Unison Network Limited v Nottingham Forest Trustee Limited
[2019] NZHC 2280
•11 September 2019
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2017-441-000099
[2019] NZHC 2280
BETWEEN UNISON NETWORKS LIMITED
Plaintiff
AND
NOTTINGHAM FOREST TRUSTEE LIMITED
First Defendant
AND
ROGER DICKIE (NZ) LIMITED
Second Defendant
AND
FOREST MANAGEMENT (NZ) LIMITED
Third Defendant
AND
NOTTINGHAM FOREST PARTNERSHIP
Fourth Defendant
Hearing: 6-10 May 2019 Appearances:
R S May and S B McCusker for Plaintiff
I J Thain and J W Thomson for Defendants
Judgment:
11 September 2019
JUDGMENT OF ELLIS J
[1] As a result of what is known as “root plate failure”, seven otherwise healthy pine trees from the defendants’ commercial pine forest (the Forest) have fallen onto a 33kV power line known as the Esk Feeder (the Line) owned and operated by Unison Networks Ltd (Unison).1 The falls occurred on four discrete occasions over a period
1 Nottingham Forestry Trustee Ltd (the first defendant) holds the forestry block in trust for the Nottingham Forestry Partnership (the fourth defendant), which has approximately 25 partners. Roger Dickie (NZ) Ltd (the second defendant) is the administrator for the Partnership and Forest Management (NZ) Ltd (the third defendant) is employed by the Partnership as forest manager of
UNISON NETWORKS LIMITED v NOTTINGHAM FOREST TRUSTEE LIMITED & ORS [2019] NZHC 2280
[11 September 2019]
of three years. On three of the four occasions the falls followed a period of heavy rains and/or high wind. All four falls resulted in power outages of varying severity for those of Unison’s customers serviced by the Line and required Unison to incur the costs of (inter alia) repairing the Line.
[2]The questions raised by these proceedings are whether the defendants:
(a)are liable in nuisance, under Rylands v Fletcher or in negligence to compensate Unison for some or all of its losses;2 and
(b)should also be compelled to cut down or top other trees within falling distance of the Line.
[3] In order to understand some of the facts and evidence in the case it is useful to begin by saying something about the regulatory regime which governs (at least in a limited way) the interface between electricity lines and trees.
THE REGULATORY CONTEXT
[4] The potential for trees to interfere with electricity lines is obvious, as is the public interest in preventing them from doing so. No doubt for that reason, s 19 of the Electricity Act 1968 (the EA68) provided:
19 Removal of trees causing damage to electric lines –
(1) If any tree growing on any land causes or is likely to cause damage to an electric line, the General Manager (in the case of a line erected by the Minister under this Act)3 or the licensee (in the case of a line licensed under section 20 or section 21 of this Act) may give notice to the owner or occupier of that land to remove the tree or any part thereof, and if the owner or occupier fails to comply with the notice within the time specified therein (being not less than 7 days) the General Manager or the licensee, as the case may require, may enter upon the land and remove the tree or any part thereof, but so that no unnecessary damage is done or incurred thereby.
…
the Forest. Roger Dickie is a director of each of the defendants. Unison owns and manages an electricity lines network in the Hawke’s Bay, Rotorua and Taupo regions.
2 Rylands v Fletcher (1868) LR 3 HL 330.
3 The words “electricity operator” were substituted for the words “General Manager (in the case of a line erected by the Minister under this Act) in 1987.
(2) Where pursuant to this section any tree or part of a tree is removed, compensation, to be assessed in the manner prescribed by the Public Works Act 1928, shall be payable if the tree was growing on the land before the erection of the electric line, but not in any other case.
[5] In other words, an electricity operator/works owner could require a tree owner to cut down a tree that was likely4 to cause damage to an electric line and the tree owner would only be compensated for that if the tree was growing on the land before the works were placed there.
[6] The EA68 was, however, repealed by the Electricity Act 1992 (the EA92). That Act, together with the Energy Companies Act 1992, were the legislative cornerstones of the electricity reforms in the early 1990s. Under those reforms, the newly privatised energy companies did not retain their predecessors’ statutory powers to enter private property to construct and maintain electrical works5 or to trim trees, although ss 22 – 23C of the EA92 preserved rights to maintain, upgrade and inspect existing works. As I understand it, the thinking was that it was preferable to leave electricity network operators to deal with such matters under the Resource Management Act 1991 (RMA)6 and private law processes.
[7] That said, however, s 169 of the EA92 did contemplate the promulgation of regulations for the of regulations for the purpose (inter alia) of:
(g)Controlling the existence and location of the whole or any part of any tree or vegetation that is in the vicinity of, or may affect, any works or electrical installation, including (without limitation)—
(i)Requiring the removal of the whole or any part of any tree or vegetation:
(ii)Requiring the removal of any debris produced as a result of any work carried out pursuant to the regulations:
4 No doubt there would have been room for debate as to how “likely” the damage was required to be.
5 Electric Power Boards Act 1925; Electricity Act 1968. The power to require trees to be trimmed or cut down contained in s 133 of the Public Works Act 1981 applies only where the trees impinge or potentially impinge on a public work (ie a work owned by the Crown or a local authority).
6 Part 8 of the Resource Management Act 1991 enables a network utility operator to apply to become a “requiring authority” and (so) to apply for a designation for a work or in relation to any land, water, subsoil, or airspace where a restriction is reasonably necessary for the safe or efficient functioning or operation of such a work.
(iii)Prescribing the person or persons who shall meet the costs of carrying out any work required pursuant to the regulations, and providing for the recovery of such costs:
(iv)Providing for the payment of the costs of remedying any damage caused to any works by any tree or vegetation, or any part of any tree or vegetation, where that damage arises (whether directly or indirectly) out of any failure to comply with the requirements of the regulations; prescribing the person or persons who shall pay those costs; and providing for the recovery of those costs:
[8] And s 58 of the EA92 provides that where any tree or part of a tree is removed pursuant to such regulations:
… compensation, to be assessed in the manner prescribed by the Public Works Act 1981, shall be payable if the tree or vegetation was growing on the land before the construction of the works or electrical installation but not in any other case.
[9] It was to be another ten years, however, before the Electricity (Hazards from Trees) Regulations 2003 (EHTR) were, in fact, promulgated. Their express purpose is to:7
... protect the security of the supply of electricity, and the safety of the public, by-
(a)prescribing distances from electrical conductors within which trees must not encroach; and
(b)setting rules about who has responsibility for cutting or trimming trees that encroach on electrical conductors; and
(c)assigning liability if those rules are breached; and
(d)providing an arbitration system to resolve disputes between works owners and tree owners about the operation of these regulations.
[10] The distance from a conductor within which trees must not encroach is referred to in the EHTR as the growth limit zone (GLZ). The GLZ varies depending on the voltage of the conductor. For a 33kV line such as the Esk Feeder the GLZ is 2.5 metres.8 There is also a wider notice zone, and a narrower dispensation zone in certain cases.
7 Electricity (Hazards from Trees) Regulations 2003, reg 3 (EHTR).
8 Schedule.
[11] The rules for cutting and trimming trees that encroach on those zones principally revolve around three types of notice.
[12] First, a “hazard warning” notice may be given by a works’ owner to a tree owner regarding trees encroaching within the notice zone.9 Hazard warning notices do not require a tree owner to act. Rather, they inform the tree owner about the zones, identify the encroaching trees and set out the rights and obligations of each party.
[13] Secondly, there are “cut or trim” notices which can be issued by a works’ owner to a tree owner, once trees have actually encroached on the GLZ.10 A cut or trim notice triggers the tree owner’s obligation to cut or trim back to the “notice zone”.11
[14] Reg 11(2) makes it clear that it is the works’ owner (not the tree owner) who must pay for the first cut or trim. Thereafter, however, financial responsibility lies with the tree owner unless that owner provides a “no-interest” notice to the works owner (as to which see below).
[15] Regulation 11(3) provides a works’ owner with the power to carry out the cut or trim itself, where it has notified its intention to do so in the cut or trim notice and has obtained consent to enter the property.12 Where a works’ owner has exercised this cut or trim power, the works’ owner must:
(a)remove or cause to be removed any resulting debris that falls on any adjoining land; or
(b)ensure that any resulting debris that falls on any adjoining land is tidied or dealt with in such a way that it does not affect the use or enjoyment of the land by its owner or occupier.
9 Regulations 6 and 7.
10 Regulations 8 – 12.
11 A works owner is also permitted to act without notice in relation to trees posing an immediate danger (reg 14); and to sever and remove any tree roots to permit the safe repair or operation of an underground conductor (reg 13).
12 If consent is refused, the works owner does not have to meet the reasonable costs.
[16] The same “remove or tidy” obligation applies to a tree owner, where it is the tree owner who is required to cut or trim a tree.
[17] The third type of notice is the “no-interest” notice, which may be issued by a tree owner to a works’ owner.13 The effect of a no-interest notice is to cede all necessary power and responsibility for a tree to the works’ owner. It gives the works’ owner the power to remove or trim the tree at its own discretion and shifts liability for damage to works to the works’ owner. Where the works owner exercises this power to remove or trim it must, if asked by the owner or occupier of the land either-14
(a)remove or cause to be removed any debris produced in the removal or trimming of the tree; or
(b)ensure that any debris produced in the removal or trimming of the tree does not interfere with the use or enjoyment of the land by its owner or occupier.
[18] It seems tolerably plain, however, that the EA92 and the EHTR are not intended to deal completely or exclusively with the legal interface between trees and electricity works. More particularly:
(a)Regulation 38 expressly provides that the right to compensation under s 58 of the EA92 is not affected by the regulations.15
(b)Regulation 40 provides:
These regulations do not affect any other claims that a works’ owner may have against a tree owner in respect of any damage caused to works by a tree owner.
(c)Regulation 41 provides that the works’ owner and a land owner may also opt out of the regulatory regime (except to the extent of the GLZ specifications) by reaching their own “specified agreement” on the trimming or felling of trees and associated costs.
13 EHTR, reg 15.
14 Regulation 16(4).
15 See [8], above.
[19] And as well as the possibility of a works’ owner making a claim in tort for tree damage:
(a)works’ owners can potentially utilise the designation procedures under pt 8 of the RMA; and
(b)ss 333 and 334 of the Property Law Act 2007 (PLA) confer on owners and occupiers of land an ability to apply to Court for an order that an owner or occupier of land on which a tree is growing or standing to remove, repair, or alter the structure or to remove or trim the tree, regardless of whether that tree constitutes a legal nuisance.16
[20] It is against this regulatory background that I now turn to the facts of the present case.
FACTS
[21] In the early 1990s the defendants bought a block of land which had formerly been a beef and sheep farm. Included on the land were power poles between which run about 400 metres of a much longer 11kV power line and about 400 metres of a much longer 33kV power line, both of which are now owned by Unison. The lines and their associated works had been placed there some years before, in the late 1960s or early 1970s.
[22] As mentioned earlier, it is the 33kV line known as the “Esk Feeder” which is presently in issue.17 It runs north from the Tamatea Substation in Napier through to the Tutira Substation and “tees off” to both the Esk Substation and Esk Hydro Generation Scheme. It provides power to approximately 380 customers in the area.18
[23] While there is nothing on the certificate of title to the land recording the presence of the electricity works, there is no dispute that the defendants knew of their
16 In the present case, however, Unison is not an “owner” or “occupier” of land as those terms are defined in the Property Law Act 2007 (PLA).
17 The 11kV line is known as the “Valley Feeder”.
18 It is also used for the transmission of power generated by the Esk Hydro Power Scheme operated by Trustpower Ltd.
existence at the time of acquisition. Nor is there any dispute that Unison is entitled (by virtue of ss 22 - 23C of the EA92) to enter the Forest to undertake repairs to, and maintenance on, its works, without notice if there is urgency.
[24] The Forest was planted in 1994, after the enactment of the EA92 but before the promulgation of the EHTR. The planting took account of the existing works by leaving corridors of unplanted land around and along them. These corridors span about 15 metres on each side of the Line. A mature pinus radiata is over 30 metres tall.19
[25] It seems that by 2010 the trees planted on the edge of the Esk Feeder corridor had grown taller than the fall distance between those trees and the Line. In other words, if one of those trees fell in the direction of the Line then there was a very good chance the Line would be hit and damage caused. Indeed, that was what began to happen. Unison’s evidence was that it experienced outages following trees failures in December 2010 and July 2011. Then, in September 2013, there was a windstorm which resulted in a tree fall which caused around $20,000 worth of damage to a two pole structure on the Line.20
[26] On 6 December 2013 Unison’s asset manager, Mr Grant Hogan, gave a presentation at a meeting of the Hawke’s Bay Forestry Group, including representative of the third defendant, Forest Management (NZ) Ltd (FMNZ). The presentation gave Unison’s perspective on issues associated with fall hazard trees, using the September 2013 windstorm as an example of the risks posed. Mr Hogan explained the consequences such events had power outages, damage to Unison’s assets and associated costs.
[27] Mr Hogan concluded his presentation by saying that what Unison wanted to achieve was a “significant reduction in risk, cost, and performance related impacts on Unison and its assets as a result of fall hazard trees”. He said this could be accomplished by having wider corridors (and so fewer trees within fall distance) and
19 In general terms, trees are not harvested by commercial foresters until they have reached maturity.
20 On 5 April 2012, 3 January 2014 and 2 November 2014 tree failures in the Forest had also resulted in outages on the 11kV line.
the “[J]oint development of innovative solutions to reduce risk to all stakeholders without significantly impacting on returns to forestry owners.” As I understand it, however, no specific solutions were tabled or discussed at the meeting.
The Falling Hazard Notice
[28] On 27 February 2015, Unison sent FMNZ a notice of its own devising. It was modelled on the “Cut or Trim” notices prescribed by the EHTR, but was entitled “Falling Hazard Notice”. It referred to potential liability for damage caused by trees falling on Unison’s powerlines and recommended that “pine trees on your land between Unison Power poles numbered 157173 and 157163” be cleared to “eliminate line strike”.
[29]On 1 July 2015, FMNZ’s lawyers wrote to Unison about the notice. They:
(a)disputed its validity on the basis that it was not a hazard limit notice or a cut or trim notice issued under the EHTR;
(b)asserted that the owners of the Forest were not legally required to cut or trim trees which did not come within the GLZ;
(c)questioned Unison’s suggestion that the Forest owners could be liable in nuisance;
(d)contended that the Notice was “an attempt by Unison to widen the tree corridor around its conductors beyond what it is already entitled to” under the EHTR; and
(e)advised that FMNZ would only be open to a wider corridor if it were “compensated appropriately”.
The four strikes
The First Strike and its aftermath
[30] On 24 September 2015, two trees from the Forest fell onto the Line a short distance north of side-by-side poles to which Unison had assigned the numbers 145521 and 145522 (the First Strike). The trees concerned were around 31 metres tall and had been growing on a slope on the edge of the cleared corridor, approximately 20 metres from the western side of the Line. The damage to the Line resulted in a supply outage. It took around 48 hours before power to the last customer was restored. All customers serviced by the Line were affected.
[31] On 14 December 2015, Mr Hogan replied to the July letter from FMNZ’s solicitors, saying that:
(a)the Falling Hazard Notice was intended to advise tree owners of the risk posed by particular trees to Unison’s assets;
(b)the Notice was not issued pursuant to the EHTR;
(c)the EHTR imposed only a minimum mandatory standard and did not govern what might be reasonable in all circumstances; and
(d)there were grounds for a claim in nuisance against the owners and managers of the Forest.
[32] In early January 2016 there was a meeting between Ms Vivian of Unison and Mr Brady of FMNZ. Ms Vivian outlined Unison’s concerns about the trees on the Block that were within fall distance of the Line. After the meeting, Ms Vivian sent Mr Brady a follow-up email reiterating these concerns and attaching an aerial map showing the trees of most concern to Unison. These were the trees on the sloped land adjacent to the western side of Line, whence the two trees had fallen during the First Strike.
[33] Ms Vivian asked Mr Brady when this area of trees was due to be harvested, saying that if harvesting was not to occur in the short term, Unison would like to see those trees cleared from the corridor before the upcoming winter, to prevent any reoccurrences.
[34] On 19 January 2016 Mr Bell of FMNZ replied to Ms Vivian, reiterating that FMNZ's position remained that which had been outlined in the letter of 1 July 2015 and that FMNZ was prepared to discuss fall distance only “on the basis that forest owners are being compensated for lost value, they have followed the regulations as set out in legislation, and are now being asked to increase the setbacks.”
[35] On 19 April 2016, FMNZ’s solicitors responded to Mr Hogan’s letter of 14 December 2015. They said:
(a)FMNZ did not consider it realistic for Unison to expect a widening of corridors on the Forest “beyond that which is expected by statute without compensation to the tree owners”;
(b)the EHTR did not permit Unison to issue the Falling Hazard Notice.
(c)the EHTR did not permit for claims to be brought against a tree owner for an “act of God”;
(d)Unison had no interest in land capable of giving rise to a claim in nuisance; and
(e)FMNZ were open to widening the corridor or granting an easement over the Forest provided it would receive “appropriate compensation”.
The Second Strike and its aftermath
[36] On 8 July 2016, another tree fell onto the Line between Pole 145523 and Poles 145521 and 145522 (the Second Strike).21 Again, the tree that fell was approximately
21 The evidence suggests that there had been no weather event of any note prior to the second strike.
30 metres tall and had been growing around 20 metres from the Line at the edge of the cleared corridor. It had been planted on the sloped land adjacent to the western side of the Line, in the vicinity of the two trees which caused the First Strike. The tree was also from the same area of concern specified by Ms Vivian in her meeting with, and subsequent email to, Mr Brady of FMNZ on 8 January 2016.
[37] As a result of the Second Strike, there was a supply interruption of up to 21 hours while the necessary repairs were carried out on the Line. All customers serviced by this Line were affected.
[38] Following the Second Strike FMNZ agreed to remove approximately 30 trees near the Line as a precaution.
The Third Strike and its aftermath
[39] One month later, on 6 August 2016, a fourth tree fell onto the Line a short distance south of side-by-side poles numbered 145521 and 145523 (the Third Strike). As before, the tree had been planted on the sloped land towards the western side of the Line.
[40] The Third Strike caused a supply interruption of up to six days while the necessary repairs were carried out which were delayed due to the impact of a major snow storm. All customers serviced by this Line were affected.
[41] On 5 October 2016, Unison’s Chief Executive wrote to the second defendant, Roger Dickie NZ Ltd (RDNZ) advising that:
(a)as a consequence of the Second and Third Strikes, Unison had suffered power outages and incurred $133,376.98 in repair costs;
(b)the concerns raised by Ms Vivian in January 2016 about the risk posed by the tree fall distance had not been adequately addressed;
(c)Unison held RDNZ responsible for the damage arising from the Second and Third Strikes as the damage was a wrongful interference with
Unison’s lawful and reasonable use of the land in circumstances where RDNZ had failed to exercise the care expected of a reasonably prudent forestry operator; and
(d)Unison would be formally claiming the total cost of repairs from RDNZ for the Second and Third Strikes.
[42] An October 2016 Forest Manager’s Report prepared for the fourth defendant (Nottingham Forest Partnership) discussed the Hazard Warning Notice and Unison’s request to widen the power corridor from early 2015. The Report stated that “if we allow Unison to widen the power corridor without any form of compensation, this would create a precedent that has serious implications for all forest owners with network lines running through their property.”
[43] On 18 November 2016, solicitors for RDNZ and FMNZ responded to Mr Sutherland’s letter, denying liability and reiterating their earlier position.
The Fourth Strike and its aftermath
[44] On 5 September 2018, after these proceedings were filed, another tree strike occurred (the Fourth Strike). The trees which fell were once again planted on the slope on the western side of the Line.
[45] The Fourth Strike caused a supply interruption of approximately five hours while the necessary repairs were carried out. All customers serviced by this Line were affected.
Consequences for Unison and its customers
[46] The damage caused to the Line by the strikes required Unison to incur repair costs, on each occasion. The reasonableness of certain aspects of those costs is disputed and I return to that issue later.
[47] As already noted, each strike also caused supply disruptions of between five hours and six days while the damage to the Line was repaired. After the Third Strike,
the frustrations of many affected customers came to a head. By way of example only, on 8 August 2018, following the outage caused by the Third Strike, one customer wrote on Unison's Facebook page:
No disrespect to unison workers who do their best in trying conditions. But once again there is a major fault on the Tutira line which has occurred in the 300 m forestry corridor at Nottingham forest. This Roger Dickie forest has claimed 10 poles in 2 years. And now two more. Forestry hides behind the legislation that allows them to plant 5m of the line yet their trees are now 20 metres high. This in a well-known high rainfall and high wind area. Unless legislation changes expect more outages and increased power accounts. We have had no snow just 230 ml in 48 hours this is not unusual for this area and would happen on average twice a year. Sorry to be a downer but the residents in Tutira need to know why their livelihoods are being affected and that it is preventable.
[48] As well, Unison is also regulated under pt 4 of the Commerce Act 1986 by the Commerce Commission and is liable to a civil penalty under the Act if it contravenes any price quality requirements under the Act. These include an obligation not to exceed a specified average number and a specified average duration of power outages experienced by its customers throughout the year.
[49] Time loss is measured through the System Average Interruption Duration Index (SAIDI). The Commerce Commission’s maximum limit for Unison customers without power was 110.2 SAIDI minutes. In part due to the outages caused by the four strikes, Unison has been unable to meet these targets, with its SAIDI minutes for the 2016/17 year being 124.6 minutes, and 128.7 minutes in the 2017/18 year. It has incurred penalties as a result.
Can such tree falls be predicted?
[50] The defendants gave evidence about routine forest inspections undertaken by them. By way of summary:
(a)FMNZ has a policy of inspecting all forests under its management every eight to 10 weeks;
(b)these inspections involve an assessment of overall forest health, including the identification of pest damage, weeds, damage to fences and any hazards;
(c)where there is a power line running through the forest, the trees down both sides of the corridor are inspected with a view to identifying any that appear to be at risk of falling;
(d)if there are any trees of concern, a closer inspection is undertaken and the lines company is notified;
(e)non-routine forest inspections (often initially involving an aerial survey from a helicopter) are also undertaken following any major weather event; and
(f)all forestry inspections are recorded in a “property visit check list” report.
[51] It is not, however, disputed that these routine inspections did not and could not reasonably have identified the trees which fell in the four strikes. That is because root plate failure can occur in otherwise healthy trees, as a result of extreme weather conditions and/or saturated soil.22
[52] Expert evidence about predicting the risk of such failure in the Forest was given by:
(a)Mr David Spencer (an arboriculturalist); and
(b)Mr Mark Roberts (an arborist).
[53]Each expert employed a different risk assessment methodology:
22 In essence, root plate failure occurs where the soil loses cohesion to a point where (usually in adverse weather) the roots of the tree are no longer sufficient to hold the tree in the soil.
(a)Mr Spencer used the Quantitative Tree Risk Assessment (QTRA) tool, which provides a quantitative probability of risk, and is designed to predict the likelihood of tree failure within a single year.23
(b)Mr Roberts used the Tree Risk Assessment Qualification (TRAQ) tool, which is a qualitative measure designed to provide tree owners and managers with information to enable them to make informed risk management decisions.24
[54] Mr Spencer had conducted two inspections of the Forest. His evidence was that there were approximately 500 trees within falling distance of the Line. He explained that the QTRA methodology involves making an assessment of:
(a)The “probability of failure” (POF) of trees in the Forest. POF ratings range from 7 (being the lowest risk, with a probability of fall within a year being between one in one million and one in 10 million) to 1 (being the highest risk, with the probability of fall with a year being between 10 and 100 per cent). POF assesses the probability of fall under “normal” weather conditions, by which is meant the range of usual weather conditions experienced at the location throughout a year, but not including severe weather events.
(b)The “target value” by which is meant the likely value of the property damage relating from a tree failure. Target values range from 6 (being the lowest likely damage value of between $4 and $36) to 1 (being the highest likely damage value of between $360,000 to $3,600,000).
(c)The risk of harm (ROH) rating, which is assessed by combining the POF and the target value in relation to a particular tree and which ranges between a “broadly acceptable” risk to an “unacceptable” risk.
23 The Quantitative Tree Risk Assessment (QTRA) framework is, however, primarily a measure of tree health and condition, and the weather data indicates that the most likely cause of tree failure is soil failure in wet conditions.
24 Tree Risk Assessment Qualification (TRAQ) is a tree risk assessment programme developed by the International Society of Arboriculture (ISA) and is based on its Best Management Practice for Tree Risk Assessment.
[55]Using this QTRA methodology, Mr Spencer concluded that:
(a)the trees in the Forest had a baseline POF rating of 6 (approximately one tree failure in 200 years);
(b)the target value of damage to the Line fell into category 2 (a likely damage value of between $36,000 and $360,000); and
(c)only one tree fell into the “unacceptable” ROH range (tree 39).25
[56] But because a QTRA assessment does not take account of severe or unusual weather events, it was impossible to use it to predict root plate failure. Indeed, during his first inspection, Mr Spencer had identified as healthy and defect-free three trees that subsequently fell in the Fourth Strike.
[57] As regards the effect of both severe weather and past strikes on his risk assessment, Mr Spencer observed:
The 500 trees within strike distance of the Line are planted within a relatively short distance of one another, and are planted in the same soil and slope conditions to those in which the failed trees were planted. …
I am aware of 16 whole tree failures within this area. Fourteen of these trees fell in connection with the Strikes, the First Strike having occurred in September 2015. Based on an assessment of their condition at the time of the First Inspection, the other two trees either fell before the First Strike (tree 49), or on or around the same time as the First Strike (tree 43).
Sixteen failures in the last four years represents a failure rate of 0.8% per year, which means an average of around four trees per year.
Having reviewed the publicly available weather data … it is clear that trees are falling when the weather is wet. The weather data at the time of each of the Strikes shows that these events occurred at times of relatively high winds and, in particular, high rainfall. This is consistent with the fact that they are falling due to root plate failure.
[58] Mr Spencer noted that it was necessary to approach the rainfall data with caution because:
25 There were two further “unacceptable” trees identified near the 11kV line.
(a)the closest weather station was some eight kilometres from the Forest, at Tutira;
(b)tree failure can be affected by not just the volume of rainfall but also wind force and direction, which can be very localised; and
(c)soil can be affected by a build-up of rain over a number of days, so daily rainfall is, at best, a guide to soil moisture content.
[59] Next, Mr Spencer observed that a strike has occurred on three of the six occasions on which the rainfall recorded at Tutira had exceeded 80 mm since 2012.26 More specifically:
(a)the First Strike occurred when rainfall was 86 mm, although the rainfall over the previous two days had been very high (135.4 mm was recorded on 21 September 2015);
(b)the Second Strike occurred during rainfall of only 33.6 mm, a daily level which has occurred or been exceeded some 40 times since 2012;
(c)the Third Strike occurred when rainfall of approximately 114.6 mm was recorded; rainfall of around or above this level has only been recorded three times since September 2012; and
(d)the Fourth Strike occurred in rainfall of around 84.8 mm, which is relatively common, with daily rainfall at or above than this level occurring eight times since 2012.
[60] Mr Spencer acknowledged that that predicting healthy tree failure in adverse weather conditions is not straightforward. But, he said:
…it is clear that the trees in the area around the Line are regularly failing in wet weather conditions. If these rainfall events continue to occur with the
26 Mr Chatterton of Unison produced a schedule of weather data recorded taken at Tutira since 2012 (which is when recordings began).
same frequency, I would expect the tree failure rate to reflect the failure rate in recent years, and for strikes to continue at around the same rate.
[61] He concluded that if he had been asked by the defendants to risk assess the trees around the Line in the knowledge of previous root plate failures, he would have advised:
(a)root plate failure can occur to healthy trees in wet and windy conditions and, as a consequence of the Strikes, it is clear that healthy trees along the Line are prone to failure in such conditions;
(b)he would expect other healthy trees to fail in similar conditions, so the risk of future tree falls was dependent on the occurrence of future weather events;
(c)the very wet conditions in which the First Strike had occurred were unusual but there could be no guarantee that such weather would not occur again, which in fact it did (when the Third and Fourth Strikes occurred);
(d)because the rainfall levels when the Second Strike occurred were much lower and more commonplace, the known risk of tree failure became was significantly higher;
(e)each tree fall event adds to the risk that newly exposed trees will fail;
(f)this increased risk would not cause him to alter his QTRA POF ratings because the QTRA framework is primarily a measure of tree health and condition, whereas the weather data indicates that the most likely cause of tree failure is soil failure in wet conditions;
(g)the only way to mitigate the risk to the Line is to top or harvest the trees;
(h)because the tree crop is already mature, it would be reasonable to harvest the trees to eliminate the risk to the Line, certainly on the western side of the line, where tree failure is very likely to result in contact with the Line; and
(i)partial harvesting needs to be carefully managed because it exposes the remaining trees to new wind load.
[62] Mr Roberts agreed with Mr Spencer’s conclusions in terms of both the QTRA assessment and its limitations. He noted that while predicting tree failure based on mathematical probability is not currently accepted as best practice within the aboricultural community, in the context of a planation forestry it is potentially applicable due to the large number of trees of the same type and age, in close proximity to one another and which have all been managed in the same way and experience the same soil and climatic conditions.
[63] As far as the alternative TRAQ assessment methodology was concerned, Mr Roberts explained that it involves two stages:
(a)a risk rating (which can be low, moderate, high, or extreme); and
(b)an assessment of the tolerability of the risk, in the eyes of the tree or the asset owner.
[64] In terms of the first stage, Mr Roberts’ assessment was that there was a “moderate” risk that a tree in the Forest will fall onto the Line and cause high-value property damage, or a major disruption. He said this risk rating was based on:
(a)Mr Spencer’s visual tree assessment;27
(b)an annual time frame;
(c)the history of prior tree failures on the site;
27 Mr Roberts did not, himself, inspect the Forest.
(d)the presence of similar trees exposed to the same or similar conditions;
(e)the likelihood of the same or similar weather conditions reoccurring;
(f)the patterns of whole tree failure and cause (windthrow, root disease, soil depth, soil moisture) or component failures; and
(g)the recent change in tree exposure to wind, as a consequence of prior tree failures.
[65] Mr Roberts said that if the time frame were to be adjusted to take account of the likely harvesting date (potentially in three years’ time) it was possible that the risk rating would increase from “Moderate” to “High”.
[66] In terms of the tolerability of risk, Mr Roberts took account of the consequences of power outages for Unison in terms of the SAIDI. He concluded:
Based on the adverse consequences to Unison from supply outages caused by tree falls on the Line, I do not believe that they would accept or tolerate a Moderate risk rating. Unison would view certainty of supply to their customers, managing their SAIDI minutes, and reducing damage to their asset as a “significant benefit” and that it would be reasonable to assume that a plantation forestry company, such as the defendants, would have the resources to carry out tree based mitigation.
[67] In the end, however, all that can really be taken from the expert evidence (in terms of assessing the risk of any specific tree failing) is that:
(a)healthy plantation pine trees can fail in adverse weather conditions for a number of reasons (including root plate failure);
(b)some risk factors are elevated where trees are grown around a cleared corridor;
(c)each tree fall event adds to the risk that newly exposed trees will fail; and
(d)earlier falls of trees in a particular area might suggest that future falls in that area are more likely.
UNISON’S CLAIMS
[68]As noted earlier, the causes of action pleaded by Unison are in nuisance,
Rylands v Fletcher and (alternatively) in negligence. By way of summary:
(a)The nuisance pleading is that:
(i)by virtue of ss 22 and 23 of the EA92 Unison has an interest in or is connected to the land over which the Line is installed;
(ii)one or more of the defendants possess and control the Forest land and the trees planted on it;
(iii)the use of the Forest by one or more of the defendants has unreasonably and substantially interfered with Unison’s right to the use and enjoyment of the land over which the Line is installed because the defendants have allowed trees on the Forest land to fall onto the Line.
(iv)the use of the Forest by one or more of the defendants has created, and continues to create, a state of affairs that unreasonably and substantially interferes with Unison's right to the use and enjoyment of the land over which the Line is installed, by:
Ø allowing trees growing near to the Line to reach a height at which they could fall onto the Line;
Ø failing to ensure that those trees are inspected and managed in a way that excludes any risk, or alternatively any material risk, to the Line; and
Ø allowing trees to fall onto the Line.
(v)Unison’s loss due to the damage caused by the four strikes was reasonably foreseeable by the defendants.
(b)The Rylands v Fletcher pleading is:
(i)by virtue of ss 22 and 23 of the EA92 Unison has an interest in or is connected to the land over which the Line is installed;
(ii)one or more of the defendants possess and control the Forest land and the trees planted on it;
(iii)each of the four strikes caused damage due to:
Ø an escape of something harmful from the Forest land, due to a non-natural use of that land; and/or
Ø other interference with Unison’s property rights arising from a non-natural use of the Forest land;
(iv)the damage caused by the four strikes was reasonably foreseeable by the defendants.
(c)The negligence pleading is:
(i)the defendants owe Unison a duty to take reasonable care and to exercise reasonable skill in managing and maintaining the trees on their land in order to ensure that none fall onto or otherwise come into contact with the Line;
(ii)the defendants breached this duty by allowing trees growing near to the Line to reach a height at which they could fall upon the Line while failing to:
Ø implement a regular programme of inspection of the trees to identify trees with an elevated risk of falling on the Line;
Ø pruning or harvesting the trees at risk of falling onto the Line;
Ø carry out regular trimming of the trees;
Ø identify and trim trees that grew to within the GLZ of 2.5 metres prescribed by the ETHR;
Ø identify and remedy the risks caused by trees that ultimately caused each of the four strikes;
(iii)the defendants continue to breach their duty of care by allowing trees growing near to the Line to reach a height at which they could fall onto the Line while failing to do the things referred to in (ii) above in respect of other trees adjacent to the Line.
(d)Unison has suffered loss and damage as a result of the defendants’ breach of duty.
[69]In all three causes of action the remedies sought are:
(a)an injunction requiring the defendants to:
(i)ensure that no tree on the Block is of such a height and proximity to the Line that it could fall on the Line;28 or
(ii)in the alternative, ensure that the defendants operate an inspection and maintenance regime sufficient to ensure that no further trees will fall on the Line;
28 The terms of this injunction were modified during the trial so that only the trees on the western side of the Line would be implicated.
(b)a declaration that the defendants are jointly and severally liable for the costs of remedying damage to the Line caused by each of the four strikes;
(c)damages in the amount of $228,828.85, representing the cost of remedying the damage caused by the four strikes; and
(d)interest and costs.
[70]And so I turn now to consider the merits of the claims.
ANALYSIS
Preliminary note: nuisance/Rylands v Fletcher
[71] At the outset it is useful to note that, as pleaded, the nuisance claim relates to the continuing “state of affairs” created by the trees on the defendants’ land, whereas the individual tree falls are pleaded under Rylands v Fletcher. The underlying thinking was, no doubt, that Rylands v Fletcher is generally regarded as more apt in cases of “one off”, rather than continuing, interference with a plaintiff’s interest.
[72] In closing submissions, however, Mr May said that the Rylands v Fletcher aspect of the claim was not pursued. As I understand it, that change in position was predicated on the assumption that both the “state of affairs” and the falling trees constituted nuisance simpliciter. Given that the individual tree falls form the foundation for the damages claim, the concession cannot have been intended to signal an abandonment of the strict liability claim relating to those falls.
[73] Notwithstanding Mr May’s change of position, I do not propose to put Rylands v Fletcher completely to one side at the outset. Importantly, there is no prejudice to the defendants in doing so because by the time of Mr May’s advice, Mr Thain had already made his closing submissions which (necessarily) included submissions directed at the Rylands v Fletcher aspect of the claim.29
29 His principal position was that liability could not be strict (whether in nuisance or under Rylands v Fletcher) and that fault was required.
The requirement that the plaintiff has a legally protected interest in land
[74] Both the nuisance pleading and the pleading in terms of Rylands v Fletcher are predicated on the proposition that Unison has an interest in or is connected to the land over which the Line is installed. That no doubt reflects the orthodoxy that nuisance is “a tort directed against the plaintiff’s enjoyment of [his or her] rights over land”.30 So while an owner of property can bring an action in nuisance, a person who is “merely present in the house” cannot.31
[75] Equally, however, it is trite that legal title to the land is not required. The cases confirm that parties with sufficient rights over land are not limited to freeholders. Tenants, licensees with exclusive possession of a property,32 grantees under an easement,33 and those with rights of profit a prendre have all been held to have found to have an interest in land capable of giving rise to a cause of action in nuisance.
[76] Unison bases its claim to a relevant interest in land on ss 22 and 23 of the EA92. As noted earlier, those sections give a “works owner” under that Act the right to:
(a)continue the fixing and installation of the Line;34
(b)own the Line;35
(c)maintain the Line;36 and
(d)upgrade the Line.37
[77] The difficulty is that those provisions tell us nothing about how the works came to be placed on the land and little about the existence or nature of any interest in that
30 Hunter v Canary Wharf [1997] AC 655, [1997] 2 All ER 426 (HL) at 656.
31 At 690.
32 Newcastle-under-Lyme Corp v Wolstanton Ltd [1947] Ch 92 at 106-108.
33 Paine & Co Ltd v St Neots Gas & Coke Co [1939] 3 All ER 812 (CA), adopted in Lyons v Breslin
(2010) 11 NZCPR 262 (HC) at [33].
34 Electricity Act 1992, s 22.
35 Section 22.
36 Section 23(1).
37 Section 23(3).
land acquired as a result. And counsel for Unison were not able to enlighten me further as to those matters. As noted earlier, there is nothing recorded on the title to the land indicating the presence of the lines or any separate interest in the land on which they sit.
[78] Without researching the point extensively, my assumption is that, given the timing of the lines’ placement on the land (late 1960s to early 1970s), their construction was authorised under either s 82 of the Electric Power Boards Act 1925 or s 21 of the EA68, possibly in combination with the Public Works Act 1928. I note, in that regard, that on 14 March 1968 the Governor-General promulgated the Hawke’s Bay Electric Power Board Electric Lines Licence 1968 pursuant to the Public Works Act 1928 and the Electric Power Boards Act 1925 which, subject to certain specified conditions, authorised the Hawke’s Bay Electric Power Board to “lay, construct, put up, place, and use electric lines, and to construct electric works” within the Hawke’s Bay Electric Power District as defined in a Proclamation Gazetted on 28 September 1967 (and subsequently amended).38
[79] Historically, permission enabling a person to lay or install infrastructure on or over land belonging to or in the occupation of another was known as a wayleave. The orthodoxy is that a wayleave (which incorporates permission subsequently to enter the land to inspect and maintain that infrastructure) is analogous to a contractual licence and does not constitute or give rise to an interest in land.39
[80] I am not, however, inclined to proceed on that basis here. It seems to me that as a matter of policy, the presence of the works must give Unison an interest that is capable of founding an action in nuisance or Rylands v Fletcher. The decision in Charing Cross Electricity Supply Co v Hydraulic Power Co is instructive in that regard.40 There, the plaintiff was the owner of electricity cables, which suffered damage from an escape of water from the defendant’s hydraulic mains. After
38 “The Hawke’s Bay Electric Power Board Electric Lines Licence 1968” (14 March 1968) 14 New Zealand Gazette 409 at 416. It appears (although I am not certain) that the land on which the Forest was later planted is included within this District.
39 See the discussion in Charles Hamer and Gary O’Brien Electricity Wayleaves, Easements and Consents Litigation Practice and Procedure (Estates Gazette, England, 2007).
40 Charing Cross Electricity Supply Co v Hydraulic Power Co [1914] 3 KB 772 (CA).
observing “if that was not a nuisance, I do not know what would be one”41 Lord Sumner said:42
I think that this present case is also indistinguishable from Rylands v Fletcher. Two grounds of distinction have been suggested. It is said that the doctrine of Rylands v Fletcher is applicable between the owners of adjacent closes, which are adjacent whether there be any intermediate property or not; and that it is a doctrine depending upon the ownership of land and the rights attaching to the ownership of land, under which violations of that species of right can be prevented or punished. In the present case, instead of having two adjacent owners of real property, you have only two neighbouring owners, not strictly adjacent, of chattels, whose chattels are there under a permission which might have been obtained by the private licence of the owners of the soil, though in fact obtained under parliamentary powers; hence the two companies are in the position of co-users of a highway, or at any rate of co-users of different rooms in one house and Rylands v Fletcher does not apply. … I am unable to agree with any of these distinctions …
[81] In any event, the decision of the New Zealand Court of Appeal in Hutt Valley Electric Power Board v Lower Hutt City Corp has long since confirmed that, by the exercise of power under s 82 of the EPBA, a power board acquired an interest in land, at least for rating purposes. 43 More specifically, the Court held that:
(a)the poles, cross-arms, insulators, and wires used by a Board for the transmission of electricity were covered by the words “lands, tenements, or hereditaments” in the definition of rateable property; and
(b)the Board’s interest in the soil occupied by its lines and that portion above ground so occupied, and its right thereto, is a corporeal hereditament, which, as such, is capable of ownership and occupation.
[82] The Hutt Valley Electric Power Board decision has later been endorsed in other “infrastructure” cases (also in a rating context) in which the Court has declined to follow English decisions to the effect that the infrastructure owners (or “undertakers”) are mere licensees, without an interest in land on or under which the infrastructure is
41 At 778.
42 At 779.
43 Hutt Valley Electric Power Board v Lower Hutt City Corp [1949] NZLR 611, (1949) 1 NZLRLC 572 (CA).
placed.44 For example, in Telecom Auckland Ltd v Auckland City Council the Court of Appeal said:45
The Telecommunications Act provides for ownership of the lines by the network operator when they are in the soil but, because their owner has an exclusive right to occupy the portion of the soil where they lie, that space is properly, and consistently with what was said ... in [the Auckland Gas] case, also to be regarded as owned for the time being by the operator. (In the case of overhead wires capable of movement, the space must encompass the area of their movement which cannot be shared in occupation.) An exclusive right of occupation of this kind, even for a limited purpose, is more than an easement because the owner of the rest of the soil is ousted. And since an easement in modern times is classified as an incorporeal hereditament, even that more limited interest would be within the definition of ‘Land’ in the Rating Powers Act. That being so, it is most unlikely that Parliament intended that a greater right, conferring exclusive possession of part of the soil should be accorded no more than the status of a mere license. It is, moreover, the distinguishing feature of a license that it does not confer exclusive possession, or does not do so on a more than very temporary basis.
[83] In the end, although Mr Thain did not concede that Unison had the requisite interest in land for nuisance or Rylands v Fletcher purposes, he did not seek strenuously to argue that these cases should be distinguished on the basis that what might properly be regarded as an interest in land in a rating context should somehow not be so regarded for the purposes of a nuisance claim. Accordingly, and based on the authorities just mentioned I am of the view that:
(a)Unison’s statutory right (once exercised) constitutes an interest in land in the form of a corporeal hereditament;
(b)the owner of the utility works has the exclusive right to occupy the portion of the soil where the works lie to the exclusion of all others;
(c)the interests of the owner of the surrounding land are ousted so long as the works remain in place;
44 See in particular Telecom Auckland Ltd v Auckland City Council [1999] 1 NZLR 426 (CA); Auckland City Council v Ports of Auckland Ltd [2000] 3 NZLR 614 (CA) and Tuapeka County Council v Otago Electric Power Board HC Dunedin CP132/89, 7 October 1992.
45 Telecom Auckland Ltd v Auckland City Council, above n 44, at 440 – 441 (citations omitted). The provision in question is materially identical to the “existing works” provision in s 22 of the Electricity Act 1992.
(d)as the statutory right confers exclusive possession, the utility company's interest in the land is greater than an easement or a license; but
(e)even if no interest in land can be said to exist, as a matter of policy, the existence and importance of the works must mean that Unison is possessed of a sufficient interest to found an action in Rylands v Fletcher or nuisance.
[84] Once that point is reached, there can be little doubt that Unison’s interest has been substantially interfered with by the falling trees. The essential question then becomes whether the defendants are strictly liable for the damage thereby caused.
The tree cases
[85] Mr Thain’s essential proposition for the defendants was that the authorities involving tortious liability for damage caused by trees demonstrate that the defendants’ liability here cannot be strict, either in terms of nuisance proper or under Rylands v Fletcher. Rather, he submitted that they demonstrate that fault on the part of the defendants must be established because:
(a)planting and growing trees is a natural use(r) of land (and so the falling trees cannot engage the rule in Rylands v Fletcher);46 and
(b)the alleged nuisance (the falling trees) was caused by weather events (natural causes without human intervention) operating on the trees.
[86] The authorities on which these (interrelated) propositions are based go back many years. I think I have now read most, if not all, of them. It seems to me that the following points emerge:
(a)a defendant who cuts off part of a tree growing on his land and drops it over the boundary directly into the plaintiff’s land is liable in trespass;47
46 Noble v Harrison [1926] 2 KB 332 at 333: “The planting of a tree on one's land does not bring anything unusual or dangerous onto it; it is the natural use of land to have trees growing on it”.
47 Lemmon v Webb [1894] 3 Ch 1, affirmed on other grounds in Lemmon v Webb [1895] AC 1 (HL).
(b)the mere planting and/or growing of trees by a defendant is generally regarded as a “reasonable” and “natural” user of land and so:48
(i)will not (without more) give rise to liability in nuisance;49 and
(ii)cannot (without more) be viewed as inherently dangerous such as gives rise to liability in Rylands v Fletcher;50
(c)planting and/or growing a tree whose branches or roots encroach on a neighbour’s land is, however, not a reasonable user of land because it involves an excessive or extravagant exercise of rights by a defendant (and so an unreasonable interference with the plaintiff’s interest in land);51
(d)accordingly, where the branches or roots of a tree growing on a defendant’s land encroach onto a plaintiff’s land:
(i)the plaintiff may take abatement action by removing the branches or roots but is not required to do so;52 or
(ii)if the encroachment has caused “actual and sensible” damage to the plaintiff, the defendant will be strictly liable for that damage in nuisance or (particularly in the case of poisonous trees)53 under the rule in Rylands v Fletcher;54 and
(iii)the plaintiff may (depending on the circumstances) obtain injunctive relief against ongoing or future encroachment;55
48 Matthews v Forgie [1917] NZLR 921 (SC) and Darroch v Carroll [1955] NZLR 997 (SC) at 999.
49 Richmond City Council v Scantelbury [1991] 2 VR 38, (1991) 68 LGRA 49 (VSC) and South Australia v Simionato [2005] SASC 412, (2005) 143 LGERA 128.
50 Molloy v Drummond [1939] NZLR 499 (SC) at 500; Matthews v Forgie, above n 48, at 925.
51 Mandeno v Brown & Wilkie [1952] NZLR 447 (SC) at 450; Smith v Giddy [1904] 2 KB 448 at 449 and Rose v Equity Boot Co & Hannafin (1913) 32 NZLR 677 (SC).
52 Smith v Giddy, above n 51, at 451 and Lemmon v Webb, above n 47.
53 Darroch v Carroll, above n 48, at 999 and Crowhurst v The Amersham Burial Board (1878) LR 4 Ex D 5.
54 Smith v Giddy, above n 51, at 450 – 451.
55 Mandeno v Brown & Wilkie, above n 51, at 451 and Woodnorth v Holdgate [1955] NZLR 552 (SC) at 554.
(e)in such cases it does not matter whether the defendant personally planted the trees;56
(f)absent some causative encroachment, a defendant will not be liable for damage caused by branches or trees falling from his property onto a plaintiff’s land unless the fall is the result of a specific defect or danger:
(i)caused by the defendant (through positive action or neglect);57 or
(ii)about which the defendant knew or should have known and in response to which he has not acted as a prudent landowner would;58
(g)absent some prior causative encroachment, there is no liability in nuisance where leaves, nuts or other debris from a defendant’s tree blow onto a plaintiff’s property (even where quite serious harm is caused) because the interference is caused by natural forces;59 and
(h)where natural causes create a hazard on a defendant’s land, he will be liable for damage to his neighbour (in nuisance or negligence) if he knows about the hazard and does not take reasonable care (judged subjectively) to stop its spread.60
56 Morgan v Kyatt [1962] NZLR 791 (CA), affirmed in Morgan v Khyatt [1964] NZLR 666, [1964] AC 475 (PC).
57 Gibson v Denton 4 AD 198 (NY SC 1896) at 201; Cunliffe v Bankes [1945] 1 All ER 459 at 465 and Noble v Harrison, above n 46, at 377.
58 Bruce v Caulfield (1918) 34 TLR 204 (CA) at 205; Noble v Harrison, above n 46, at 377; Caminer v Northern & London Investment Trust Ltd [1951] AC 88 (HL) at 100; Darroch v Carroll, above n 48; Quinn v Scott [1965] 2 All ER 588, [1965] 1 WLR 1004 (QB) at 1011 - 1012; Helson v Dear HC Wellington CP536/86, 25 October 1988 at 15.
59 Smith v Giddy, above n 51; Molloy v Drummond, above n 50; Woodnorth v Holdgate, above n 56.
60 Goldman v Hargrave [1967] 1 AC 645, [1966] 2 All ER 989 (PC); Leakey v National Trust for Places of Historical Interest or Natural Beauty [1980] QB 485, [1980] 1 All ER 17 at 522; and Robson v Leischke [2008] NSWLEC 152, (2008) 72 NSWLR 98. The early decisions (Giles v Walker (1890) 24 QBD 656; Sparke v Osborne (1908) 7 CLR 51 (HCA)) which held that no liability at all arises for harm caused by the natural spread from a defendant’s property to a plaintiff’s property of naturally occurring plants (weeds) are no longer good law and liability (in either nuisance or negligence) may attach: French v Auckland City Corporation [1974] 1 NZLR 340 (SC) at 350.
Discussion
[87] In the end, it seems to me that none of the above propositions suggests that there is anything “special” about trees. Rather, they can be explained as a matter of principle, by reference to the commonly understood dividing lines between the torts of negligence and nuisance and the rule in Rylands v Fletcher. Put simply:
(a)where there is an ongoing interference with a plaintiff’s relevant interest in land, attributable to a defendant’s unreasonable user of his land, liability (in nuisance) is strict (as evidenced by the encroachment cases);
(b)physical damage to a plaintiff’s land caused by a continuous or recurring emanation from a defendant’s land suffices to establish unreasonable user (nuisance) by a defendant;
(c)one off incidents are unlikely to be the result of an unreasonable user;
(d)where a plaintiff’s interest is damaged by a “one off” incident attributable to a defendant, liability (in negligence) requires fault to be established; except
(e)where the “one off” incident of damage to a plaintiff’s interest is the result of an isolated escape of something dangerous (a non-natural user) which a defendant has brought onto or accumulated on his land, liability (under the rule in Rylands v Fletcher) is strict.
Liability for the tree falls
[88] As noted earlier, the plaintiff’s pleadings draw a distinction between liability for the tree falls (pleaded in Rylands v Fletcher) and liability for the “state of affairs” threat posed by the continuing by the trees within falling distance of the line state of affairs (pleaded in nuisance). I deal with the tree falls first.
[89] I begin by acknowledging that the tree cases analysed above suggest that liability for individual tree falls will not attach absent some causative fault on the part of a defendant. But what is also clear from the cases is that context is everything. As Lord Porter said in Read v J Lyons & Co Ltd:61
Manifestly these requirements must give rise to difficulty in applying the rule in individual cases and necessitate at least a decision as to what is a non- natural use. … For the present I need only say that each seems to me a question of fact subject to a ruling of the judge as to whether the particular object can be dangerous or the particular use can be non-natural, and in deciding this question I think that all the circumstances of the time and place and practice of mankind must be taken into consideration so that what might be regarded as dangerous or non-natural may vary according to those circumstances.
[90] And here, I consider the context points in a different direction from the authorities relied on by the defendants. That context relevantly includes the following:
(a)the bulk supply of electricity (and ensuring its continuity) is a matter of significant public importance;62
(b)the electricity works (Unison’s interest in land) pre-date the planting of the Forest;63
(c)while it does not seem that the defendants receive compensation from Unison for the ongoing presence of the works, their presence would logically have influenced the price for which they purchased the land;
(d)the Forest was planted at a time when there was no statutory/regulatory obligation to ensure that trees/branches were located or kept at any particular distance from the works;
61 Read v J Lyons & Co Ltd [1947] AC 156 (HL) at 176.
62 If evidence for this proposition is required, it can be found in the fact that network performance is regulated and incentivised by the Commerce Commission in the manner discussed earlier in this judgment.
63 This seems relevant because, to the extent the regulatory regime does (and did formerly) provide for compensation to tree owners when their trees were required to be cut to protect electricity works it is only payable where the trees predate the works.
(e)the object in planting and growing the Forest is commercial and it is implicit in that endeavour that the trees are to reach a certain (mature) height before harvesting;
(f)it was foreseeable (at the time of planting) that a number of those mature height trees would be within falling distance of Unison’s pre- existing electricity works;
(g)it was foreseeable (at the time of planting) that any trees which do fall on the works are likely to do physical damage to the works and that such damage would have both a physical component and a consequential effect for Unison’s customers;
(h)it was known (and again was foreseeable) that healthy trees in forests can fall from time to time, for example as a result of weather events and/or soil conditions, and notwithstanding that the trees themselves have no obvious defects;64 and
(i)at the time of planting Unison had no ability (statutory or otherwise) to require the defendants’ trees to be felled or to fell them itself and (accordingly) no way of protecting the works;65 and
(j)the subsequent promulgation of the EHTR has not changed that position, because they apply only to encroaching trees.
[91] In my view, all these contextual factors point in favour of strict liability for the tree falls here. While a plaintiff might reasonably be expected to bear any risk posed by his neighbour’s apparently healthy, naturally growing trees, the cases do not so easily suggest that Unison should bear the risk posed to its works by a mature forest of trees, deliberately planted around Unison’s existing works for profit and in the knowledge (and intention) that they will ultimately grow to be within falling distance of those works.
64 This was expressly accepted by the defendants.
65 As noted earlier, Unison has no right to apply under the PLA because it does not fall within the relevant definition of “owner” or “occupier”.
[92] In the end it probably does not matter much whether liability is founded in terms of Rylands v Fletcher or in nuisance “proper”.
[93] Analysed in Rylands v Fletcher terms, the individual tree falls could be regarded as “one off” escapes of dangerous things from the defendants’ land. While a single healthy tree might not, in the ordinary course, be regarded as dangerous, I think a different conclusion is warranted in light of the contextual matters just outlined. As the (non-tree) authorities make clear, quantity matters in a Rylands v Fletcher analysis
- a distinction can properly be drawn between one or a small number of trees growing in a domestic context and a commercial forest planted around power lines. It is, for example, well established that the inherent danger in the bulk conveyance of water, gas or electricity can found Rylands v Fletcher liability whereas the (more limited) danger arising from the domestic installation of electric wiring, gas or plumbing may not.66 And so it is the “accumulation” of trees represented by the Forest (or that part of it that grows to within falling distance) which is outside any “natural” user of the defendants’ land, as that term is properly understood.67
[94] Analysed in nuisance terms, it could equally be said that the physical damage that has been caused to the Line by recurrently falling trees constitutes an ongoing substantial and unreasonable interference with Unison’s enjoyment of its interest in land.68 A plaintiff might reasonably be expected to bear the risk posed by his neighbour’s naturally growing trees – as an ordinary incident of neighbourhood and as a manifestation of the expected degree of mutual sufferance that goes with it. But the “live and let live” ethos that underpins the usual limits of nuisance does not so easily suggest that Unison should bear the risk posed to its works by a mature forest of trees, deliberately planted (around Unison’s existing works) for profit and ultimately growing within falling distance of its lines. So again, quantity must matter; the present is simply not comparable with the cases involving a single tree fall and, in my view, it is not a case where fault (beyond the planting of the trees knowing that they would grow to within falling distance) needs to be established.
66 John Smillie “Non-natural Use” [2011] NZLJ 88. The line is, however, far from distinct.
67 The word “natural” as it is used in the term “natural user” means “ordinary” rather than something (such as a tree) which occurs in nature.
68 Or the deliberate growth of many trees within falling distance of the Line constitutes an unreasonable user by the defendants of their land.
[95]And on either analysis, both the damage and Unison’s loss was foreseeable.
[96] In short, it seems right in principle that strict liability should follow where both the choice to accumulate the trees in the first place and the ability to ensure that, in the event of a fall, they do not damage Unison’s works, lies with the defendants. Unison is powerless to protect itself and its customers from harm (no evidence was called, and no argument made, in terms of any ability Unison might have to insure against the risk). Damage from tree fall was never a risk its predecessor assumed when placing the works on the land.
[97] For completeness, I would add that there is, in my view, no “act of God” defence available to the defendants here. That is firstly because (by contrast with the relevant cases earlier noted)69 the planting of part of the forest within falling distance of the Line, and in the knowledge that healthy trees can fall, was a deliberate act by the defendants. And secondly, even acknowledging the part played by weather in the falls, such a defence is or very limited application where liability in Rylands v Fletcher is established, as I think it is here.70 As the House of Lords in Greenock Corp v Caledonian Railway Co emphasised, the test is not whether the natural event that caused the escape could reasonably be anticipated, but rather whether human foresight and prudence could recognise the possibility of such an occurrence.71 And here, all witnesses acknowledged that healthy trees can fall. Indeed, since the time of the First Strike, at least, it has been known that trees along the Line do fall, in adverse weather conditions.
[98] In my view the defendants are strictly liable for the damage caused to the works by the falling trees, accordingly.
69 See the cases referred to in n 61, above.
70 As commentators have noted, there would be little or no practical difference between strict liability and negligence, if the rule in Rylands v Fletcher were to be confined to escapes caused by foreseeable events: see for example the discussion in Stephen Todd (ed) The Law of Torts in New Zealand (7th ed, Thomson Reuters, Wellington, 2016) at 607.
71 Greenock Corp v Caledonian Railway Co [1917] AC 556 at 572.
Liability for the ongoing “state of affairs”
[99] Given my conclusion that the defendants are liable to pay damages for the tree falls, the only continuing relevance of the “state of affairs” pleading is as a foundation for the claim for “quia timet” injunctive relief.72 As a matter of logic, such relief is unavailable unless either the relevant nuisance can be said to be ongoing.
[100] Ordinarily, a successful claim under the rule in Rylands v Fletcher is unlikely to give rise to injunctive relief, simply by virtue of the fact that the rule is concerned with “one off” incidents. As one commentator has said:73
Since liability only attaches in the event of the escape of a dangerous substance, a plaintiff cannot obtain a quia timet injunction under the rule and this distinction between Rylands v Fletcher and nuisance adds weight to the view that the doctrine is based on the idea of an unavoidable or irreducible risk. However, a prohibitory injunction is available on proof of the likelihood of the continuance of the escaping substance.
[101] The authority cited in support of that last proposition is decision in Attorney- General v Corke, which appears to be the only Rylands v Fletcher case in which injunctive relief has been ordered.74 Arguably, it is better viewed as a nuisance case.75
[102] As far as “ordinary” nuisance is concerned it is arguable that the existence of a well-founded fear that the nuisance constituted by the falling trees will reoccur is, itself, a nuisance. The relevant interference with Unison’s interest in land is the apprehension or fear created by the presence of the trees and a real danger (established on the balance of probabilities) of a further fall or falls.76 And here, the history of past falls and the evidence at trial necessarily means that the fear and the danger of future falls is well-founded. Accordingly, and to the extent it is necessary to do so I find that the continued existence of trees within falling distance of the western side of the Line constitute a (separate) nuisance. But the critical question will be whether the
72 To reiterate, the “state of affairs” pleading is that the use of the Forest by the defendants has created, and continues to create, a state of affairs that unreasonably and substantially interferes with Unison’s right to the use and enjoyment of the land over which the Line is installed.
73 Declan Carroll “The Rule in Rylands v Fletcher: A Re-Assessment” (1973) 8 Irish Jurist 208 at 223.
74 Attorney-General v Corke [1933] Ch 89. The decision has been criticised for extending the rule in Rylands v Fletcher to dangerous people (troublesome caravan dwellers brought onto the defendant’s land for profit).
75 See Scott v Scott [1973] Ch 314, [1972] 3 WLR 783 at 788.
76 Birmingham Development Co Ltd v Tyler [2008] EWCA 859 at [50] – [51].
danger posed by the trees suffices to ground the injunctive relief sought by Unison here. I turn to that issue shortly.
Negligence
[103] Negligence was pleaded as an alternative to Unison’s primary claims in nuisance and Rylands v Fletcher. It was not the preferred cause of action not just because it requires fault to be established but also because injunctive relief is not an available remedy. And unless the relevant breach of duty could be said to be planting the trees within falling distance of the Line in the first place (which is not pleaded and as to the merits of which I do not comment) no fault is established on the evidence here.
[104] In any event, in light of my conclusions above, it is unnecessary to consider it further.
INJUNCTIVE RELIEF?
[105] As noted at [69] above, Unison seeks both damages for the Strikes and injunctive relief. On the basis of my analysis above its entitlement to the former arises from my finding of Rylands v Fletcher liability for the Strikes. The second potentially arises from my finding of ongoing “state of affairs” nuisance. I consider the question of injunctive relief, first.
[106] I begin by noting that it is only the first pleaded injunction (to ensure that no tree is of such a height and proximity to the Line that it could fall on the Line) which may be tenable here. That is because the evidence makes it clear that it would not be possible for the defendants to comply with the second pleaded injunction (to operate an inspection and maintenance regime sufficient to ensure that no further trees will fall on the Line)77 because it is not possible to predict which particular trees will fall. Moreover, an injunction in such terms would be too vague in its terms; it would leave it unclear what exactly the defendants were required to do.
77 A I understood it Unison now agrees that the scope of any such injunction would need to be limited so that it applies only to the western side of the Line, where the risk is greatest.
[107] Next, as my discussion above makes clear, the state of affairs nuisance does not involve continuing actual harm to Unison but, rather, the threat or fear of further harm. So what is sought is an injunction which is both mandatory (requiring not simply restraint, but the taking of positive steps by the defendants) and quia timet (in anticipation of harm not yet done).
[108] The threshold for the grant of mandatory quia timet injunctions is high. In Redland Brick Ltd v Morris, Lord Upjohn proposed principles to guide the exercise of the Court’s discretion to grant such injunctions.78 The principles have subsequently conveniently been summarised in The Law of Torts in New Zealand as follows:79
(i)a mandatory injunction can be granted only where the plaintiff shows a very strong probability on the facts that grave damage will accrue to him or her in the future;
(ii)it must be shown that damages will not be a sufficient or adequate remedy if such damage does happen;
(iii)the cost to the defendant of doing the work required to prevent or lessen the likelihood of a future apprehended wrong is an element to be taken into account where the defendant has acted reasonably, though in the event wrongly; and
(iv)if, in the exercise of its discretion, the court decides that it is a proper case to grant a mandatory injunction, then the court must be careful to express the injunction in very clear and specific terms so that the defendant knows exactly what has to be done and can give proper instructions to contractors.
[109]I consider these factors in turn.
The probability of one or more trees falling on the Line in future
[110] While the evidence makes it clear that it is not possible to predict individual tree falls, in my view the upshot of the expert evidence is that it is more likely than not that there will be one or more falls from the western slope onto the Line within the next year or so. While I might be inclined to describe that probability as “strong”, I do not think the evidence supports the conclusion that it is “very strong”.
78 Redland Bricks Ltd v Morris [1970] AC 652, [1969] 2 All ER 576 (HL) at 665.
79 Stephen Todd, above n 70, at 1349 - 1350.
[111] The defendants’ advice at trial that harvesting is likely to begin as a matter of course, next year also assumes mitigating relevance here.
The gravity of the consequences in the event of such a tree fall
[112] In the event that there is a further tree fall onto the Line, however, the likely consequences are quite serious. Although the cost of repairs on previous fall occasions have varied greatly there would, almost inevitably, be an impact on electricity supply and on consumers serviced by the Line. I have already noted that electricity, and the continuity of its supply, can properly is regarded as a matter of fundamental importance in New Zealand society. As well, a tree falling onto a conductor always brings with it the possibility of fire which, in the middle of a commercial forest, is a distinct and grave consequence.
The cost to the defendants of felling all the trees within falling distance of the Line
[113] Dr Katz gave evidence for the defendants about the cost of widening the line corridors by cutting down the trees within falling distance of them. He performed alternative calculations based on both a 40 metre corridor and a 52.5 metre corridor. They took into account:
(a)the loss in value of the crop;
(b)the felling costs; and
(c)the loss in land value.
[114] Dr Katz’ calculations were based on clearing wider corridors for both the Esk Feeder (the 33kV line) and the Valley Feeder (the 11kV line). But in its statement of claim Unison sought only clearance of corridors around the 33kV line and that was further modified at trial to the western side of that line (whence the strikes have occurred). It is therefore necessary to make some adjustment to his cost calculations.
[115]Based on the recalculation performed by Unison’s counsel:
(a)the cost of widening the corridors around both sides of the 33kV line would be:
(i)$65,024.50, if increased to 40 m; and
(ii)$99,241 if increased to 52.5 m.
(b)the cost of widening the corridors around the western side of the 33kV line (ie that side of the Line on which the strikes occurred) would be:
(i)$32,512.25, if increased to 40 m; and
(ii)$49,620.50, if increased to 52.5 m.
Adequacy of damages
[116] It seems to me that damages are an adequate remedy when it comes to repair costs but not in terms of continuity of supply, at least insofar as Unison’s customers are concerned. Quite how that should play out in terms of my overall assessment is, however, unclear to me.
Conclusion
[117] I confess I have found this a difficult issue. But on balance, I am unable to find that the risk is sufficiently strong to justify the grant of a mandatory injunction here. In my view the better course is to leave it to the defendants to undertake the relevant cost/benefit analysis, in light of the fact that they know they will be liable in damages in the event of any future falls onto the Line. If Dr Katz’s estimates are correct they may well decide that the better course is to fell the trees regardless. But as things stand, I do not consider the grounds for injunctive relief are established here.
DAMAGES
[118]The damages claimed by Unison as a result of the four strikes total
$228,828.85. There is no question of remoteness, and nor do the defendants challenge
the nature of the damages claimed, all of which arise from actual physical damage which was reasonably foreseeable.80
[119] Mr Mitchell Graham gave evidence for the plaintiff that Unison incurred costs of:
(a)$87,667.42 as a result of the First Strike;
(b)$129,948.10 as a result of the Second Strike;
(c)$2,257.08 as a result of the Third Strike; and
(d)$8,956.25 as a result of the Fourth Strike.
[120] These costs were substantiated by material lists, timesheets and subcontractors’ invoices.81
The defendants’ challenge to the reasonableness of the repair costs
[121] Expert evidence was called by the defendants from Mr Russell Stronach, an electricity consultant. Mr Stronach was asked to review the costs claimed by Unison in relation to the repairs to the Line and provided an independent estimate of what the reasonable costs of repairs would be. His conclusion was that, while the costs resulting from the third and fourth strikes were consistent with the damage and repair costs undertaken, the costs resulting from the first and second were significantly overstated. His own estimate put the reasonable costs of repairs following the First Strike at
$48,318.36 (55 per cent of the claimed costs of $87,667.42) and following the Second Strike at $88,139.02 (68 per cent of the claimed costs of $129,948.10).
[122] Mr Stronach’s critique of the first and second strike costs focused on the following matters:
80 It is not my understanding that the defendants took issue with foreseeability; there had been strikes on the 11kV line prior to the four strikes and it was obvious that there were trees within falling distance of the 33kV line.
81 Although certain discrepancies and anomalies in aspects of the record-keeping and documentation were identified by the defendants, these were resolved in the course of the trial and I do not consider them further.
(a)the effect of the repair work being undertaken by Unison Contracting Services Ltd (UCSL), a wholly owned subsidiary of Unison;
(b)the overtime rate charged;
(c)the decision initially to undertake temporary repairs after the First Strike;
(d)the decision to replace rather than repair the conductor after the Second Strike; and
(e)the total number of hours it took UCSL to undertake the repairs.
[123]I address each in turn.
The related party issue
[124] As just noted, the repair works were undertaken by UCSL, a wholly owned subsidiary of Unison. Mr Stronach said that the absence of competition means that there was little incentive for UCSL to act in a competitive and efficient manner. To a greater or lesser extent each of his other specific grounds of criticism could each be seen as manifestations of that general point.
[125] Mr Darryl Yorke, an engineering consultant who gave expert evidence for Unison, disputed that proposition. He pointed out that Unison is regulated by the Commerce Commission, and dealings between Unison and UCSL are “related transactions” for the purposes of pt 4 of the Commerce Act.
[126] More specifically, Mr Yorke said that the Commission’s Input Methodologies on Related Party Transactions (the Input Methodologies) are designed to ensure that consumers should not be required to pay higher prices for a regulated service because of a transaction is between related parties.82 The Input Methodologies place is an onus on a regulated supplier to show that the cost of the underlying service is consistent
82 See in particular: Commerce Commission Electricity Distribution Services Input Methodologies Determination 2012 (consolidated 31 January 2019).
with the input price that it would otherwise have paid in an arms-length transaction. So, he said, there could be some confidence that the price charged by UCSL to Unison for the repair transactions was no more or less than would have been charged had the repairs been undertaken by an unrelated entity.
[127] While I accept Mr Yorke’s evidence as a matter of theory, as Mr Thain’s cross- examination made clear, the practice may well have been different. In particular, Mr Thain referred to a December 2017 paper setting out the Commerce Commission’s final decision on its review of the Input Methodologies’ related party transaction provisions for Electricity Distribution Business and Gas Pipeline Businesses.83 The decision confirms the policy intent articulated by Mr Yorke but notes (inter alia):
3.2We identified the following broad problem with the original related party provisions:
3.2.1The practical application of the related party provisions was not well aligned with the policy intent.
3.3This can be further broken down into two problems with a common linked potential harm to consumers of regulated services:
3.3.1Aspects of the way we designed and implemented the related party transaction rules raises a risk that we would not achieve the related party transactions policy (problem one).
3.3.2Aspects of the way in which some regulated suppliers applied the rules also raised the risk that the related party transactions policy intent is not being achieved in practice (problem two).
[128] The Commission found (inter alia) that it was “unable to conclude whether a large share of the related party transactions met the arm’s-length standard”.84
[129] For that reason, I am unable to derive any general comfort from the fact that the transactions between Unison and UCSL were regulated by the Commerce Commission at the time of the first and second strikes.
[130] I turn now to the specific aspects of UCSL’s charging that were criticised by Mr Stronach.
83 Commerce Commission Input Methodologies Review – Related Party Transactions – Final Decision and Determinations Guidance (21 December 2017).
84 At [3.18].
The overtime charge out rate
[131] There is no dispute that UCSL charged overtime for its workers at 150 percent of its ordinary charge-out rate for those workers. Mr Stronach’s essential point was that simply increasing the ordinary rate by 50 per cent failed to take account of the fact that, while the cost of labour (ie charge out rates) might increase by 50 per cent outside ordinary hours, the fixed cost component of the ordinary rate did not vary.
[132] The example given by Mr Stronach related to the amounts charged by UCSL for the services of a Line Mechanic. He said:
(a)the ordinary rate charged for a Line Mechanic was $74.01 and the overtime rate charged was $111.02;
(b)the Line Mechanic’s actual pay for an ordinary hour’s work is approximately $30, which means that $44.01 of the charge out rate reflects UCSL’s fixed costs;
(c)if the Line Mechanic is paid time and a half for overtime, then his actual pay increases to $45 for each hour, and there will be extra associated costs of around $7;85
(d)fixed costs do not change (are not multiplied by 1.5) when overtime is worked; and
(e)the overtime rate charged to Unison should therefore comprise the hourly fixed cost rate plus the actual payments, namely $96.01 ($44.01
+ $52), some $15 per hour less that what UCSL has charged Unison.
[133] Mr Stronach said that UCSL’s practice of multiplying both the pay and the fixed costs by 1.5 increased its profits in a manner that would not be sustainable in a competitive market.
85 That this additional figure was appropriate was accepted by Mr Stronach in cross-examination.
[134] In response, Mr Yorke made the point that Unison was bound by the terms of a collective agreement which required that overtime hours be paid at 1.5 times an employee’s normal hourly rate. He also confirmed that, based on a 2011 analysis of industry labour rates (adjusted for inflation), the benchmarked average charge out rate for a Line Mechanic was $73.85 in 2015 and $75.03 in 2016. He did not, however, specifically engage with Mr Stronach’s position that part of that charge out rate was comprised of fixed costs which did not alter when overtime was worked.86
[135] While I am inclined to accept Mr Stronach’s evidence on this point, excluding fixed costs from the overtime rate would make only a marginal difference to the overall cost of repairs. I nonetheless do take it into account in my ultimate assessment, below.
Temporary repairs
[136] Mr Stronach was critical of UCSL’s decision to undertake only temporary repairs following the First Strike and not to undertake permanent repairs for another five months.
[137] It cannot be doubted that undertaking the repairs in two tranches increased the costs. But I am satisfied that Unison’s decisions in that respect cannot be impeached. As Mr Graham explained, the First Strike occurred in wet and soggy conditions. The heavy machinery required to undertaking permanent repairs at the time would have caused damage to the defendants’ land and the surrounding land. Mr Yorke agreed that Unison’s decisions were appropriate and I am not prepared to second guess them now.
Replacing rather than repairing the conductor
[138] Mr Stronach said that from the photographs of the broken poles after the Second Strike, it was not clear how much damage had been done to the conductor (ie the Line itself). He noted that while it appeared to be relative intact, UCSL replaced, rather than repaired it. He said:
Given the age of the conductor and the pole replacements, it is reasonable for Unison to have taken the opportunity to renew the conductor. However, if the
86 Nor was he cross-examined on the issue.
original conductor could have been repaired and could have provided reasonable utility, then Unison should carry the costs associated with the decision to renew it as part of the repair work. This cost should not be passed on to FMNZ.
[139] Mr Stronach then assessed what would have been involved in “restringing”, rather than replacing, the conductor. His estimate was that it would have:
(a)required 40 fewer hours of labour, at a cost saving of $7,959.67; and
(b)saved a further $4,080.84 for new conductor and $10,147.50 for helicopter hire.
[140] Again, however, I prefer the evidence of Mr Graham who said that replacing the conductor was the most efficient and economic approach in the circumstances. Repair would have required UCSL to inspect the conductor for damage, and to fix it with repair sleeves which might compromise the future reliability of the Line. Mr Yorke agreed that replacement was the more cost-effective solution, based on his understanding of the damage sustained by the conductor at the time.
The time it took UCSL to undertake the repairs
[141] As noted earlier, it is only the reasonableness of the repair costs in relation to the first and second strikes that are disputed.
[142] The First Strike (when two trees fell onto the Line) caused damage to four poles and associated hardware. Temporary repairs were undertaken immediately, with permanent repairs completed in April 2016. Unison’s position is that the total cost of the First Strike repair work was $87,667.42. This includes $11,858.98 for materials,
$67,405.58 for labour and $8,402.86 for sub-contractors.
[143] The Second Strike (when one tree fell on the Line) resulted in the replacement of affected cross-arms and insulators, the replacement of three poles and a two pole structure with wooden poles and the replacement of the conductor. Unison’s position is that the total cost of the Second Strike repair works was $129,948.10. This
comprises $20,685.80 for materials, $87,577.10 for labour and $21,685.13 for sub- contractors.
[144] As to the First Strike, Mr Stronach accepted that the material costs and sub- contractor costs are consistent with the work undertaken which was, in turn, consistent with the damage caused by two trees falling. But he took issue with the labour cost, which was based on a total of 648 hours’ labour, 147 hours of plant hire and 4459 km of travel. Mr Stronach’s view was that the work undertaken should have taken only 284 hours to complete. He made proportionate reductions to the plant hire and mileage costs. In other words, Mr Stronach said that UCSL had overworked by some 56 per cent and overcharged by more than that, once account was taken of the overtime adjustment already discussed.
[145] And as to the Second Strike, Mr Stronach raised queries about the labour cost, which was based on 828.75 hours of labour, 143 plant hours and 4464 kilometres of travel.87 His own assessment was that the work could have been done in a little over half that time, or 460 hours which, after taking into account the “overtime” issue, would give a cost of $45,768.09, plus $20,685.80 for materials and $21,685.13 for sub-contractors.
[146] But Mr Yorke described Mr Stronach’s assessment of the time necessary to complete the work “highly optimistic”. He said:
This is not a simple flat work site. The steep terrain will require significantly more effort to lift conductors into position, the pole top load at the highest structure in each span will be high which will require back blocking to allow the conductor to be tensioned in order to remove the risk of further structure failure. This is because on a flat terrain the majority of the conductor weight transfers straight down the pole to the ground with little side load and is equally shared between both poles at the end of the span. Where there is an elevation change the higher pole takes a lot of side load (which would normally be vertical load on a flat terrain). This is known as the weight span.
[147] He also noted that both the first and second strikes had occurred during periods of high wind and rainfall, which would affect the time it took to undertake repair work
87 A separate issue about the need to replace the conductor (and the consequent need to use a helicopter to do so) is discussed separately, above at [138] – [140].
and referred to the evidence of Mr Graham of Unison, in which he described the actual difficulties encountered.
[148] Mr Yorke strove to test his view that the labour costs were reasonable by undertaking a “benchmarking” exercise, which he said was a “more rigorous” means of assessing the costs of a project works than the method employed by Mr Stronach. He described benchmarking as “a valuation tool to support related party transaction costs to the Commerce Commission, and for developing business cases by electricity network companies for initiation of network projects”.
[149]He said:
The benchmarking process offers a comparison to similar works carried out at other locations but is not intended as a detailed quantity survey valuation for any specific task.
As part of a benchmark assessment, a library of benchmarked costs is derived from data on actual costs for typical tasks or components from various sources, including network and substation projects, as well as previous contracts within the industry. These benchmark costs are then applied to a breakdown (i.e. each cost item) of the works that are to be undertaken.
A “constructability factor” is further applied to each cost item, to allow for aspects of that work that differentiate it from the benchmarked item. For example, any pole replacement at a roadside location that would have required traffic management has a 1.05 multiplier applied to allow for the additional cost of traffic management.
[150] I do not intend to go into the benchmarking exercise in any detail in this judgment. The upshot of it was that the costs actually incurred by Unison in relation to each strike were slightly higher, but broadly consistent, with Mr Yorke’s benchmark costs.
[151] But the usefulness and accuracy of the benchmarking exercise was contested by Mr Thain on two principal grounds.
[152] First, the data used by Mr Yorke to conduct the assessment was not disclosed for reasons of commercial sensitivity but was largely taken from a Contractor Rates Review (Benchmarking Process) Report completed in 2011 by Edison Consulting Ltd
(a company with which Mr Yorke’s company (Yorke Consulting) contracts).88 As indicated above, the data was based on related party transactions for Commerce Commission purposes. But in light of the difficulties subsequently identified by the Commission with such transactions, Mr Thain said the data could not be regarded as a reliable indicator of arms-length costs.
[153] Secondly, Mr Thain took issue with the 1.5 “constructability factor” used by Mr Yorke. It was only by applying this factor (by multiplying the benchmarked project management, response management and design fees by 1.5) that the benchmarking exercise yielded an outcome that was on a par with the costs actually charged by UCSL.
[154] Use of the 1.5 multiplier was justified by Mr Yorke by reference to Unison’s evidence about particular problems associated with the pole replacements following both the first and second strikes. In particular, Mr Graham had explained that the difficulty of the terrain, the limited access UCSL had to the farm site and the wet, winter, weather conditions meant that aspects of the repair work were considerably more labour and cost intensive than the norm. Those complexities were compounded by the need to undertake the repairs urgently.
[155] The most graphic example given by Mr Graham was that, after the second strike, wind conditions were so high that it was necessary for the helicopter flying the new conductor in to make three attempts before succeeding and that an excavator had to be used to drag in the poles.
[156] Moreover, when challenged to identify specific examples of inefficiencies by UCSL, Mr Stronach was only able to refer to the driving out of entire teams for the helicopter flights which were then abandoned. And when further pressed to explain the disparity between the actual hours and his assessment of what was reasonable, Mr Stronach said:
Well I think they were working on a cost plus mentality. There’s a real drive, and it’s an understandable drive, that when a powerline is down and people don't have power, that people really, the Unison staff in general, would have
88 Some of the 2011 rates were adjusted for inflation and others were supplemented and updated.
been really striving to put that power back on and in those situations often costs go out the window so they don't worry about what it’s going to cost, they’re simply thinking end goal, got to get the power back on.
[157] While this statement may well go some way to explaining the disparity, ultimately it tells against the reduction in damages for which the defendants contend. The supply of electricity is properly regarded an essential service. The strikes were in the middle of winter. Unison had obligations to its customers which were underscored by targets (backed by civil penalties) set by the Commerce Commission. So while UCSL may have incurred costs that might have been avoided had it been able to make a more considered (and less urgent) response it is not, in my view, appropriate to take any significant account of that.
[158] That said, however, I do bear in mind the wider point about the lack of contestability and the Commerce Commission’s concerns about the efficacy of regulation at the time. On any analysis, Mr Yorke’s constructability factor could only ever be a blunt instrument. And I do not doubt Mr Stronach’s expertise and am not fairly able to discount his alternative analysis entirely. The best that can, I think, be said is that the “reasonableness” line lies somewhere between his assessment and UCSL’s actual charges.
[159] In my view, the award of damages should take the above matters into account by reducing the actual costs charged and claimed by approximately 15 per cent (which includes an adjustment for overtime charges). Accordingly I consider that the appropriate award of damages here is $195,000.
SUMMARY AND CONCLUSION
[160]By way of summary, my conclusions are as follows:
(a)the defendants are strictly liable to Unison for tree falls onto the Line;
(b)injunctive (quia timet) relief is not appropriate; and
(c)the defendants must pay damages to Unison in the sum of $195,000.
[161]As well:
(a)Unison is entitled to interest on the damages award amount at the Senior Courts Act 2016 rate;
(b)counsel are to confer as to the date from which interest should run and if agreement cannot be reached, leave is granted to file memoranda; and
(c)Unison is also entitled to its costs, on a 2B basis, and I certify for second counsel.
Rebecca Ellis J
Solicitors:
Luke, Cunningham & Clere, Wellington DLA Piper New Zealand, Auckland
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