Transpower New Zealand Limited v Meridian Energy Limited HC Auckland Cl 45/99 - [2001] NZHC 460

IN THE HIGH COURT OF NEW ZEALAND CL 45/99
AUCKLAND REGISTRY

BETWEEN TRANSPOWER NEW ZEALAND LIMITED
Plaintiff

AND MERIDIAN ENERGY LIMITED
Defendant

Hearing 26, 27, 28, 29, 30 March, 2, 3, 5, April 2001

Counsel: J.A. Farmer QC, A.M. Callinan & J.A. Craig for Plaintiff
R.J. Craddock QC, J.S. Kos & S.M. Hunter for Defendant

Judgment: 6 June 2001

RESERVED JUDGMENT OF FISHER J

Introduction

[1] Transpower and Meridian are state-owned enterprises. Transpower is the owner and operator of the national electricity transmission grid. Meridian is a generator of electricity and user of the grid. Transpower sues Meridian for $70.6 million in unpaid transmission charges said to be due under a contract with Meridian. Meridian denies the existence of any such contract.

[2] The principal question is a contractual one that arises where one party offers a benefit to another on stated terms. Can the offeree argue that it is not contractually bound if it takes the benefit while clearly rejecting the terms? I have concluded that as a general principle it can, and that in consequence Meridian is not bound by the suggested contract upon which Transpower sues. Transpower could have sued in quantum meruit but elected not to do so. There are no background features of a legislative or regulatory nature which require a different outcome.

Electricity distribution system

[3] New Zealand’s power stations are spread throughout the country. They are owned by legal entities conveniently referred to as “Generators”. The major Generators feed most of their electricity into the national grid. Meridian is New Zealand’s largest Generator, providing 28 percent of the country’s generation capacity.

[4] The national grid connects approximately 40 major power stations to several major direct supply customers and about 30 distribution companies (“Distributors”). The Distributors provide transmission to consumers within local regional areas under contract to retailers. The retailers purchase electricity on the wholesale market and on-sell it to the retail customers. The New Zealand electricity market (NZEM) is a voluntary one in which Generators make offers to the market specifying the price and quantity. Retailers place bids specifying the price and quantities at which they are willing to buy. Upon acceptance of an offer of electricity the NZEM advises Transpower. Acting in its role as a dispatcher Transpower uses electronic means to draw the required measure of electricity from a Generator and supply equivalent electricity to a purchaser. Generators can also use the national grid to sell electricity bilaterally outside the NZEM.

[5] The predominant form in which electricity is passed through the national grid is high voltage alternating current (HVAC). An exception is the high voltage direct current cable linking the North and South Islands (the HVDC link). The only way of supplying electricity from the South Island to the North island is via the HVDC link. It costs more to supply electricity via the HVDC link. Consequently it is cheaper to supply a consumer in the North Island from a North Island Generator. The incidence of charges for the extra cost of the HVDC link has always been controversial.

Transpower

[6] In the 1990s there was a movement to divide the provision of energy and transmission services between separate economic entities. In consequence in 1994 Transpower was formed as a state-owned enterprise to own and operate the national grid. The Electricity Corporation of New Zealand (ECNZ) initially continued as a state-owned enterprise generating electricity but its functions were then progressively devolved to individual state-owned enterprise Generators, Contact Energy in 1995 and later Meridian, Mighty River and Genesis on 1 April 1999.

[7] Transpower does not generate electricity, own local electricity distribution networks, or trade in electricity in any usual sense. It owns and operates only the national grid. That gives it a central co-ordinating role in transmitting electricity between other players in the electricity industry. In more detail this includes the purchase of common quality services from Generators and other industry participants, scheduling the production of electricity from power stations, despatching electricity between participants through the use of its own control centres, monitoring the network to ensure that voltage and frequency targets are met, and managing grid emergencies to maintain short-term security of electricity supply in the country.

[8] Transpower offers its services by contract. The contracts include a set of standard terms designed to govern the conditions under which the services will be provided - physical connection to the grid, nature of the services provided by the connection, co-ordination of generation and offtake, instantaneous reserves, frequency keeping and voltage support, customer observance of conditions designed to preserve adequate standards and security, and distribution of excess payments received by Transpower through the wholesale electricity market.

[9] In the contracts the customer agrees to pay for Transpower’s services. The payments are broken down into a connection charge for use of the grid for injection (for Generators) or peak demand (for offtake), an interconnection charge intended to recover an appropriate portion of the HDAC assets revenue requirement for offtake customers, and, for some, an HVDC charge intended to recover the costs associated with the HVDC inter-island transmission link.

[10] Transpower’s preference has always been to arrive at a specific bilaterally negotiated contract with each customer. Each bilateral contract consists of standard terms, conditions and prices modified in minor ways to meet the individual case. Such contracts are generally referred to as “connections contracts” or “customised connections agreements”. They are to be contrasted with arrangements with other customers who, for whatever reason, do not have a specific bilateral contract. For these customers Transpower offers its services on standard terms dictated to the customer on a “take it or leave it” basis. Transpower refers to these as “Posted Terms and Conditions” or “Posted Teens”. Posted Terms are the standard teens and conditions referred to earlier combined with a set of standard prices which Transpower updates annually.

Generator restructuring

[11] The way in which Transpower allocated the HVDC link costs between its customers was always controversial. Initially Transpower allocated 53 percent of the desired cost recovery to North Island Distributors and the other 47 percent to Generators. From 1 October 1996 Transpower tried to move the whole of that cost to the two South Island Generators, then ECNZ and Contact Energy. Both protested and reached compromises with Transpower. In Contact’s case Transpower agreed to only partial recovery of the proportion of costs which it attributed to Contact. In ECNZ’s case Transpower entered into a memorandum of understanding involving an interim solution and an understanding that the parties would negotiate towards a long term agreement. Transpower saw neither arrangement as satisfactory, particularly given that it committed itself to bilateral agreements with Distributors which relieved the Distributors of the former contribution to the HVDC link.

[12] That remained the situation until 1998 when the decision was made to split ECNZ into Meridian and two other state-owned enterprises. Transpower saw the split of ECNZ as an opportunity to put into place a contract with Meridian under which the HVDC proportion payable would, in combination with the other South Island Generators, fully pay for the HVDC link.

[13] Prior to the formation of the new SOEs an interim governmental agency, the Electricity Reform Transition Unit (ERTU) was established to ensure that the restructuring would be viable. This entailed preliminary negotiations between Transpower and ERTU. ERTU would not accept Transpower’s proposal that the full costs of the HVDC link be imposed upon the South Island Generators. However it did negotiate with Transpower Heads of Agreement (the ERTU HOA) which would cater for that issue. By the time this matter came to trial it was not suggested that the ERTU HOA was legally binding but it formed and important background to other negotiations which followed.

[14] The ERTU HOA provided that in the event of a dispute Meridian would be entitled to “Pay on 19/05/99 the monthly equivalent of an annual charge of $51m”, identify what proportion of Transpower’s charges it disputed and paid on a without prejudice basis, and embark upon an alternative dispute resolution process with Transpower. If that process did not result in agreement within four months, followed by another two months allowed for Ministerial recommendation, either party would be free to take appropriate action to resolve the dispute in Court. In more detail the document provided:

“TRANSPOWER PROPOSAL FOR SOUTH ISLAND HYDRO SOE TRANSMISSION CONTRACTS

Terms of Contract

One year from 1 April 1999.

Conditions

Transpower’s Standard form of Contract for Input Connection, GOSC/GSSC and GOC (excludes Tiwai contract).

Price

Transpower clearly articulates the pricing methodology.

Input Connection and Injection contracts $64m per year inclusive of GST in accordance with Standard Terms and conditions.

GOSC, GSSC, GOC to be in accordance with the standard conditions of those contracts. It should be noted that these contracts may change format as they are developed through the GSP project.

Any off-take contracts for the South Island SOE will be negotiated separately.

The proportion of HVDC rentals due to the South Island SOE will be returned to them in accordance with the Standard Terms and Conditions.

Payment Obligations

Transpower invoices according to standard terms and conditions and pricing methodology.

South Island IDG can:

(a) pay invoice in full with no dispute over charges; or

(b) pay invoice in full on a without prejudice basis and dispute charges on any basis it can sustain at law; or

(ii) Identify what proportion of Transpower’s charges it disputes and is therefore paying on a without prejudice basis.

(iii) Clearly articulate the grounds, legal and factual, upon which it disputes Transpower’s charges.

(iv) Negotiate with Transpower and/or mediate the issues in dispute, both parties acting in good faith and using best endeavours to resolve the issues. This process is to take no more than four months.

(v) If at the end of the process described in (iv) no agreement has been reached, refer the issues to the Ministers of Finance and Energy for them to determine a process by which the issues will be resolved. Both parties will have the opportunity to make submissions on the most appropriate process. The Minister’s recommendation on process will be binding on both parties.

(vi) If a ministerial recommendation on process is not obtained within two months of the issues being referred to the Ministers, either party may take appropriate action to resolve the dispute including, if necessary, taking a claim to the court.”

[15] The ERTU HOA envisaged that Meridian and the other new SOEs would adopt Transpower’s standard conditions and would make interim payments according to a prescribed formula pending the long-term resolution of ultimate liability. On the strength of that document ERTU certified to the Government that the proposed ECNZ split would be viable. In consequence, Meridian was incorporated on 16 December 1998 and began preparations for taking over the South Island operations of ECNZ on 1 April 1999.

Transpower-Meridian negotiations

[16] Meridian’s preparations included the negotiation of terms with Transpower. A contract was needed to govern the terms upon which Meridian would use Transpower’s services as from 1 April 1999. The background from which Transpower and Meridian came to negotiate can therefore be summarised as follows:

[a] Transpower and Meridian intended to enter into a legally binding contract.

[b] They intended that the contract would reflect the principles envisaged in the ERTU HOA.

[c] The ERTU HOA had in turn been entered into against a background of existing Transpower standard terms and conditions.

[d] They intended that the new contract would adopt the standard terms and conditions along with either finite terms for payment or the ERTU HOA formula for provisional payments pending long-terms resolution of differences pursuant to the alternative dispute resolution procedures envisaged in the ERTU HOA.

[e] The HVDC link issue made the formula for determining ultimate payments critical. Its importance is illustrated by the annual charges later sought by Transpower in Meridian’s first year of operation. Of approximately $76 million which Transpower sought from Meridian, $68 million was attributable to the charge which Transpower sought for the HVDC link.

[17] From the outset there were delays in negotiating the proposed Transpower-Meridian supply contract. The chief cause was that Transpower happened to choose this period for the drafting and negotiation of a new set of standard terms for the electricity industry as a whole. That entailed lengthy correspondence and meetings between Transpower and industry users extending well into 1999. Along with other members of the electricity industry, Meridian participated in meetings at which there was discussion between Transpower and its customers over the new standard terms proposed by Transpower.

[18] By mid-February timeframes were becoming very tight. It was not until 17 February 1999 that Transpower began direct communications with Meridian about its contract in particular. Transpower began by producing for Meridian’s comment parts of its proposed new standard terms and prices in a generic form. The new standard terms were significantly different from those which had applied when ERTU and Transpower entered into the Heads of Agreement.

[19] Meridian’s takeover on 1 April was imminent. In case the parties had not successfully negotiated a bilateral contract by then, Transpower wrote to Meridian on 26 February 1999 seeking to establish a contractual backstop in the following terms:

“It is our strong preference that we are able to negotiate a new CONNECTIONS contract with you. However, in the event that this is not achievable, we will post terms and conditions based on the new CONNECTIONS contracts, and incorporating the Coordination Policy and Connection Policy.”

[20] Transpower followed that up with a further letter of 19 March 1999, delivered on 23 March, saying:

“Further time is needed for the negotiation of a signed contract with you. It has taken some time to process the feedback from customers and prepare changes to the standard contract which was sent to you in February. A form of the contract which is suitable for negotiation towards achievement of a signed agreement between our two companies will be available within the next few days.

In the interim Transpower will of course continue to provide its services and it is therefore important to provide certainty over the contractual arrangements that will be in place from 1 April 1999 in relation to those services. For this reason I enclose Transpower’s new Posted Terms including the Connection Policy and the Common Quality Obligations which will take effect from 1 April 1999. These are Transpower’s standard terms and conditions for services provided by Transpower to connected parties in the absence of a signed contract. Transpower will be prepared to provide service to you on these terms, until a new agreement is negotiated and signed.” (emphasis added)

[21] Transpower’s new “Posted Terms” were enclosed with the letter. In addition to standard conditions intended to be common to all customers using the grid, the Posted Terms materially provided:

“3.4 Acceptance of Posted Terms: By connecting assets or continuing to have assets connected to the Grid Assets without a signed agreement, the Customer has accepted these Posted Terms . . .

3.7 Changes to Posted Terms: These Posted Terms may be changed at any time by Transpower giving the Customer not less than 20 Business Days’ notice of new terms . . .

13.1 Transpower: Transpower may terminate these Posted Terms:

(a) Notice: in whole or in respect of any Point of Connection, at any time Transpower intends to decommission all Points of Connection or the relevant Point of Connection (as the case may be), by giving not less than 12 months notice of termination . . .

13.2 Customer: These Posted Terms will cease to apply at a Point of Connection where the Customer causes the Customer’s Assets to be disconnected from the Grid Assets following a period of notice as follows:

(a) Failure to Comply with Technical Compliance Obligation: in the event of failure by Transpower to comply with a Technical Compliance Obligation as provided in clause 5.3; and

(b) Other: any other reasons, having given not less than six months notice of its intention to disconnect . . . .”

[22] The Posted Terms included charges assessed according to stated formulae. The effect of the ERTU HOA would have involved Meridian’s payment of $64 million “inclusive of GST”, or if pricing were disputed, provision for alternative dispute resolution and in the meantime payment of the monthly equivalent of $51 million. The effect of the Posted Terms as delivered on 23 March 1999 was that Meridian would instead need to pay $73,881,957. By contrast with the ERTU HOA the Posted Terms would also permit Transpower to increase the charges at any time upon giving 20 business days’ notice. There was no provision for Meridian to dispute the price and make interim payments pending the outcome of alternative dispute resolution procedures.

[23] On the same day, 23 March 1999, Meridian’s own letter crossed that of Transpower. In its letter Meridian referred to the large task ahead if the terms of a new contract were to be resolved and then went on to say:

“We are totally absorbed by the challenge of our start up in two weeks, and so we would like to commence discussions with you when we have achieved that. Fortunately we have Heads of Agreement to govern our relationship from 1 April, and so we will rely on that and look forward to well prepared discussions with you in accordance with the processes which have been established under that agreement.” (emphasis added)

[24] This case turns on the fact that the positions taken up by the parties in those two letters never changed. Essentially Transpower’s position was that it would continue with negotiations for the purpose of arriving at a mutually signed bilateral contract but that in the meantime the rights of the parties would be governed by the contract to be found in the Posted Tennis. The position of Meridian was that the rights of the parties would be governed by the ERTU HOA pursuant to which any dispute over price would result in interim payments pending alternative dispute resolution.

[25] On 26 March 1999 Transpower sent Meridian a fresh set of contract documents representing the first individualised contract prepared specifically for Meridian. Essentially it represented Transpower’s new standard conditions with some modification to introduce the ERTU HOA approach of an interim payment pending alternative dispute resolution but without any grid charges schedule and without any maximum payment as had been provided for in the ERTU HOA. That was followed by a Transpower letter of 29 March 1999 forwarding a proposed contract based on Transpower’s new standard conditions as modified to introduce terms similar to the ERTU HOA ones but again without maximum. In the covering letter Transpower specifically said to Meridian that:

“It would not be appropriate to rely on the Heads of Agreement to record the legal relationship between Transpower and Meridian after 31 March 1999.” (emphasis added)

[26] Meridian responded immediately with a letter of 30 March 1999 stating:

“As explained in my letter to Transpower of 23 March 1999 Meridian will be relying on the HoA to govern our relationship with Transpower. . . . You subsequently advised at the meeting on 26 March that this would not be so and that Transpower wanted the “Posted Terms and Conditions”, which we had not then received, to provide that detail. . . . You will appreciate that Meridian cannot step away from the HoA principles which underpinned ECNZ’s split, Meridian’s incorporation and Meridian’s acquisition of ECNZ’s assets.” (emphasis added)

[27] Transpower responded immediately by making it clear that in the absence of a specifically signed bilateral agreement, Posted Terms would apply, stating:

“As discussed at our meeting on 26 March 1999, the purpose of this pack [containing the Posted Terms] was to provide a backstop measure to cover the situation in the event that there was not a signed “Standard Terms and Condition” in place between Transpower and the respective customer as at 1 April 1999. . . . If Meridian does not sign the contract offered to it in accordance with the HoA then the Posted Terms and Conditions will apply in the absence of a signed contract between Transpower and Meridian.”

[28] On the next day, 31 March 1999, Meridian maintained its position that the ERTU HOA was the guide and that “we cannot change any aspect of the HoA. We consider it is a binding legal obligation of Transpower, and will enforce it if necessary.” However, it went on to say:

“Without prejudice to our position and to accommodate your wishes, we would be prepared to sign a contract consisted of the HOA as agreed in November, and the standard terms and conditions you have provided. Neither would be “modified” as that would amount to a negotiation of key documents which we are not prepared to do and which, in any event, are capable of implementation in their present form.

In order to preserve the integrity of the HOA, we would require that both the standard terms and conditions and the HOA would be subject to the same negotiation and dispute resolution, and that neither should be capable of replacement by Transpower unilaterally. Transpower must have a genuine incentive to honour Bob Thompson’s undertaking to Keith and me that the standard terms would be subject to genuine negotiation.

Accordingly, we do not intend devoting more time to the issue on the day before we commence operation. We enclose a letter of agreement to which we have attached the HOA and the Standard Terms and Conditions. If you wish to accept our offer, could you please sign and return it to me. If I have not personally received the signed agreement by 3pm this afternoon, we will presume it is not acceptable to you and Meridian will at that time withdraw the offer. In that case, the HOA in its present form will continue to be the legal basis upon which Transpower will provide transmission services to Meridian (emphasis added).

[29] The accompanying offer from Meridian essentially substituted Transpower’s new standard conditions for those which had existed at the time of the ERTU HOA in 19 November 1998 and otherwise went on to adopt the terms of the ERTU HOA including the provision for the negotiation process and interim payments. It did not permit Transpower to change terms during the 12 month term nor on its termination without the prior written agreement of Meridian. Under the attached contract, as provided for in the ERTU HOA, the charges were to be $64 million per year inclusive of GST, this being essentially a maximum with provision for disputing price and other terms and providing that in the event of such dispute Meridian would “pay on 19/05/99 the monthly equivalent of an annual charge of $51 million”.

[30] Later on the same day, 31 March 1999, Meridian sent a slightly modified version of that offer under cover of a letter stating “failing your acceptance we will operate under the HOA as previously advised”.

[31] Transpower responded with a letter dated 31 March 1999 rejecting Meridian’s offer and stating “in the absence of a signed contract the Posted Terms and Conditions provided to you on 23 March 1999 will govern Meridian’s connection to the grid assets.” It sent a new contract to Meridian by facsimile, the transmission commencing at 10.37 pm on the night of 31 March 1999 and, after various interruptions, concluding at 9.11 am on the following morning. Essentially the offer contained in these documents represented Transpower’s new generic form standard terms with some adjustment to adopt ERTU HOA provisions but still requiring a maximum of $73,881,835 rather than the lower maximum which had been referred to, at least as expressly recorded, in the ERTU HOA. Meridian responded with a letter of 1 April 1999 reiterating that “We consider the Posted Terms do not apply. . . . As previously advised we consider that Meridian is entitled to receive transmission services under the Heads of Agreement which refers to `standard’ terms and conditions” (emphasis added).

[32] Later on the same day Meridian settled the purchase of ECNZ assets and began operations. This included the generation of electricity while connected to the national grid with the inevitable consequence that electricity would be injected into the grid. It also included the making of periodic offers of electricity to the NZEM. The consequence of the offers was a series of acceptances by buyers on the NZEM and actions by Transpower as dispatcher to draw electricity from Meridian into the grid.

[33] Over the next few days, weeks, and months, exchanges continued between Transpower and Meridian as to the terms upon which Meridian was using, and would continue to use, the national grid. On 8 April 1999 Meridian gave Transpower a letter and proposed contract which was essentially a repetition of the ERTU HOA in combination with Transpower’s new generic standard terms. The offer made it clear that Transpower could not substitute new terms, terminate or withhold services or unilaterally post new terms, conditions or prices. It expressly provided that the amounts referred to in the ERTU HOA “are inclusive of GST”, the latter being a continuing argument between the two. Transpower maintained that there had been an error in recording the ERTU HOA and that the stated “$64 million inclusive of GST” was intended and understood by the parties to be “$64 million exclusive of GST”.

[34] Transpower responded with alternative terms on 15 April 1999 but neither that letter nor subsequent correspondence produced agreement. As Meridian stated in its letter of 23 April, notwithstanding its willingness to negotiate “in the meantime Meridian Energy’s position remains consistent with our letter to you on 31 March. We consider that Meridian is entitled to receive transmission services under the HOA, which refers to ‘standard’ terms and conditions” (emphasis added). Transpower’s position remained as stated in its letter of 4 May 1999 that “until Meridian signs such a contract with Transpower the Posted Terms and Conditions provided to you on 23 March 1999 will govern Meridian’s connection to the grid assets” (emphasis added).

[35] In terms of cl (c)(1) of the payment obligations provisions of the ERTU HOA Meridian made its initial monthly payment of $4.25 million in May 1999 and again in the following month. Thereafter it unilaterally reduced the payments to the level which it calculated was being paid by its chief South Island competitor, Contact Energy. It is not disputed that this was a fraction of the level required under the Posted Terms, and less than even the initial interim payment which would have been required under the ERTU HOA.

[36] No ministerial recommendation was made in terms of cl (c)(vi) of the ERTU HOA and the parties were unable to negotiate a solution themselves. Consequently Transpower issued the present proceedings on 29 November 1999.

Issues

[37] Transpower claims $70,621,254 said to be the sum due to Transpower to 31 March 2001 pursuant to a binding contract which it has with Meridian. The contract is said to be constituted in the Posted Terms as provided to Meridian on 23 March 1999 and as varied by fresh Posted Terms provided to Meridian on 17 December 1999 and 28 February 2000. It further claims for additional charges incurred since 31 March 2001, these to be calculated in accordance with a variation to the Posted Terms provided to Meridian in February 2001. The contract is said to have been constituted by Transpower’s offer of Posted Terms and Meridian’s acceptance of that offer by its conduct in availing itself of Transpower’s services. An alternative cause of action based upon the ERTU HOA was abandoned in the course of trial.

[38] Meridian denies the existence of any contract. It says that it expressly and repeatedly rejected the Posted Terms as a basis for any contract. In those circumstances it denies that its conduct could have constituted acceptance of Transpower’s offer. It does not dispute Transpower’s power to offer its services upon such terms as Transpower thinks fit. The sole resistance to payment is a denial that it ever accepted Transpower’s offer.

Contractual effect of the verbal communications

[39] It was common ground that no contract could be elicited from the verbal communications alone. Meridian stated clearly and repeatedly that it rejected the Posted Terms as the basis for any contract.

Contractual effect of Meridian’s conduct

[40] Transpower’s core argument is that notwithstanding the lack of any accord in the express communications, Meridian’s conduct in taking Transpower’s services amounted to acceptance of Transpower’s offer of the services on Posted Terms. In Mr Farmer’s words, “Meridian had, by its voluntary use of the national grid, accepted Transpower’s position that uses of the national grid could only occur under a contract and that, in the absence of a signed contract, Posted Terms would constitute the contract.”

[41] I have no difficulty with several of Transpower’s preliminary propositions: that Meridian knew that Transpower was offering its services on the basis that there had to be a contract; that Transpower required that in the absence of a signed contract Posted Terms would apply; and that by its conduct Meridian manifested an intentional use of Transpower’s services. Whatever alternative explanations there may have been for certain ancillary connections and uses of the grid, there is no denying Meridian’s use of the grid as a voluntary and active means of selling its own electricity. For contract purposes Meridian’s conduct differs in no way from that of any other consumer who elects to make use of a service offered on a contractual basis. But for associated verbal rejections Meridian’s conduct would have constituted acceptance of Transpower’s offer.

[42] However, Transpower could not choose to take notice of one form of response (use of the services) while ignoring the other (verbal rejection of Posted Terms). Meridian’s responses had to be viewed as a total package. The question is how an objective and reasonable observer placed in the shoes of Transpower would have interpreted Meridian’s statements and conduct in their totality. Meridian’s position was unambiguous. It was rejecting Transpower’s offer of Posted Terms while also making it plain that it intended to use Transpower’s services. The fact that it intended to combine use of the services with resort to the ERTU HOA is neither here nor there for present purposes, it being common ground that for its part Transpower rejected the ERTU HOA as a basis for contracting. The critical point is that from Transpower’s perspective Meridian was plainly rejecting the only basis upon which there could have been a contract, namely Posted Terms.

[43] Interpreted in that light, there could be no contract. Meridian’s conduct in taking Transpower’s services was no more an acceptance of Posted Terms than Transpower’s provision of the services was an acceptance of Meridian’s suggestion that they rely on the ERTU HOA. The fact was that on an objective appraisal of the representations held out by each party there was no coincident offer and acceptance. To the contrary, there was express and unambiguous disagreement. Nor was it argued that the difference between Posted Terms and ERTU Heads of Agreement was immaterial or manifestly regarded by either party as dispensable.

[44] In my judgment Transpower’s case fails irrevocably at this point. It has sued solely in contract. The only contract alleged was one based on Posted Terms. No such contract was ever formed. I proceed on to some of the other matters traversed only in deference to the elaborate arguments presented, the length of the hearing thought to be necessary, and the sums at issue.

Authorities as to acceptance by conduct.

[45] In my view the foregoing conclusion accords with authority. In deciding whether an offer has been accepted, the central question is whether a reasonable person in the shoes of the offeror would in all the circumstances have believed that the offeree intended to be bound by the terms of the offer. For this purpose the offeree’s statements and conduct are to be viewed as a whole. Both points are encapsulated in Cooke J’s dictum in Meates v Attorney-General [1983] NZLR 308 at 377:

“The acid test . . . is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain.”

[46] Narrowing the focus to situations in which the offeree has accepted offered goods or services, I would adopt para 53(2) of the United States Restatement of the Law, Second, Contracts as apposite in New Zealand:

“Except as stated in 69 [not relevant here], the rendering of a performance does not constitute an acceptance if within a reasonable time the offeree exercises reasonable diligence to notify the offeror of non-acceptance.”

And as stated in the commentary thereto:

“Ordinarily the making of an offer does not limit the offeree’s freedom of action or inaction; he may act or forbear without reference to the offer. But if he has reason to know that the offeror may reasonably infer from his conduct that he assents, he runs the risk of being bound by his manifestation of assent. . . . He may guard against that risk by manifesting an intention not to accept.”

[47] Mack & Edwards (Sales) Ltd v McPhail Bros (English Court of Appeal, The Times, 28 February 1968) illustrates the point. In that case a seller offered goods at a stated price plus a surcharge. The purchaser rejected the surcharge but took delivery of the goods. The Court held that:

“It was not right to say that the seller had the last word. It depended on the facts; and in the present case the parties were not agreed on the matter of surcharge. Each side was sticking to its own point of view and the other side knew that perfectly well. When that was the position, there was no concluded bargain on that point of contract.”

[48] The approach is also supported by the weight of authority where, in banking a cheque sent in full settlement of an unliquidated sum, the creditor has made it plain at or before the time of banking (and even promptly after the banking) that it will not be accepted in full settlement (McLauchlan (1987) 12 NZULR 259; HBF Dalgety Ltd v Morton [1987] 1 NZLR 411; Burrows, Finn and Todd Law of Contract (8th NZ ed) para 18.5; Magnum Photo Supplies Ltd v Viko New Zealand Ltd [1999] 1 NZLR 395 (CA) contra Homeguard Products (NZ) Ltd v Kiwi Packaging Ltd [1981] 2 NZLR 322). It is also supported by Federated Farmers of New Zealand (Inc) v New Zealand Post Limited [1990-92] 3 NZBORR 399 and Airways Corporation of New Zealand Limited v Geyserland Airways Limited [ 1996] 1 NZLR 116 to which I will come later in this judgment.

[49] What I take from these authorities is confirmation of the proposition that where an offeree takes the benefit offered, but in doing so makes it clear that it rejects the terms on which they were offered, there can be no assumption that the offer has been accepted. In each case it is necessary to return to the question posed earlier: would a reasonable person in the shoes of the offeror, in all the circumstances, have believed that the offeree intended to be bound by the terms of the offer? On the facts of the present case I have answered that in the negative.

Subjective understanding that there was no contract

[50] In this case the result reached on an objective appraisal of the parties’ communications and conduct can equally be reached on the alternative basis of the offeror’s actual understanding. Appreciation that an offeree is not accepting an offer is independently fatal to the existence of a contract: Paal Wilson & Co v Partenreederei Hannah Blumenthal (The “Hannah Blumenthal’) [1983] 1 AC 854 at 915/F and 924/E-F; Rattray’s Wholesale Ltd v Meredith-Young & A’Court Ltd [1997] 2 NZLR 363 at 374 and Magnum Photo Supplies Ltd, supra, at 401. In the present case Transpower knew that Meridian rejected the Posted Terms as the basis of any contract - see the evidence of Mr Heaps at p 53 and appendix A to Transpower’s letter of 1 July 1999 to the Minister for State-Owned Enterprises (Exhibit 2165). That too is fatal to Transpower’s case.

Particular aspects of offer and acceptance

[51] Mr Farmer advanced a number of other arguments concerned with offer and acceptance. One was that in a commercial context a realistic and practical approach must be taken to the question whether, viewed as a whole and objectively, the exchanges between the parties show a concluded agreement. Undue emphasis upon the traditional sequence of offer followed by acceptance can sometimes distract from the ultimate question which is whether the dealings show a concluded baragain: New Zealand Shipping Co Ltd v A.M. Satterwaite & Co Ltd [1975] AC 154 at 167 and Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560, 563 (CA). I agree, but it is difficult to see how this helps. Viewing the exchanges between these parties as a whole, it is impossible to find any common set of terms to which both sides were assenting.

[52] Mr Farmer also relied upon the widespread recognition that “will theory” is inadequate as an explanation for modern contract. As Professor Coote recently reminded us in Coote, “Common Forms, Consideration & Contract Doctrine” (1999) 14 Journal of Contract Law 116, 120:

“To a considerable extent, the confusion in this area has been caused by the tendency of some judges to use the will theory as a test of whether a contract exists. That theory dates back at least to Greek and Roman times and it has, no doubt, influenced the development of some aspects of the law. But it is in crucial respects inconsistent with the common law of contract as that law really is. Instances include the postal rule, implied by law terms, objective tests of formation and interpretation and, in particular, the recognition of contracts of agreements made in non-negotiated common forms. In any event, the theory that contracts are to be enforced because they are manifestations of the human will seems altogether too metaphysical to explain something as rooted in practice and practical concerns as the common law. The reasons for the recognition and enforcement of contracts lie, rather, in the realms of peace, order and good government.”

[53] For myself I might have been inclined to put more emphasis upon contract law’s empowering effect for the individual (the opportunity to bind oneself in the future in order to gain an immediate benefit or commitment from the other contracting party) than upon the maintenance of peace, order and good government (with its apparent emphasis upon the unrest which might follow if contracts were unenforceable) but I respectfully agree with Professor Coote’s fundamental point that will theory is an inadequate explanation for modern contract. What is more difficult to see is how this helps Transpower. It is not as if Meridian seeks to escape the outward appearance of a contract by resorting to actual intentions. The adoption of will theory in this case would serve merely to show that Meridian never actually intended to be bound by the Posted Terms and that Transpower actually knew that.

[54] Next, Mr Farmer submitted that the parties intended that Transpower supply its services to Meridian in return for payment, and that in a commercial setting it was to be presumed that they intended to create a legally binding relationship. I have no difficulty with those propositions. However, an intention that payments would be made, and an intention to be legally bound, come to nought unless carried through into agreement on essential terms, or at least agreement on some formula by which essential terms could be formulated through a third party. The same applies to the submission that there was an inherent contradiction between Meridian’s acceptance of the services and its rejection of the terms upon which they were offered. Aside from other explanations as to the basis upon which Meridian was accepting the services, no amount of contradiction could convert the dealings between the parties into a contract unless, on an objective appraisal of Meridian’s responses, a reasonable person in the shoes of Transpower would have concluded that Meridian was accepting Transpower’s terms. I have found to the contrary.

[55] During the hearing I raised the question whether the offer of Posted Terms contained in the documents faxed on the evening of 31 March 1999 and the morning of 1 April 1999 might have been accepted by Meridian’s conduct in using the national grid before Transpower received Meridian’s further letter rejecting Posted Terms later on the same day. I do not understand Mr Farmer to have pursued any such argument, and for good reason. There was no clear act by Meridian making use of the national grid before its letter rejecting Posted Terms was received by Transpower. Nor could the argument survive the requirement that a reasonable person in the shoes of Transpower would have to believe that Meridian was accepting the Posted Terms. Such a belief could not be reconciled with Meridian’s letters rejecting Posted Terms immediately before, and again immediately after, it took over the grid.

[56] The special arguments relating to offer and acceptance do not persuade me that there was a contract.

The compelling reasons for having a contract

[57] Mr Farmer also advanced a series of arguments designed to show that the parties had compelling reasons for wanting a contract - the large interests and sums at stake, the importance of achieving grid security through contractual regulation of users, the need to co-ordinate the New Zealand electricity industry, the difficult financial consequences for Transpower if unable to recover anticipated revenue, and the multi-party features of Transpower’s pricing policies. I have no difficulty with any of these. If, with sufficient ingenuity, one could fashion the essentials of a bargain from the dealings between the parties there would be compelling reasons for doing so. But it does not help to show how strong the reasons were for having a contract if there was clearly no agreement. It is not for the Court to impose upon the parties a fictional contract which they ought to have agreed upon but in fact did not.

[58] The same must apply to Transpower’s argument that in the absence of a contract it would be left without a remedy. For reasons which remain unclear, Transpower chose not to include in these proceedings an alternative restitutionary claim to quantum meruit. Mr Farmer went so far as to submit repeatedly and clearly that no such claim was legally open to Transpower. It is not for me to say what estoppel consequences that might have in any later proceedings but I am not convinced that Transpower could not have included such a claim in the alternative.

[59] As a general principle where value is provided on the mistaken assumption that payment for it is protected by a binding contract, or where there is a contract but it fails to prescribe the price, the provider normally has a claim for reasonable value known as quantum meruit - Goff and Jones, The Law of Restitution (5th ed - 1998) at p 4 and for examples see British Steel Corporation v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504; Mack & Edwards (Sales) Ltd, supra, and Peter Lind & Co v Mersey Docks & Harbour Board [1972] Lloyd’s Rep 234, 240. The conceptual basis has shifted from implied contract theory to the principle against unjust enrichment (Lipkin Gorman v Karpnale [1991] 2 AC 548 and Westdeutsche v Islington London Borough Council [1996] AC 669) but the jurisdiction is not in doubt.

[60] Mr Farmer submitted that the jurisdiction is unavailable to monopoly suppliers. In support he cited Vector Ltd v Transpower New Zealand Ltd [1999] 3 NZLR 646, 665-666 (CA). There, the Court declined to resort to the common law doctrine of prime necessity as a means of controlling Transpower’s prices. It held that the special price control mechanism provided for in Part IV of the Commerce Act was intended to be “the exclusive means of achieving price control over the transmission of bulk electricity by Transpower” (p 666). In making that point the Court had this to say about the practicability of having the courts undertake such inquiries themselves:

“A Court considering Transpower’s pricing at the suit of Vector would surely have to assess allocation and subsidisation issues across the board and so look at prices and pricing implications for all customers of Transpower. That would almost certainly call for joinder of other parties and the conversion of the proceedings into the kind of inquiry that Part IV entrusts to the Commerce Commission. Prime necessity, whose origins are quite different, is an unsuitable instrument for price regulation in a multidimensional setting. Hence the importance of respecting the exclusivity of the price-fixing mechanism under Part IV” (p 667).

[61] I would not have seen Vector v Transpower as an obstacle to quantum meruit had such been sought in the present proceedings. The key point in Vector was that the express statutory provision for prospective price control under circumstances of limited competition pursuant to Part IV of the Commerce Act showed an implied legislative intention to exclude the competing price control jurisdiction of prime necessity. In my view Vector has nothing useful to say about quantum meruit. Quantum meruit is the radically different exercise of retrospectively valuing services that have already been provided. The price control measures possible under Part IV of the Commerce Act are purely prospective. There is no overlap.

[62] Nor would a quantum meruit inquiry be freighted with the multi-dimensional and policy aspects of setting prices for the future. I do not doubt that valuing the transmission services already provided to Meridian would have been prolonged and complicated but in kind the exercise would not differ from many of the more difficult valuation and damages inquiries routinely undertaken by the courts. The fact that the assessment of damages may be difficult has never relieved a Court of the responsibility of making an assessment. Quantum meruit is no different.

[63] The fundamental response to Transpower’s position over quantum meruit must be that the lack of an alternative remedy could not, per se, be translated into the imposition of a contract where one did not otherwise exist. However in my view quantum meruit would have been available in the present proceedings had it been sought.

The “regulatory overlay”

[64] Although I have left the suggested “regulatory overlay” to last I should acknowledge that Transpower has always put it to the forefront. For fear of doing it an injustice I leave the argument to counsel’s own words. Mr Farmer submitted that “Transpower has a right (implied by statute) to recover its charges from customers who take its services, thus rendering any protests ineffective”. He went on to explain:

“Transpower submits that, in the circumstances in which it operates, these objectives cannot be achieved unless it has an implied power to determine its charges and recover them from customers. Otherwise s 4 of the SOE Act, insofar as it applies to Transpower, would be rendered “unworkable”. It would constitute a complete frustration of the regulatory objectives imposed by Parliament and adhered to by the industry as a whole if it were open to any industry participant to reject Transpower’s charges out of hand while also taking its services.”

and further that:

“. . . any conventional private law analysis must be overlaid with the public law features that have been identified and discussed above. Such an approach is consistent with that taken in Webster v Auckland Harbour Board [1983] NZLR 646 (CA), 650, where Cooke and Jeffries JJ stated:

“Undoubtedly a public body which has, as here, lawfully entered into a contract is bound by it and has the same powers under it as any other contracting party. But in exercising the contractual powers it may also be restricted by its public law responsibilities. The result may be that a decision taken by the public body cannot be treated as purely in the realm of contract; it can be at the same time a decision governed to some extent by statute.” (ll 3-35)

Certainly in that case it was held that contractual powers may be limited to “public law responsibilities” but in principle there is no reason why the converse should not be true - that is, that public law responsibilities can determine the conditions under which contracts are formed and contractual powers conferred.”

[65] In support Mr Farmer traversed at some length the legislative and constitutional framework within which Transpower operated - Transpower’s statement of corporate intent; ss 4 and 26 of the State-Owned Enterprises Act 1986; the New Zealand Government’s 1994 directive to the Commerce Commission under s 26 of the Commerce Act 1986; s 36 and Part IV of the Commerce Act; reg 5(2) of the Electricity (Information Disclosure) Regulations 1999; and the handbook published by the Energy Markets Regulation Unit of the Ministy of Economic Development with particular reference to optimised deprival valuation methodology and optimised depreciated replacement cost. In this context Mr Farmer also traversed the decisions in Mercury Energy Ltd v Electricity Corporation of New Zealand, unreported, High Court, Auckland, CL 20/92, 22 May 1995, Temm J, pp 3-4), Auckland Electric Power Board v Electricity Corporation of New Zealand [1993] 3 NZLR 53 (HC), 59, ll 49-51, Auckland Electric Power Board v Electricity Corporation of New Zealand [1994] 1 NZLR 551 (CA), 558-560, Mercury Energy Ltd v ECNZ Ltd [1994] 2 NZLR 385, 388, ll 39-46, and Mercury Energy Ltd v Trans Power New Zealand Ltd (1998) 8 TCLR 554 (HC), 558-560 in addition to Vector v Transpower in the Court of Appeal referred to earlier.

[66] Despite the thoroughness with which this argument was presented I have been unable to find any underlying legal rationale for it. The claim was brought in contract. No independent cause of action founded upon an express or implied statutory power to recover prices or costs was suggested or pleaded. Contract presupposes an agreement voluntarily assented to by both sides. The simple fact is that Meridian never agreed to Transpower’s terms.

[67] These two state-owned enterprises are first and foremost companies incorporated under the Companies Act. It is true that internally they are subject to various forms of political supervision through shareholding ministers and, through them, the Parliamentary process. Like most companies, they are also required to operate within certain constraints of a constitutional, administrative or financial nature. In the case of state-owned enterprises this includes a statement of corporate intent but that is essentially an internal constitutional document designed to ensure accountability to the shareholding minister. Every company, state-owned enterprise or not, operates under powerful incentives to recover its costs. These are all matters of indoor management. Externally, Transpower’s pricing is subject to potential intervention under the Commerce Act but the same is true of every other supplier of services. Transpower has certain disclosure obligations but these have no bearing upon the way in which it contracts with others.

[68] In its trading relationships with others a state-owned enterprise is subject to laws drawn from common law and statute that are of general application: Auckland Electric Power Board supra, (CA), 558-560. Conventional contract lies at the heart of trading relationships. There is nothing in the State-Owned Enterprises Act, the Commerce Act, or the Electricity (Information Disclosure) Regulations, to the contrary. Transpower has already established in prior litigation that it is free to make such offers to its customers as it thinks fit: see in particular Vector v Transpower [1999] 3 NZLR 646 (CA). It is to be treated in the same way as any other trader in that respect. It is ironic that having sought and secured recognition of its ordinary trading status Transpower should now seek distinctive legal treatment.

Authorities said to illustrate regulatory overlay.

[69] Mr Farmer cited several cases in support of the proposition that special modifications to the law of contract were necessary in the case of monopolist state-owned enterprises. My preliminary comment is that in considering these cases it is important to distinguish between the power to offer services on whatever terms the SOE thinks fit and the power to impose those terms upon the customer without contractual acceptance. With that in mind I turn to the particular cases.

[70] The first was Federated Farmers of New Zealand (Inc) v New Zealand Post Limited supra. The question there was whether farmers were liable to pay a special rural delivery service fee sought by the state-owned enterprise New Zealand Post Limited. McGechan J affirmed the power of NZ Post to set its own prices for its services (pp 366 and 367) but went on to consider the matter from a conventional contractual viewpoint. NZ Post had increased its charge from $40 to $80 per annum and sent rural customers invoices for $80 for a 12-month period. A number of customers made payment of only $40, refusing to pay the balance. NZ Post argued that the customers had made payment for only a 6-month period and therefore remained liable in contract to pay a further $40 for the additional 6 months of service they had received. Dealing with that point McGechan J said (at p 398):

“When NZP sent out invoices for $80/12 months, it offered to supply on those terms. When farmers replied by cheques of $40, against a background in which NZP well knew such were intended to cover a full 12 months’ service, that offer was rejected. A counter offer in those 12 month terms was made. When NZP sent its letter stating the $40 would be applied to 6 months supply, with a further $40 due upon invoice following the further 6 months unless a request was made for refund, such was a rejection of the farmer’s counter offer, and itself a further counter offer by NZP. Silence by the farmers which followed did not amount to acceptance of the latter counter offer. No concluded contract arose at all. NZP nevertheless chose at its own risk to supply for 6 months.”

I would see that passage as clear recognition by McGechan J that notwithstanding NZ Post’s right to stipulate the prices for which it would offer its services, that would achieve little for NZ Post on the facts of that case unless the offer had been accepted. It remained open to the farmers to reject the offer, and make a counter-offer, while still accepting NZ Post’s services. That is precisely the difficulty faced by Transpower in the present case.

[71] Secondly Mr Farmer appropriately cited, and sought to distinguish, Airways Corporation of New Zealand Limited v Geyserland Airways Limited [1996] 1 NZLR 116. In that case Airways Corporation had offered airport services to two small airlines in accordance with its standard terms. The airlines rejected the standard terms while continuing to avail themselves of the services, a situation seemingly analogous to the present one. Thorp J found that at least on conventional contract principles there was no contract, holding that (p 125):

“Quite plainly the inference to be drawn from the acceptance of supply with no objection to proposed terms of supply is entirely different from that which can be made when there has been repeated objections to those terms.”

[72] Thorpe J then moved to the second issue, namely “whether the Court should extend the principles of the ticket cases and standard-term contract cases by reason of the arrival of the SOE regime” (p 126). In an odd precursor to the present case, the Corporation stoutly rejected the suggestion that it consider quantum meruit, instead pinning its flag to contract (pp 123 and 124). Like Transpower, it warned the Court of the predicament it would be left in if the Court failed to uphold a contract. Thorp J was unmoved given his conclusion that quantum meruit was available and continued (p 127):

“The position which the appellant took in relation to the appeal was that unless the decision of the District Court was reversed the corporation would be compelled to provide air traffic control services without reward, and that the Court should take steps to avoid such a plainly untenable situation, particularly as it related to the provision of necessary services. But as the preceding judgment indicates, I am not persuaded either that the corporation is bound to supply a service, or that if it chooses to do so it is not able to claim a reasonable recompense for the services it has provided.”

[73] On its face, Airways Corporation is clear authority against Transpower. Mr Farmer’s first ground for distinguishing it was that Thorp J had taken comfort in the alternative of quantum meruit which Mr Farmer submitted was not available to Transpower. For reasons traversed earlier, I am unable to accept that view. Secondly, Mr Farmer argued that unlike Airways Corporation, “Transpower is practically if not legally bound to supply its services, at least to the extent that continuity of supply is not interrupted.” It seems to me that where Parliament has chosen a regime in which public utilities are left to trade contractually it must have been intended that until a contract were entered into both sides would be treated for legal purposes as if they had been free to accept or withhold their assent, their services and their payments. Whatever may be the commercial, political and practical difficulties if Transpower withheld its services, it is to be treated here in the same way as other persons who are free to offer or withhold goods and services.

[74] I have not overlooked the fact that in Airways Corporation Thorp J went on to consider the position if quantum meruit had not been available, and in that context seemed open to the possibility of a power to impose charges without acceptance by the user in the contractual sense:

“Had the alternatives been as stark as Mr White suggested then the principles declared in Northland Milk Vendors Association Inc v Northern Milk Ltd [1988] 1 NZLR 530, which encouraged the Courts to take appropriate action to bridge gaps in legislation in order to make it “work as Parliament must have intended”, may have warranted the Court extending the normal rules as to formation of contract.”

However it will be noted that this obiter possibility was not explored further by counsel or judge (see pp 123 and 124). I respectfully share Thorp J’s view that quantum meruit was in fact available.

[75] The third case cited was Lawson v Housing New Zealand [1997] 2 NZLR 474, 495-496. In that case Williams J rejected the contention that Housing New Zealand’s proposal to charge market rent for state houses would constitute a breach of the NZ Bill of Rights Act 1990. I can find nothing in the decision to suggest that having set its charges, Housing New Zealand was entitled to impose them upon a tenant even where the tenant rejected them. The real power wielded by Housing New Zealand was that if its terms were rejected, it would be entitled to evict the intended tenant, just as (at least in law) New Zealand Post could have refused to provide its delivery services to the farmers and Transpower could have refused Meridian access to its transmission services.

[76] The final case was Metrowater Limited v Gladwin & Others (unreported, Salmon J. Auckland CP 260/99, 8 December 2000). There, Mr Gladwin refused to pay Metrowater’s invoices and specifically told Metrowater that “he did not accept any obligation to pay waste water charges and would pay only that part of his account which represented the charge for water services”. After disconnection by Metrowater, Mr Gladwin reconnected himself without authority. Metrowater gave the Court an interim undertaking not to disconnect Mr Gladwin but applied to strike out Mr Gladwin’s defences and to be released from its undertaking.

[77] It is important to note that in Metrowater v Gladwin it was Metrowater which argued that there was no contract and that in consequence Metrowater was free to discontinue supply. For his part Mr Gladwin pleaded that certain statutory provisions formed part of the terms of the contract between the two parties, that there was an implied term that the charges for the services would be fair, and that in the alternative Metrowater was bound to charge no more than a fair and reasonable price. For this he relied upon the Consumer Guarantees Act 1993. He also denied that Metrowater was entitled to cancel the contract which he said existed between the parties. Salmon J struck out the statement of defence and released Metrowater from its undertaking. It was in that context that he went on to add (para 33):

“Although the point was not argued, it may be that what the defendant is saying is that the plaintiffs material did not constitute an offer. As a matter of law it is my view that that material did constitute an offer which was accepted by the on-going acceptance of the services provided by the plaintiff.”

[78] I can understand why, at least taken in isolation, Transpower might find some comfort in that passage. Mr Farmer advanced it in support of his argument that when a state-owned monopoly supplier offers a service on stated terms, and the customer elects to take the service, it is not open to the customer to then rely upon any antecedent or simultaneous verbal rejection of the terms on which the service has been offered. It should be noted, however, that this was said in the context of a reversal of the current arguments, Metrowater arguing that there was no binding contract and Mr Gladwin arguing that there was. It was also no more than an obiter comment on a point which was not argued. There may also have been difficulties in the concept that Metrowater had offered the service to Mr Gladwin, given that it had disconnected him and that he had unilaterally reconnected his property himself. Arguably, Metrowater’s available cause of action was in quantum meruit rather than contract.

Conclusion as to regulatory overlay

[79] In the end I think that the suggested “regulatory overlay” is a red herring. The case stands or falls on conventional contract. It was an encounter between two companies. One offered its services on stated terms. The other rejected the terms while taking the services. At all material times the former knew that its terms were rejected. In those circumstances there could be no contract. The authorities do not suggest otherwise. Lawson has no real bearing on this case. The Judge in Metrowater did not purport to come to any considered finding on the point. Airways Corporation and Federated Farmers directly support a finding for Meridian.

Result

[80] There will be judgment for the defendant, Meridian. Counsel agreed that the losing party should pay C3 costs. The plaintiff is directed to pay costs to the defendant assessed on a C3 basis, the details to be determined by the Registrar in the absence of agreement.