Vodafone New Zealand Limited v Telecom New Zealand Limited

[2014] NZHC 1549

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2008-485-2194

CIV-2008-485-2195 [2014] NZHC 1549

UNDER

the Telecommunications Act 2001

IN THE MATTER

of an appeal from a determination of the
Commerce Commission

BETWEEN

VODAFONE NEW ZEALAND LIMITED

Appellant

AND

TELECOM NEW ZEALAND LIMITED Respondent

CIV-2008-485-2341

UNDER  the Judicature Amendment Act 1972

IN THE MATTER             of an application for judicial review

BETWEEN  VODAFONE NEW ZEALAND LIMITED

Plaintiff

ANDCOMMERCE COMMISSION Defendant

Hearing:	On the papers
Appearances:	T H Thursby for Vodafone New Zealand Limited D J Goddard QC for Telecom New Zealand Limited J C Dixon and J B Hamlin for Commerce Commission
Judgment:	3 July 2014

JUDGMENT OF WINKELMANN J

VODAFONE NEW ZEALAND LTD v TELECOM NEW ZEALAND LTD [2014] NZHC 1549 [3 July 2014]

This judgment was delivered by me on 3 July 2014 at 4 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date: ...................................

Solicitors:           Meredith Connell, Auckland Counsel:           D J Goddard QC, Wellington Copy for:    Vodafone New Zealand Limited

Introduction

[1]      The parties to this proceeding, Chorus Ltd, Vodafone New Zealand Ltd and the Commerce Commission ask that I revisit orders made by me in a judgment in

2010, setting aside the Commission’s Telecommunications Services Obligations (TSO) determinations for the 2004/2005 and 2005/2006 years, and referring the determinations back to the Commission for reconsideration.1   The parties ask that I issue a direction that the Commission is no longer required to reconsider its TSO determinations for those years because reconsideration of the determinations is undesirable, it would no longer serve any practical purpose, and would involve considerable time and expense for the Commission and for industry participants. Chorus Ltd is the party responsible for the liabilities of Telecom New Zealand

Limited in respect of TSO determinations prior to December 2011.

Judgment of 1 April 2010

[2]      In these proceedings Vodafone challenged two TSO determinations made by the Commission under the then operative provisions of Part 3 of the Telecommunications Act 2001.   These determinations were in respect of the allocation of costs incurred by Telecom providing telecommunication services to commercially non-viable customers for the years 2004/2005 and 2005/2006.   The Commission’s final TSO determinations for these years were released in September

2008.  Vodafone and Telecom each appealed and sought to judicially review those decisions.  The Commission was named as the respondent to Vodafone’s application for judicial  review,  while Telecom  was  named  as  the  respondent  to Vodafone’s appeal.

[3]      I heard both the appeal and the judicial review applications in August 2009, and issued judgment in April 2010.  I found that in making the determinations, the Commission had made an error of law in its net costs calculation when calculating

the share of costs to liable persons.  I concluded the judgment as follows:

1      Vodafone New Zealand Ltd v Telecom New Zealand Ltd HC Wellington CIV-2008-485-2194, 1

April 2010; Vodafone New Zealand Ltd v Commerce Commission HC Wellington CIV-2005-485-
2293, 1 April 2010.

[99]     Vodafone seeks to have the net cost calculation in the allocation of TSO cost to liable persons contained within the two determinations set aside. In light of the error of law that I have held occurred in the course of those determinations I am satisfied that those orders should be made.   The determinations should be referred back to the Commission for reconsideration.   Vodafone also asks that I direct the Commission to reconsider the net cost calculation to take into account the existence of alternative technologies.  I am not prepared to make such an order.  It is for the Commission to fulfil its task under the Act in accordance with the terms of the Act.

[4]      The Commission and Telecom appealed that judgment, and the appeal was heard in the Supreme Court in 2011.  Following hearing, but prior to judgment, all issues as between Telecom and Vodafone were settled.  As recorded in the Supreme Court judgment, the parties advised the Court that the “… financial consequences of all TSO matters at issue between them in [those] appeals, and those that await Commerce Commission determination” had been resolved.2   The Commission asked that  notwithstanding  the  resolution,  the  Supreme  Court  deliver  judgment  in  its appeal. The Commission says that this was principally because:

(a)       settlement had not then been reached with all other liable persons, and those liable persons had an interest in the outcome of the appeal;3 and

(b)of  the  need  for  the  Commission  to  issue  determinations  for  two subsequent years, namely 2008/2009 and 2009/2010.

[5]      The appeal  was  dismissed  by the  Supreme  Court  in  the judgment  dated

17 November 2011.4   My direction to the Commission to reconsider these two TSO determinations was affirmed.   In its judgment the Supreme Court considered a submission  from  the  Commission  that  given  the  settlement  that  had  occurred between Vodafone and Telecom, the Court ought not to require the Commission to reconsider the 2004/2005 and 2005/2006 determinations.   The Court rejected the submission, noting that to take this approach would be to disregard the interests of

the other liable persons (notably TelstraClear) in this and subsequent determinations.

2      Vodafone New Zealand Ltd v Telecom New Zealand Ltd [2011] NZSC 138, [2012] 3 NZLR 153 at [60].

3      Liable  persons  are  telecommunications  providers  who  could  have  been  required  by  a determination to share the cost of Telecom providing the TSO.

4      Vodafone New Zealand Ltd v Telecom New Zealand Ltd, above n 2.

Subsequent developments rendering reconsideration moot

[6]      The  parties  now  bring  this  application  for  directions  on  the  basis  that subsequent developments have rendered reconsideration moot, and, in all the circumstances, undesirable. The parties point to the following.

[7]      The statutory scheme that regulated TSO determinations has been repealed and replaced with a fundamentally different arrangement.  The determinations will be redundant in light of the new scheme, and will have no precedential value.  The Telecommunications (TSO, Broadband, and Other Matters) Amendment Act was enacted in 2011.   It introduced, amongst other things, a new Part 2A to the Telecommunications Act 2001 dealing with aspects of Telecom’s structural separation, as well as amending those provisions in the principal Act relating to the TSO.   The regime that had previously governed the process relating to TSO determinations was repealed, and replaced with an entirely new regime with application from 1 July 2011.

[8]      The Commission has filed an affidavit of Dr Robert Deuchars, Chief Advisor, Telecommunications, in the Regulation Branch of Commerce Commission.   He characterises the TSO regime under the new Part 3 of the Act as radically different from the framework considered by the Court.  He says:

(a)       first,  the  Commission  is  not  required  to  undertake  a  TSO  cost calculation unless the TSO provider requests that it do so; and

(b)       second, if an application is made and the Commission determines that the TSO cost is zero, the TSO provider may be ordered to pay the costs of the TSO cost calculation.  If the Commission determines the TSO cost is above zero, the Crown must pay the TSO cost to the TSO provider.

Dr Deuchars says that no request for a TSO cost calculation was made in 2011/2012 or 2012/2013, and the TSO cost was therefore deemed to be zero for those years.

[9]      The parties submit that it is also material that there are no regulatory regimes similar to the TSO in New Zealand, and Part 3 of the Act post-1 July 2011 is, in substance, radically different from the provisions that would be applied to any re- determination.    Therefore  the  TSO  re-determinations  would  have  no  material

precedent value and the process of reaching them would hinder, rather than improve,

the Commission’s capability to carry out present and future regulatory activities.

[10]     The second development of significance since the Supreme Court judgment is that Chorus has concluded further commercial settlements with all liable persons, covering all relevant TSO determinations prior to the repeal of the TSO regime operating before 1 July 2011.  Chorus and Vodafone confirm that these commercial settlements have finally and conclusively determined the financial rights and obligations between Chorus and all remaining liable persons, which would otherwise have formed the basis for the Commission’s reconsideration of the 2004/2005 and

2005/2006 determinations.  They also resolve the financial obligations of all parties for the other years in which the relevant regulatory regime applied (that is to say prior to 1 July 2011).   The purpose of the TSO determinations is to ascertain the liability of liable persons to the TSO provider.   But since all such liabilities have been determined between the TSO provider and the liable parties by agreement, a re-determination   would   either   upset   commercial   arrangements   reached   by agreement, or more likely have no practical consequences at all.

[11]     Dr Deuchars confirms that the settlement agreements were provided to the Commission by Chorus on a confidential basis.   Commission staff reviewed them and the Commission reached the view that these settlements were conducted in a non-discriminatory manner and the sharing of the TSO liability was generally appropriate.   The Commission also contacted all of the liable persons (other than Ihug and TelstraClear, now part of Vodafone) to seek their views on both the settlements  and  the costs  or benefits  of  any determinations.   All  liable persons responded.  Dr Deuchars summarises the responses as follows:

3.12All of the liable persons that completed the template indicated that what the Commission understands from Chorus about the terms and nature of the settlements is correct, in particular, that:

(a)       the parties intended that the settlements be full and final, and that any subsequent Commission determination would have no impact on their rights and obligations; and

(b)       there are no outstanding issues as to the TSO regulatory regime, let alone issues that would be assisted by a TSO determination for the Commission

[12]     The  liable  persons  confirmed  that  the  settlements  were  conducted  in  a non-discriminatory manner, that it would not be in any way beneficial for the Commission to make further TSO determinations, and that doing so would result in unnecessary cost to them.

[13]     The parties say that new determinations would also be extremely difficult to conduct, because they would have to be based on outdated and redundant economic modelling.   Their cost would be passed on to the telecommunications firms, and ultimately the consumer.   As to the time and cost involved for the Commission, Dr Deuchars says that while it is difficult to estimate, it would be substantial.  The Commission’s estimate of the cost of conducting the modelling required for any re-determination is between $200,000 and $800,000, with Commission costs of around $600,000 per determination.

[14]   Dr Deuchars also says that because of the specialised nature of the telecommunications regulation and the TSO regime, carrying out the TSO work will inevitably   divert   Commission   staff   from   other   regulatory   matters.      The re-determinations will also impose a burden upon industry participants.  Even if they choose not to advocate actively for any point of view, the Commission will likely require additional information from them, which they will be obliged to provide. The technical and historical nature of the information means its production can involve significant resource demands.  Moreover, all liable persons are required to pay to the government a levy under s 11 of the Telecommunications Act 2001 for the performance of the Commission’s functions and duties.   Therefore, were the Commission to proceed with the re-determinations, liable persons would end up paying for the Commission to carry out re-determinations.

Analysis

[15]     The starting point in consideration of this application is the general principle that once a Court has decided a proceeding and issued a final judgment, the Court cannot  re-open  that  judgment.     However,  as   the  Supreme  Court   noted  in

Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd, there are exceptions to this rule:5

[28]     ... The [finality] rule recognises, however, that a policy of absolute finality is unsafe.  It accommodates exceptional situations by allowing final determinations to be revisited but within prescribed limits. ...

[16]     Although acknowledging that this case does not fall neatly within any prior consideration of the powers of the Court to vary orders, the parties submit that a helpful line of authority for present purposes is that concerning the ability to discharge  or  modify  permanent  injunctions.    They  cite  a  number  of  examples

including the decision in Quin v The Mercury Bay Timber Company Ltd.6    In that

case Gillies J rescinded a permanent injunction which restrained the defendant from driving logs down and placing booms across the mouth of a navigable river. Subsequently an Act of Parliament was passed allowing certain persons to drive logs and place booms across rivers, and the defendant acquired a right to do so under the Act.   Gillies J held that although he could discover no precedent for dissolving a perpetual injunction, on principle it ought to be dissolved instead of remaining as an unenforceable order.   That case was subsequently applied in the High  Court in

Dumbar  v  Paccar.7    Recent  English  authority  has  also  held  that  permanent

injunctions may be dissolved when circumstances change.8

[17]     Counsel for Chorus and Vodafone submit that an order under the Judicature Amendment Act  1972,  the  order  made  in  this  case,  is  similar  to  a  permanent injunction in that it requires implementation in the future by the relevant decision maker,  implementation  which  could  occur  sometime  after  judgment  is  entered. There is therefore the potential for a change in circumstance to render a direction that was wholly appropriate at the time it was made, no longer relevant or appropriate.

[18]     I accept counsel’s submission that it follows that a Court must have the power

to address the consequences of a change in circumstances, just as it does in the context  of  permanent  injunction.    To  hold  otherwise  would  have  the  entirely

5      Commissioner of Inland Revenue v Redcliffe Forestry Ventures Ltd [2012] NZSC 94, (2012) 25

NZTC 20-151, at [28].

6      Quin v The Mercury Bay Timber Company Ltd (1885) 3 NZLR 352 (SC).

7      Dumbar v Paccar (2000) 14 PRNZ 408 (HC).

8      Collier v  Williams [2006] EWCA Civ 20, [2006] 1 WLR 1945; Advent Capital Ltd v GN Ellincies Imports-Exports Ltd [2005] EWHC 1442 (Comm).

unsatisfactory result that a decision maker would be obliged either to ignore a Court order or embark on the directed action, however destructive, burdensome, inappropriate or futile that course of action may have become.   In short, to hold otherwise would be to bring the administration of justice into disrepute.

[19]     The situation has changed from when the Supreme Court declined to relieve the Commission of the obligation to revisit its determinations.   At that time the Supreme Court was concerned with the impact of the challenged determinations, and subsequent  determinations,  upon  liable  persons.    But  liable  persons  have  now reached full and final settlement with the parties, and have no interest in seeing the Commission revisit its determinations.

[20]     In  this  case  I  am  satisfied  that  the  facts  as  set  out  in  the  affidavit  of

Dr Deuchars establish that to oblige the Commission to reconsider its 2004/2005 and

2005/2006 determinations would be futile, and expensive for the parties and the public purse.  It would divert the Commission from its other work, and place undue burdens upon other industry participants.   To require reconsideration of the determinations  would  be to  require the Commission  to  labour hard,  to  produce nothing of value.  That would be undesirable and not in the interests of justice.  The Commission is entitled to the order it seeks.

An addendum

[21]     Counsel for Vodafone and Chorus raise a final issue in their memoranda. They say that there are two later years, namely 2008/2009 and 2009/2010, that raise TSO  issues  that  the  parties  wish  to  draw  to  the  Court’s  attention.     TSO determinations in respect of those years had not been commenced at the time of the earlier appeal.  All financial rights and obligations in respect of those later two years have now been fully and finally resolved with all remaining liable persons.  In these circumstances, Vodafone and Chorus say that it is common ground that it would make no practical sense for the Commission to embark on a process leading to determinations for those years, again for the reason that such determinations would serve no useful purpose, be expensive and burdensome.   Although the legislation does not expressly provide for the Commission to refrain from embarking on a

practically futile  determination  exercise, Vodafone  and  Chorus  consider  that  the Commission can decide that the determination exercise in respect of these later years is moot, and that the Commission has an implied power to refrain from embarking on a futile and wasteful exercise.   They say the position is analogous to a Court which is a creature of statute without inherent jurisdiction (such as the Court of Appeal).  It says it is well established that a Court has that implied power.

[22]     The parties raise this issue with me in the hope that I can offer some comfort to the Commission on this point.   I do not consider that I am able to provide any comfort, although not because I do not agree with what are persuasive submissions put forward by Vodafone and Chorus.  It is simply this, the issue raised by them falls outside the scope of this proceeding, and any legitimate re-opening of the proceeding which is raised by this application for reconsideration.

Result

[23]     I therefore  order  that  the  direction  to  the  Commission  to  reconsider  the relevant TSO determinations, 2004/2005 and 2005/2006 is discharged.  No issue of cost arises.

Winkelmann J