysis and modelling of the service provider’s efficient costs. The two stage process on price accords with the spirit of the recommendations made by both investigating committees.
[17] As noted, to date the parties have made three applications to the Commission. On 16 and 17 May 2002 respectively TelstraClear and Telecom lodged interconnection applications. On 5 November 2002 the Commission issued its s 27 determination. It is a complex document; the substantive decision totals 45 pages together with a further 14 pages of appendices. The determination records the parties’ joint agreement on a date of its inception or effect from 1 June 2002 (paras 190 and 191). The Commission itself set an expiry date for 5 November 2003 (para 192).
[18] Telecom and TelstraClear filed interconnection pricing review applications on 15 and 26 November 2002 respectively. Over two years have now passed but the Commission has not yet delivered its pricing review determination. As noted, the s 27 determination expired on 5 November 2003. On 31 March 2004 Telecom fired its first shot across the Commission’s bows. It wrote:
The Commission currently has before it applications by Telecom and TelstraClear for price review of the initial interconnection price. The Commission will be aware that the initial determination underpinning these applications expired on 5 November 2003. Having considered the current situation, Telecom is of the view that the Telecommunications Act does not empower or intend the Commission to ‘backdate’ results of a price review, and, further, that the term of any final determination cannot extend beyond the term of the initial determination. This means that the price review applications of Telecom and TelstraClear are now of no effect. This was obviously not the desired outcome of either party, and is simply the result of more pressing aspects of the Telecommunications Act regime taking precedence…
[19] By letter dated 2 April 2004 the Commission expressed disagreement with Telecom’s proposition. The parties then exchanged further correspondence on the subject. On 5 May 2004 the Commission provided an indicative timetable for the pricing review to conclude with a final determination some time between September and November 2004. On 5 October 2004 Telecom filed this application.
[20] At first blush the Commission’s inability to produce an interconnection pricing review determination is extraordinary. However, both the Fletcher and Commerce Committees foresaw this contingency. The latter noted that ‘the potential complexity of a pricing review determination means that it may take a long time to resolve’ (10). The Fletcher Committee observed (68):
… cost based models (e.g. TSLRIC) are complex and take considerable time to develop. In addition, they require numerous assumptions on which there can be legitimate differences of opinion. Thus, not only can cost based modelling be expensive and take considerable time to complete, but agreement about the appropriate interconnection and data tail access prices deriving from such models can be difficult.
[21] All counsel, speaking with the benefit of experience in this area, confirmed these observations. Messrs Farmer and Simpson summarised a range of additional and time consuming commitments made on the Commission’s time and resources by other events falling within its jurisdiction, in particular a series of investigations and applications. In November 2004 the Commission advised TelstraClear that its draft pricing review determination would not be available before 31 January 2005. It has still to materialise.
First Declaration
(a)Statutory Interpretation
[22] First, Telecom seeks a declaration that a pricing review determination relating to a designated service and made after an earlier s 27 determination, which includes provision for the price payable for the designated service, cannot include a commencement date earlier than the date of public notice of its making.
[23] I do not know whether the Act’s silence about the operative date of a pricing review determination is intentional or accidental. Whatever is the case, there is a certain attraction in the submissions made for TelstraClear and the Commission. Messrs Farmer and Simpson contend that TelstraClear’s statutory rights of review will be rendered largely inoperative by acceptance of Telecom’s argument that the pricing review determination commences when it is publicly notified and cannot expire after the initial determination date. Messrs Dobson and McHerron acknowledged that such a result would substantially frustrate the aims of the statute, and work an injustice against a party advantaged by the terms of a pricing review determination where the Commission’s delays are beyond the party’s control. Mr Jack Hodder for Telecom conceded , not without euphemism, that acceptance of its challenge carried what he described as “the potential for the erosion of the value of a pricing review determination”, tempered by an assertion that a s 27 determination at a probable price would achieve the core statutory object of providing access. That qualification does not, of course, answer the point. The Courts have long adopted a purposive approach to interpreting legislation, to avoid an absurd result – one that is “unworkable or impracticable, inconvenient, anomalous or illogical, futile or pointless, artificial, or productive of a disproportionate counter- mischief” (Frucor Beverages Ltd v Rio Beverages Ltd [2001] 2 NZLR 604 (CA) per Thomas and Blanchard JJ at para 28; see also Nunns v Licensing Control Commission [1967] NZLR 730 (CA) per McCarthy J at 745). A ‘practical and realistic’ interpretation is required (R v Salmond [1992] 3 NZLR 8 (CA) per Cooke P at 13).
[24] The principal submission advanced by Mr Hodder and Ms Briony Davies was that the statutory context demonstrates Parliament did not intend backdating of pricing review determinations. He accepted that the Act did not expressly address the Commission’s power to provide an operative date for a pricing review determination earlier than its public notification. He referred to the language of s51(2) as evidence of a progressive, not retrospective, timing of alteration of a s 27 determination by a pricing review determination. s51(2) recites:
To avoid doubt, a determination made under section 27 continues to have effect and is enforceable to the extent that it has not been altered by a pricing review determination.
[25] Mr Hodder made his ‘fundamental point’ that the Act gives a s 27 determination prompt powerful effect, enforceable as a judgment of the Court and not susceptible to stay (s60(3)). The determination has that effect absolutely for both price and non price terms unless and until it is altered by a pricing review determination. Mr Hodder submitted that the pricing review determination has the same powerful effect but is not based upon an error in the s27 determination and does not revoke the lawfulness of what was required to be done under it prior to making the pricing review determination. He also contended that the description of ‘initial’ (‘of or at the beginning’) rather than ‘interim’ (‘temporary or provisional’) pricing principles was also significant.
[26] With respect, I cannot follow how this submission assists Telecom’s case. It does not lead anywhere. The purpose of the enforcement provisions is obvious. They are designed to ensure that the parties are immediately bound by all terms of supply struck by the s 27 determination, so that one party cannot rely upon the existence of the pricing review application to constitute a stay or suspension of its price obligations pending a final determination. As already noted, when passing the statute Parliament was aware of the delays likely to be inherent in the pricing review process. A stay of any terms in the interim period would make a nonsense of the s27 determination.
[27] The mirror terms of ss42 and 51 are nothing more than Parliament’s statement in reinforcement of the same fundamental message; all terms are enforceable from the dates of the relevant determinations. But while confirming the obvious – that a s27 determination ‘is enforceable to the extent that it has not been altered’ and that it no longer has any legal effect following an alteration to terms brought about by a pricing review determination – s51(2) does not specify the date from which that alteration becomes operative. However, by implication it suggests that the Commission would provide for both determinations, which are effectively merged into one when the second is delivered, to take effect from the same date. That date is set by the s27 determination, which is the foundation judicial instrument. I agree with Messrs Farmer and Simpson that, where the only alteration brought about by the pricing review determination is to replace the initial price with a
different final price, the remainder of the s 27 determination remains unchanged including, of course, the operative date.
[28] In my judgment, a number of other provisions support this conclusion. The question is one of jurisdiction, to be answered by analysing the nature and extent of the Commission’s statutory powers. S20(1) recites:
An access seeker or an access provider of a designated access service or specified service may apply to the Commission for a determination of all or some of the terms on which the service must be supplied during the period of time specified in the application.
Those terms may include ‘the price payable by the access seeker for the service’ (s 20(2)). That phrase or something very similar is used throughout the Act (ss 42, 45, 48, 49 and 51).
[29] A review of the price ‘to be paid’ could only relate to the price fixed by the s 27 determination for a defined period. The Commission is not constrained by the period of time fixed by the applicant; it is empowered to determine the terms of supply and expiry date (s 30). It does not matter whether the prices fixed by each determination are the result of applying different methodologies, or whether the second does not constitute a finding that the first was wrong. What matters most is that, as Mr Hodder conceded, the two determinations are separate judicial instruments, and that the pricing review determination extinguishes and replaces the s 27 determination on price and related terms. It has that effect because it reviews the amount of ‘the price [initially fixed] to be paid for the service’ (s42(1)).
[30] The s 27 interconnection determination provides an example. The Commission calculated a price of $1.13 for origination and termination of Telecom’s fixed PSTN for a defined term from 1 June 2002 to 5 November 2003. It is now reviewing that term. The Commission’s power to review the price must of necessity encompass the period from inception to expiry. Mr Hodder did not suggest that the review would apply to any other time span, and nor could it. There would be no commercial or legal sense in applying different commencement dates for the two determinations where one is a process of reviewing the price fixed by the other for a specified period of service.
[31] Accordingly, the term of a pricing review determination would have to take effect from the inception date of the s 27 determination unless the Commission within its powers decided that another date was appropriate (s 52). This is entirely consistent with the Commission’s power when preparing the draft pricing review determination to consider matters included in a s 27 determination ‘that relate to the price payable for the designated access service’ (s 48(b)), and to make a determination in respect of them. In exercising this power the Commission would be considering terms that relate to or bear upon price for the same period.
[32] Mr Hodder sought support for his principal submission on statutory interpretation in two other areas. First, he submitted it was telling that Parliament had omitted to provide a mechanism for an access seeker to recover overpayments or an access provider to recover underpayments made according to a s 27 determination if the pricing review determination was to take effect from the same date. In his submission an explicit recovery mechanism would be essential if the Act were to be construed to permit the Commission to stipulate an earlier operative date for a pricing review determination.
[33] Mr Hodder gave a multi-staged example. Its essence was that, as a consequence of a pricing review determination taking effect from an earlier date, an access seeker had paid less than was necessary for the service for the period between the dates of commencement of the s 27 determination and making of the pricing review determination. The access provider could require the seeker to pay the new price going forward by enforcing the pricing review determination as a High Court judgment from the date of its delivery. However, the provider had no means of requiring the seeker to pay the money it had underpaid in the interim because at the time of payment the money was lawfully paid pursuant with what was and may have been enforced as a High Court judgment. He submitted that it defied credibility that the provider could enforce two separate price terms for the same period, each as a High Court judgment.
[34] I do not discern anything defying credibility in this example. It seems entirely consistent with the review regime where the final price is fixed by applying a different methodology. As noted, a s 27 determination continues to have effect and
is enforceable pending the making of a pricing review determination (s 42(2)) and to the extent that it is not altered by it (s 51(2)). The fact that the seeker has paid monies lawfully in accordance with the equivalent of a High Court judgment for a certain period does not operate as a bar against the provider later enforcing payment of an additional or differential sum as required by a subsequent or replacement judgment for the same period. Mr Hodder did not raise, for example, the existence of an estoppel or identify any other legal barrier to enforcement. This argument would require a principled basis, more than an appeal to notions of credibility, to succeed.
[35] Alternatively, Mr Hodder raised the spectre of the pricing review determination reducing the price payable by the access seeker from the inception date of the s 27 determination. In this event, he submitted, there was no mechanism to recover overpayments. A restitutionary remedy only assists where one party has benefited unjustly at the other’s expense. An overpayment made as a result of a legal process cannot usually be recovered through restitution if there is no unjust benefit, and neither is the s 27 determination reversed as a judgment on appeal might be. Mr Hodder cited in support this passage from Halsbury’s Laws of England, 4th ed., Vol. 40(2) at para 1346:
Money paid under compulsion of properly applied legal process cannot be recovered in a claim for restitution. Thus money paid in pursuance of a judgment is not recoverable, even if it was paid under a mistake of fact and the judgment was obtained fraudulently, unless and until the judgment has been set aside.
[My emphasis]
[36] It is not my function in an exercise on statutory interpretation to attempt a definitive analysis of the availability of a restitutionary right as if I were deciding a money claim. However, I repeat Mr Hodder’s acknowledgement that the pricing review determination supersedes or extinguishes the s 27 determination on price. In terms of Halsbury’s statement of the law, this process is analogous to setting aside the earlier determination or judgment. Orthodox restitutionary principles should then apply. An access provider who refuses to repay the amount overpaid by the seeker is unjustly enriched, not by the original determination, but by retaining the
amount which the substitute determination says it is not entitled to retain. That conduct would be unconscionable.
[37] In any event, I agree with Messrs Farmer and Simpson. The practical means of resolving this question would be for the Commission, when delivering its pricing review determination, to impose a condition for repayment by the provider (s 52(b)). Such a condition, including payment of interest, would be intra vires the Commission’s powers unless is elected to exercise rights of appeal. The provider in this example could not complain that it was unfair or unjust. More likely, parties like Telecom and TelstraClear would agree on a mechanism for this purpose. Mr Hodder cited the statute’s emphasis upon dialogue; for example, a party is prohibited from making an application unless it has made reasonable terms to negotiate the terms of supply of the service with the other party (s 22(c). Co-operation, rather than recourse to the law of restitution, must characterise their ongoing relationship. The s 27 interconnection determination gives an example; appendix 2 provides (para 5.2):
Each party agrees to waive any right it may have to receive a retrospective adjustment which would otherwise be required to be made under these terms for the period up to the commencement date [1 June 2002]. For the avoidance of doubt, the parties will still be bound by the obligations to make retrospective adjustments required by these terms for the period on and from the commencement date until (but not including) the determination date.
[38] The statute’s silence on recovery mechanisms may reflect a legislative presumption that common and commercial sense would prevail in this way.
[39] Second, Mr Hodder relied on the statutory provision for an appeal against a s 27 determination contemporaneously with preparation of the pricing review determination (s 60(1)(b)). A party may appeal a s 27 determination on a question of law but until disposal the determination continues to have effect and is enforceable (s 60(3)). Accordingly, Mr Hodder submitted, the appeal process would be rendered redundant if the pricing review determination was to supersede the s 27 determination for the period back to the commencement date.
[40] I disagree. The right of appeal applies to all terms and conditions of a s 27 determination. A disaffected party may elect both to appeal and apply to review a
s 27 determination on price. The High Court might find that the price is excessive due to an error of law. In that event, an adjustment will take effect from the date of the s 27 determination, whatever is the outcome of the pricing review determination. It may or may not later be altered by the pricing review determination. As Messrs Farmer and Simpson noted, the result may simply alter the cashflow burden. In my judgment, though, it does not render the right of appeal redundant.
(b) Retrospectivity
[41] Separately, Mr Hodder relied upon the well known general proscription against retrospective operation of the law – “an enactment does not have retrospective effect” (s 7 Interpretation Act 1999) – based upon the presumption that Parliament does not intend to act unjustly or unfairly by altering the rules while an event is still in progress (Bennion: Statutory Interpretation, 4th Ed., p689). He submitted that retrospective price orders undermine the efficient functioning of the market and regulatory regime. They would hinder business planning and commercial certainty where, for example, market participants wished to enter into transactions prior to pricing review determinations being made. This prospect would ‘hang over the market’. Also, Mr Hodder referred to the obligations imposed upon Telecom and other listed carriers to comply with statutory financial reporting requirements on which others rely to make investments and business decisions, and the companies themselves rely to monitor their own performance. He painted a gloomy prognosis of a pervasive lack of commercial confidence, due solely to this statutory contingency.
[42] In my judgment Mr Hodder’s retrospectivity argument is misconceived. It confuses an inquiry into the existence of statutory power or jurisdiction with a canon of construction that a statute should operate from the date of its enactment, to avoid an adverse effect on pre-existing rights or obligations. The starting point is that, providing an act is within the decision maker’s statutory power, the fact that it takes effect from a date earlier than the date of the decision does not of itself lead to invalidity (Bank of New Zealand v Board of Management of the Bank of New Zealand Officers’ Provident Association [2004] 1 NZLR 577 (PC) per Lord
Walker at para 26). This case is not about the date from which a statute takes effect; it is about the date, of necessity some time afterwards, when a determination made under it becomes effective.
[43] I have already found that the Commissioner has a statutory power to make a pricing review determination effective from the date of the s 27 determination. Powers of this nature are common to judicial decision makers. For example, a Court has a discretionary power to award interest on an award of damages from an earlier date (“when the cause of action arose”) (s87(1) Judicature Act 1908). Often that commencement date is when proceedings are filed. Where awarded on a compounding or market basis, interest will often amount to a substantial portion of the total judgment sum. The relief now available under the Judicature Amendment Act 1972 frequently if not always takes effect from a date earlier than judgment. It is all a question of jurisdiction determined by reference to its statutory source.
[44] Mr Hodder sought assistance from Telecom’s letter to the Commission dated 30 April 2004 which asserted among other things:
For instance, both Telecom and other carriers have relied on the initial price as a reference point when entering into commercially negotiated interconnection agreements. These agreements do not allow for retrospective adjustment. This reflects the commercial importance of certainty…
[My emphasis]
[45] However, the force of this argument was itself undermined, if not destroyed, by Messrs Farmer and Simpson’s uncontested advice that on all three s 27 determinations made by the Commission which are subject to review, both Telecom and TelstraClear gave final undertakings to make retrospective adjustments (with interest) for any overpayments or underpayments arising through that process.
[46] I cannot help but conclude that Telecom has overplayed its hand on unfairness. Submission to all judicial processes, whether originating or on review, carries an element of uncertainty for the participants. One or more must make an adjustment to its affairs following the final result. Large corporations employ sophisticated financial mechanisms for reserving against adverse contingencies.
Telecom, for example, must itself have the ability and capacity to forecast with accuracy the likely price to be fixed by the Commission on a pricing review determination. It is aware of the Commission’s power to require the access provider to submit its own calculation of the price payable for the designated access service (s 45(1)), and its obligation to reply within a time fixed by the Commission with its calculation made in accordance with ‘the applicable final pricing principle’ including a statement about how the price was calculated and all information on which the calculation was based (s 45(2)). And despite Mr Hodder’s prognosis of a market undermined by a lack of certainty and competence, the deterrent effect of a pricing review determination operative from an earlier date is not immediately apparent. The documents tendered in support of this application do not suggest that Telecom is an unwilling or reluctant participant to the three applications submitted to the Commission for determination thus far.
[47] It follows that I decline to make the first declaration sought by Telecom. The Commission and TelstraClear have not counterclaimed for declaratory relief. However, if they had taken that step, I would have made a declaration in the same terms sought by Telecom but to the opposite effect by substituting the word ‘can’ for ‘cannot’ in the penultimate line of the application.
Second Declaration
[48] Second, Telecom seeks a declaration that a pricing review determination relating to a designated service made under s 51, after an earlier s 27 determination which includes provision for the price payable for the designated service, cannot amend the expiry date or include an expiry date other than that included in the s 27 determination.
[49] Mr Hodder separately submitted that the Commission cannot in a pricing review determination amend the expiry date of a s 27 determination. He characterised the logic of the enactment relating to this question as ‘straightforward’; that is, a pricing review application deals only with price whereas a s 27 determination prescribes the terms of access to services, both price and non price terms. By contrast, he submitted a pricing review determination may prescribe a
different price term but not different non price terms (s 42). The expiry date of a s 27 determination is a non price term. The statutory references to an expiry date being included in the pricing review determination (ss 49(f) and 52(f)) are necessary to avoid the gap which might otherwise exist relating to an originating pricing review application. These provisions simply reflect the fact that there may be no s 27 determination when the initial application for determination relates only to price. Accordingly, where a s 27 determination is already in place, such that the pricing review determination must operate in tandem with the non price terms in it (as both are enforceable together), the only expiry date for the pricing review determination which makes sense is the expiry date of the underlying s 27 determination. Otherwise the parties would have a price, but no terms of service.
[50] With respect, the problem with this submission is its subtlety, and that its acceptance requires me to treat statutory provisions as if they did not exist. The Commission is expressly empowered to fix the expiry date of its pricing review determination (ss 49(f) and 52(f)). The power is unconditional. The Act does not stipulate that the expiry date must be the expiry date of the s 27 determination. Messrs Farmer and Simpson may be correct that the jurisdiction to set a new expiry date is a statutory recognition that the time and resources expended in the complex and lengthy process of making a pricing review determination should be reflected in a right to extend the term in order to maximise the benefits derived from that work, thereby deterring unnecessarily frequent applications on a rolling basis.
[51] More specifically, the fact that a s 27 determination continues to have effect and is enforceable to the extent that it has not been altered by a pricing review determination implies that when carrying out the latter process the Commission is not restricted solely to the specific question of price but may alter related terms. This is consistent with the Commission’s jurisdiction to consider any matters included in ‘[a s 27 determination] that relate to the price payable for the designated access service’ (s 48(b)), and to make a determination accordingly. The expiry date may be such a matter. As Mr Dobson pointed out, in practical terms the amount of the final price may be influenced by the period of supply. In my judgment, the term of the determination falls squarely within the scope of this provision.
[52] It follows that I disagree with Mr Hodder that the Commission’s power to make a determination on matters ‘that relate to the price to be paid for the service’ (s 42(1)) or ‘to the price payable’ (s 48(b)) must be read subject to a gloss of relating directly to price. That is not what the Act says, and the rationale advanced by Messrs Farmer and Simpson for an unfettered construction of the power to fix an expiry date of the determination is, in my view, consistent with the purpose of the pricing review mechanism; it is not a process to be treated in isolation from other terms which may bear upon it.
[53] Thus, I decline to make the second declaration sought by Telecom. Again the other parties have not counterclaimed for relief. However, if they had done so, I would have made declarations by substituting the word ‘can’ for the word ‘cannot’ where it appears in both the ante and penultimate lines of Telecom’s application.
Third Declaration
[54] Third, Telecom seeks a declaration that a pricing review determination relating to a designated service cannot be made under s 51 after the expiry date included in an earlier s 27 determination which includes provision for the price payable for the designated service.
[55] Mr Hodder did not address separate submissions in support of this application. He simply asserted that this third declaration followed ‘as a matter of application’ from the second. Thus, as the second application has failed, the third must suffer the same fate. Accordingly, I dismiss it.
Conclusion
[56] In the result, I dismiss Telecom’s application for declaratory relief. Both the Commission and TelstraClear are entitled to costs. I assume that counsel will be able to agree; costs for two counsel for each defendant according to category 2B appear to be the appropriate measure. However, if the parties are unable to agree, I direct the Commission and TelstraClear to file memoranda within 21 days, and
Telecom to file a memorandum in answer within a further 14 days. I do not want memoranda in reply.
[57] I regret the length of this judgment, which is more a recognition of the ingenuity of the submissions ably advanced by Mr Hodder and Ms Davies than of any doubt about the correct result. They were unable to overcome my resistance to an argument which strained to reach an absurd result by frustrating a central purpose of the Telecommunications Act. I wish to express my appreciation also for the quality of the submissions by Messrs Farmer and Simpson for TelstraClear, and Messrs Dobson and McHerron for the Commission.
Rhys Harrison J
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