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High Court of New Zealand Decisions |
IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY
CIV 2007-485-1960
BETWEEN THE ATTORNEY-GENERAL
Plaintiff
AND CONTACT ENERGY LIMITED
Defendant
Hearing:
30 April 2008 and 14 July 2008
Appearances: JS Kós QC and P. Scott for the plaintiff
Judgment: 21 July 2008 at 4.00
pm
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
This judgment was delivered by Associate Judge Gendall on 21 July
2008 at
4.00 p.m. pursuant to r 540(4) of the High Court Rules 1985.
Solicitors: Crown Law, PO Box 2858, Wellington
T.J. Whiteley, Legal Counsel, Contact Energy Limited, Wellington
THE ATTORNEY-GENERAL V CONTACT ENERGY LIMITED
HC WN CIV 2007-485-1960 21 July 2008
Introduction
[1] The plaintiff Attorney General ("the Crown"), by statement of claim dated
4
September 2007, sues the defendant, Contact Energy Ltd ("Contact") for breach of
contract. The Crown also seeks certain declarations
from the Court relating to the
contract. The contract provides for the sale and purchase of gas from the Maui Gas
Field. The Crown,
as vendor, claims from Contact, as purchaser, monies it says are
owing from Contact ($711,818.77 plus interest) in respect of revised
invoices issued
for the period April 2000 to September 2001 ("period 1"). Alternatively, if the Court
determines that the invoices
should not have been revised or replaced, the Crown
seeks declarations that it can reopen and reissue other invoices issued under
the
contract for the subsequent periods April 2003 to September 2003 ("period 2") and
October 2003 to March 2004 ("period 3").
[2]
In response, Contact applies for summary judgment against the Crown or, in
the alternative, for the proceeding to be struck out.
In relation to the period 1 claims,
Contact's applications are pleaded on the basis of cause of action estoppel, issue
estoppel,
the rule in Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100, and on construction
of the contract. In relation to periods 2 and 3, Contact says that the Crown is
precluded from now reopening
the invoices due to a limitation in the contract.
[3] The Crown opposes these summary judgment and strike out applications
which
are before the Court for consideration.
Background Facts
[4] The Crown purchases gas from the Maui Gas Field from the Maui Partners
(who presently are Shell Petroleum Mining Company Limited, Todd Petroleum
Mining Company Limited and OMV Limited) under a contract
dated 1 October 1973
("the Maui Gas Contract"). It then sells the gas under six downstream contracts.
The contract at issue in this
case is one of those six downstream contracts. On 5 July
1990, the Crown entered into that downstream contract with the Electricity
Corporation of New Zealand (ECNZ) ("the contract"). Under the contract ECNZ
agreed to buy Maui gas from the Crown. Contact succeeded
ECNZ as the purchaser
of gas under the contract by Deed dated 1 February 1996 (an assignment under s 23
of the State-Owned Enterprises
Act 1986). There was no amendment to the material
provisions of the contract at this time.
[5] The contract is already a long-standing
one, which I understand the parties
expected to run until 27 June 2009. Its provisions have a degree of complexity and
have already
been the subject of substantial litigation. Under clause 9.1.1 of the
contract Contact agrees to buy "Base Gas" from the Crown, (at
the annual quantities
defined in Schedule 1, Column (i) or Schedule 2, Column (i)) for the years 1989 to
2009. Clause 9.3.1 requires
Contact to pay to the Crown:
ˇ The Maui Gas Price an upwardly variable figure set under the Maui Gas
Contract by the
Maui Partners and the Crown; plus
ˇ The Energy Resources Levy a fixed sum of $NZ0.45 per gigajoule (GJ) of gas;
plus
ˇ The "Crown Margin" a changeable margin on the gas Contact buys, fixed or
determined on six-monthly "Adjustment Days".
[6] The "Adjustment Days", defined as the last day of each "Pricing Period"
successive six month periods commencing on 1
October 1989 are 31 March and 30
September each year. In practice, however, the parties have always treated 1 April
and 1 October
as the Adjustment Days. Nothing turns on this point.
[7] The Crown Margin is defined in clause 1.2 in the following way:
"`Crown Margin' means, at any time, an amount for a GJ [a gigajoule] of
gas equal to:
(a) NZD2.225
as adjusted by application of clause 9.5; less
(b) The aggregate of the Maui Gas Price and NZD0.45 [ie the ERL or
Energy Resource Levy], in each case, for each GJ of gas."
[8] Clause 9.5.1 provides the formula for adjusting
the Crown Margin over time,
as follows:
"On each successive Adjustment Date the Crown Margin payable for each
GJ of Base Gas under Clause 9.3.1 shall be adjusted by:
(a) multiplying an amount equal to NZD2.225 by the quotient obtained
by
dividing PPI by the Initial PPI; and then
(b) deducting from the product an amount equal to the Maui
Gas and
NZD0.45."
[9] Clause 1.2 defines "PPI" and "initial PPI" as follows. The Initial PPI is
defined as a
fixed number, 1600, being the PPI for the quarter ended 30 June 1989.
PPI is defined in clause 1.2 as meaning:
"On any Adjustment
Day, the index number shown in the index for the last
quarter in respect of which the index has been published and publicly
released that ended no less than 3 months prior to such Adjustment Day: for
this purpose the index is the Producers
Price Index Inputs (all Industries) as
from time to time published as table PPIQ.SI9 in the Key Statistics published
by the Department of Statistics ... and if that index is no longer published
then such other index or its equivalent as
may be agreed to by and between
ECNZ and the Crown ...".
[10] "PPI" is a price index used to measure inflation. As I understand the
position, in 2001 an
examination of what "PPI" meant was the subject of substantial
litigation which proceeded in this Court, the Court of Appeal and
the Privy Council.
More on this later.
[11] Statistics New Zealand ("SNZ") calculates and publishes the PPI on a
quarterly basis,
with the quarters ending 30 May, 30 June, 30 September and 31
December in each year. The PPI numbers published not less than 3 months
before
the Adjustment Days (clause 1.2 of the contract) are therefore those published on 31
December (for the 1 April adjustment)
and 30 June (for the 1 October adjustment).
[12] Clauses 12.5.1 and 12.5.2 specify what the Crown is to do on each
Adjustment
Day:
"12.5.1 On each successive Adjustment Day, and after making any
adjustment required by Clause 9.5,
the Crown shall calculate the
amount payable on account of Crown Margin in respect of each
Month
in the next succeeding Pricing Period ("the monthly
amount") by applying the following formula ...
12.5.2
The Crown shall notify ECNZ (Contact) of a monthly amount
calculated in accordance with Clause 12.5.1;"
[13]
The formula in clause 12.5.1 for the monthly amount is the annual Base Gas
GJ, divided by the number of months in question, multiplied
by "the Crown Margin
for the time being known".
[14] Clause 12.5.3 provides that Contact must pay the monthly amount calculated
in accordance with clause 12.5.1 and allocated to each month in the Pricing Period
on the 20th day of the month following the month
to which it is notionally allocated.
[15] At the start of the contract the parties agreed to use the Producers Price Index
Inputs
(all Industries) as published from time to time as table PPIQ.SI9 ("SI9") in the
publication Key Statistics which SNZ publishes.
[16] In 1995 SNZ decided to redevelop the Producers Price Index. As such, it
stopped publishing the SI9 index in Key Statistics
after August 1996. The index was,
however, still calculated and provided on request until the quarter ending 30
September 1999.
[17] The parties to the contract used SI9 according to clause 1.2 of the contract
until and including the 1 October 1999 Adjustment
Day (using the 30 June 1999
SI9). They also agreed that PPIQ.SN9 ("SN9") should be the replacement index,
with effect from the next
Adjustment Day, namely 1 April 2000. However, in 2001
the parties could not agree on how to effect this change.
[18] As I have
noted above, this failure to agree led to proceedings between the
parties, litigated in the High Court, Court of Appeal and Privy
Council ("the 2001
proceedings").
[19] In those proceedings, Contact argued that SN9 should simply replace SI9.
As I have already
noted, Initial PPI was fixed in the contract at 1600 (being the PPI
for the quarter ended 30 June 1989) whereas SN9, having a base
of 1000 at
December 1997, was 863 at June 1989. As such, Contact said that to use the initial
PPI of 1600 the figures in SN9 should
be scaled by a factor of 1600/863. Conversely,
the Crown said that there should be no break that SI9 and SN9 should be linked by
"splicing" SI9 and SN9 together so they formed a continuous line. Where the indices
had different base numbers, one would have to
be "rebased" so that they had the
same value at the link date. The resulting ratio the "link factor" would then be
applied to
the published numbers from the SN9 index to give a quarterly value
relative to the original SI9 index series. An essential difference
between the
approaches was that Contact's approach would have meant a "jump down" at the
date of the change over, which would have
resulted in a windfall to Contact of over
$2.2 million.
[20] The Crown issued invoices to Contact based on its linking approach
and
Contact refused to pay (at least in full). The Crown sued. The High Court and Court
of Appeal found in favour of the Crown's approach. Contact appealed again, this
time to the
Privy Council. The Privy Council held that the contract did not specify
how a transition from one index to another should be effected
and, in the absence of
such a provision, the parties were to be assumed to have intended that the transition
would be according to
normal commercial practices. In light of the expert evidence
led by the Crown that its approach was usual practice when an index
was changed,
the Privy Council also found for the Crown.
[21] A second issue in dispute in the 2001 proceedings was when the index
should
have been linked. The Privy Council again upheld the Crown's position that the
linking should be at September 1999 (when the
last SI9 value was published), as
opposed to June 1999 (the last SI9 used under the contract).
[22] In the 2001 proceedings, the
matters at issue were listed in an agreed
statement of issues. Issues 1-4 concerned how to effect the change and issue 5
became irrelevant
in light of the answer to issue 3. Issues 6-8 asked and were
answered by Goddard J in the High Court (and not disturbed on appeal)
as follows:
"6. What is the PPI index number for each Adjustment Date calculation?
(a) for 1 April
2000: 2925
(b) for 1 October 2000: 1974
(c) for 1 April 2001: 2121
(d)
for 1 October 2001: 2144
(e) for each successive Adjustment Date, the appropriate SN9
index number scaled by a link factor of 1897/1014
7. Using the Initial PPI index number and the PPI index number
determined by the Court in respect of the relevant Adjustment Dates,
what amounts did Contact owe to the
Crown on each of the invoice
dates listed in paragraph 30 of the second amended statement of
claim?
(a) For the 1 April 2000 Adjustment Date and the six successive
months thereafter: $3,222,835.000
(ex GST).
(b) For the 1 October 2000 Adjustment Date and the six
successive months thereafter:
$3,213,7700.83 (ex GST).
(c) For the 1 April 2001 Adjustment Date and the five successive
months thereafter: $3,691,200.83 (ex GST).
(d) For the 1 October Adjustment Date and the month of October
2001: $2,434,688.74 (ex GST).
8. What, if any, debt owed by Contact to the Crown remains unpaid?
The sum of $2,253,185.90 (incl GST) (ex interest)."
(Attorney-General v Contact Energy Limited HC WN CP116/01
18 April
2002 at para. [81])
[23] I turn now to consider each of the three charging periods under the contract at
issue
here.
Period 1 April 2000 to September 2001
The Crown issued invoices to Contact on the 5th day of each month between
[24]
April 2000 and September 2001 for the monthly amount due under clause 12.5. The
invoices were based on the published SN9 numbers
for the quarters December 1999,
June 2000 and December 2000.
[25] Following the 2001 proceedings, Contact paid these amounts in
full.
[26] However, on 30 August 2001, SNZ published and publicly released a
revision to SN9, which applied retrospectively to
the quarters June 1999 to March
2001. These changes, as tabulated in the Crown's submissions, were as follows:
Quarter
Original Index Revised Index Adj Day affected
June 1999 1,000 1,001
1 October 1999
September 1999 1,014 1,016
December 1999 1,029 1,032
1 April 2000
March 2000 1,043 1,046
June 2000 1,055
1,060 1 October 2000
September 2000 1,095 1,101
December 2000 1,134 1,142 1 April 2001
March 2001
1,124 1,130
[27] The import of these changes in relation to the contract was, on the Crown
case, two-fold.
First, the "link factor" as ascertained in the 2001 proceedings was
obtained by multiplying SN9 by a factor of 1897/1014, the denominator
being the
unrevised SN9 value for September 1999, the date of the linking. The revisions,
however, meant that the denominator used
in the link factor should instead be 1016.
On Contact's suggestion (by letter dated 3 May 2002), the parties agreed to this
change.
This had the effect of reducing the price payable by Contact. Mr Peter
McKenzie, who had primary responsibility for the Crown negotiations
with Contact,
estimated that the likely value of this change for Contact was $1.9 million.
[28] Secondly, the Crown says that
the August 2001 revisions had the effect of
increasing the PPI index numbers to be used in the calculation of the Crown Margin
under
clause 9.5.1.
[29] As such, on 5 September 2001 the Crown stated its intention to reopen the
monthly invoices sent during period
1 on the basis that the revisions resulted in the
Crown undercharging Contact (although the revised link factor had the effect of
reducing the amount of this undercharging). The Crown purported to do this under
clause 12.6.2 of the contract, which provides as
follows:
"If within 2 Years after the date of any invoice or statement delivered under
this Clause 12 it is found
that ECNZ has been either undercharged or
overcharged the matter may be reopened and after any set-off the
appropriate
adjustment made by ECNZ either paying the amount of the
undercharge of being given a refund by the Crown of the amount of
the
overcharge...".
[30] On 1 July 2002, the Crown subsequently reissued the monthly invoices for
period 1 based on the
revised PPI index numbers. There was considerable argument
before me as to why there was such a delay between the September 2001
correspondence and the actual reissuing of the invoices (for reasons discussed in
detail below). The Crown said that this was because
of its expectation that SI9 might
also be revised (as referred to in the 5 September 2001 letter), which would have the
effect of
reducing the impact of the revisions, in Contact's favour. As it turned out,
SI9 was not revised because of its status as a discontinued
index.
[31] Under the revised invoices, the Crown sought payment, after set-off, of an
additional $711,818.77 (incl GST). The
Crown demanded payment on 22 July 2002.
Contact has not paid.
Period 2 April 2003 to September 2003
[32] SNZ again published
and publicly released a revision to the SN9 index on 28
May 2003, retrospectively revising the published SN9 numbers for the quarters
September 2000 and December 2000. The changes, as tabulated in the Crown's
submissions, were as follows:
Quarter
Original Index Revised Index Adj Day affected
September 2002 1,149 1,145
December
2002 1,152 1,147 1 April 2003
[33] This time the index numbers were revised downwards. Thus,
if the revised
index numbers were used, the monies payable by Contact would be reduced.
[34] The Crown advised Contact of the
revision on 4 June 2003 and provided its
calculations of the monthly amounts due for April 2003 to September 2003 on the
basis of
the revised index numbers.
[35] The Crown, however, in a fax dated 4 June 2003, expressly reserved the right
to reissue invoices
and obtain payment for the monthly amounts due in period 2
based on the unrevised SN9, if it was later determined that the revised
numbers
could not be used. The Crown stated:
"We note that Contact may dispute the application of the revised indices. In
the event that Contact does so dispute the invoices, and any such dispute is
resolved in Contact's favour, the Crown reserves the right to recover any
amounts
due and owing from Contact on the basis of the unrevised SN9
indices (i.e. the index as first published by Statistics New
Zealand)."
[36] Contact responded by letter dated 6 June 2003:
"You are now offering a further adjustment of the Crown
Margin as a result
of advice from Statistics New Zealand that there were errors in the
calculation of PPIQ.SN9 for
the December 2002 quarter when it was first
released. That is inconsistent with the position that the Crown has previously
adopted.
Nevertheless, we are prepared to accept the reduction in the Crown Margin
payable that you have offered
in your fax dated 4 June 2003. Our acceptance
of your offer is without prejudice to Contact's view of the correct adjustment
of the Crown Margin."
[37] The use of the revised SN9 numbers gave rise to a refund to Contact in
relation to the monthly
amount for April 2003. Thereafter, the Crown issued invoices
to Contact on the 5th of each month, based on the revisions. Contact
paid these
invoices. The net result of using the revisions was that Contact was better off by
$224,084.44.
Period 3 October 2003
to March 2004
[38] On 28 November 2003, SNZ once again published and publicly released
further revisions to SN9, retrospectively
revising the index numbers for the June
2003 quarter, as follows:
Quarter Original Index Revised Index
Adj Day affected
June 2003 1,140 1,141 1 October 2003
[39] On 4 December
2003, the Crown advised Contact of the revision and
provided its calculations of the amounts due for the period October 2003 to March
2004 on the basis of the revised SN9. The revision had the effect of increasing the
amount payable by Contact by $37,983.49 over
this period.
[40] The Crown issued monthly invoices to Contact on 5 December 2003 and
thereafter on the basis of the revision.
Contact has not paid these invoices.
The Substantive Proceedings
[41] The Crown's claim is that the contract entitles it to invoice
Contact on the
basis of the revised SN9 numbers and that Contact is obliged to pay these amounts
("the period 1 claim"). As such,
the Crown claims the $711,818.77 (plus interest and
costs) unpaid on the revised period 1 invoices. This cause of action is pleaded
as for
breach of contract but it was my understanding that both counsel accepted before me
that the cause of action is more aptly
in debt.
[42] In the alternative, if the Crown cannot issue invoices on the revisions, the
Crown seeks declarations that it has
undercharged Contact by a net $186,100.95
(plus interest) for periods 2 and 3 and that it is entitled to reissue the invoices for
these periods to recover this sum.
The law relating to summary judgment and strike out
[43] The jurisdiction to grant summary
judgment on the application of a defendant
is found in r 136(2) of the High Court Rules, which states:
"(2) The Court
may give judgment against a plaintiff if the defendant
satisfies the Court that none of the causes of action in the
plaintiff's statement of claim can succeed."
[44] The onus is on the defendant to prove on the balance of probabilities
that
none of the plaintiff's causes of action can succeed: Westpac Banking Corp v M M
Kembla NZ Ltd [2001] 2 NZLR 298 at para. [61]. Where the defendant can show
only that some of the causes of actions cannot succeed a summary judgment
application
will fail. The appropriate course there is to apply for strike out under r
186 McGechan on Procedure at HR136.07(1).
[45] Summary
judgment is not appropriate where there are material disputes of fact
or real issues of credibility: see McGechan on Procedure at
HR136.08. Thus, Elias
CJ stated in Westpac Banking Corp v M M Kembla NZ Ltd:
"[62] Application for summary judgment will
be inappropriate where there
are disputed issues of material fact or where material facts need to be
ascertained by the Court and cannot confidently be concluded from
affidavits. It may also be inappropriate where
ultimate determination
turns on a judgment only able to be properly arrived at after a full
hearing
of the evidence. Summary judgment is suitable for cases
where abbreviated procedure and affidavit evidence will sufficiently
expose the facts and the legal issues. Although a legal point may be
as well decided on summary judgment
application as at trial if
sufficiently clear (Pemberton v Chappell [1987] 1 NZLR 1), novel or
developing points of law may require the context provided by trial to
provide the Court with
sufficient perspective.
...
[64] The defendant bears the onus of satisfying the Court that none of the
claims can succeed. It is not necessary for the plaintiff to put up
evidence at all although, if the defendant
supplies evidence which
would satisfy the Court that the claim cannot succeed, a plaintiff will
usually
have to respond with credible evidence of its own. Even then it
is perhaps unhelpful to describe the effect as one
where an onus is
transferred. At the end of the day, the Court must be satisfied that
none of the claims
can succeed. It is not enough that they are shown
to have weaknesses. The assessment made by the Court on
interlocutory application is not one to be arrived at on a fine balance
of the available evidence, such as
is appropriate at trial."
[46] This statement was approved by the Privy Council in Attorney-General v
Jones [2003] UKPC 48; (2003) 16 PRNZ 715. The Board commented at para. [5]:
"It cannot be doubted that, properly used, r 136(2) can save both time and cost
by permitting claims with no hope of success to be summarily dismissed at an
early stage. But rarely if ever will the procedure
be appropriate where the
outcome of the action may depend on disputed issues of fact, and reliance on
the rule in an
inappropriate case may serve to increase both the length and the
cost of proceedings."
[47] However, in Eng Mee Young
v Letchumanan [1980] AC 331 at 341, the
Court stated that a Judge will not be bound:
"[t] o accept uncritically, as raising a dispute of fact which
calls for
further investigation, every statement on an affidavit, however
equivocal, lacking in precision,
inconsistent with undisputed
contemporary documents or other statements by the same deponent, or
inherently
improbable in itself it may be."
[48] Similarly, the Court said in Bilbie Dymock Corporation Ltd v Patel (1987) 1
PRNZ 84 at 85-86:
"But the need for judicial caution has to be balanced, when considering a
summary judgment application,
with the appropriateness of a robust and
realistic judicial attitude when that is called for by the particular facts of
the
case. In the end it can only be a matter of judgment on the particular facts."
[49] Nonetheless, the test for granting
summary judgment on the application of
the defendant is a high one, as recognised by the Privy Council in Attorney-General
v Jones
at para. [10]:
"But it is clear, applying the guidance given by the Court of Appeal in
Westpac, that summary judgment
should not be given for the defendant unless
he shows on the balance of probabilities that none of the plaintiff's claims
can
succeed. That is an exacting test, and rightly so since it is a serious thing to
stop a plaintiff bringing his
claim to trial unless it is quite clearly hopeless."
[50] Contact applies in the alternative for strike out under r 186, which
provides:
"186 Striking out pleading
Without prejudice to the inherent jurisdiction of the Court in that regard,
where a pleading--
(a) Discloses no reasonable cause of action or defence or other case
appropriate
to the nature of the pleading; or
(b) Is likely to cause prejudice, embarrassment, or delay in the proceeding;
or
(c) Is otherwise an abuse of the process of the Court,--
the Court may at any stage of the proceeding, on
such terms as it thinks fit,
order that the whole or any part of the pleading be struck out."
[51] The essential differences
between an application under r 136(2) and an
application for strike out under r 186 are explained by Elias CJ in Westpac Banking
Corp v M M Kembla NZ Ltd at para. [60] as follows:
"...r 136(2) permits a defendant who has a clear answer to the plaintiff
which cannot be contradicted to put up the evidence which constitutes the
answer so that the proceedings can be summarily
dismissed. The difference
between an application to strike out the claim and summary judgment is that
strike-out
is usually determined on the pleadings alone whereas summary
judgment requires evidence. Summary judgment is a judgment between
the
parties on the dispute which operates as issue estoppel, whereas if a pleading
is struck out as untenable as
a matter of law the plaintiff is not precluded
from bringing a further properly constituted claim."
[52] Strike out applications
under r 186(a) are to proceed on the assumption that
the facts pleaded in the statement of claim are true, unless the pleaded allegations
are
entirely speculative and without foundation: Attorney-General v Prince and Gardner
[1998] 1 NZLR 262 (CA); Collier v Pankhurst CA136/97 6 September 1999. The
Court must be satisfied the causes of action are so clearly untenable that
they could
not possibly succeed: Attorney-General v Prince and Gardner.
[53] The strike out jurisdiction is to be exercised sparingly
and only in a clear case
where the Court is satisfied it has the requisite material (Attorney-General v Prince
and Gardner; see also
Gartside v Sheffield, Young & Ellis [1983] NZLR 37, 45;
Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641). However,
the mere fact that applications to strike out raise difficult questions of law and
require extensive argument does not exclude
jurisdiction: Gartside v Sheffield,
Young & Ellis.
[54] The standard of proof required of the applicant "is made deliberately
difficult
to attain": Adams v Joseph Banks Trusts Ltd HC Wellington CP224/91 4 March
1992 per Master Williams QC at 2. This is appropriate
"so as not to stifle the right of
recourse to the Courts for the resolution of disputes and so as not to stifle the orderly
development
of the law".
[55] Abuse of process under r 186(c) defies precise definition but appears to
subsume various instances of misuse
of the Court's process: Heenan Family Trust
1960 & Ors v Da Vella June Gore & Ors HC DUN CIV 2006-412-1023 8 October
2007. It will,
for example, cover an attempt to relitigate matters already determined:
Hardy v Elphick [1973] 2 All ER 914 (CA); Collier v Butterworths of New Zealand
Ltd (1997) 11 PRNZ 581; McGechan on Procedure at HR186.05.
[56] In Wattie v Hamburg Sudamerikanische Dampfschiffahrtsgesellschaft (1999)
14 PRNZ 227 the Court accepted that a contractual limitation barring the cause of
action could be grounds for striking out the proceedings for
abuse of process.
Counsel's Arguments and My Decision
[57] Contact advances four grounds in support of its application for
summary
judgment or strike-out in relation to period 1, namely cause of action estoppel, issue
estoppel, the rule in Henderson v
Henderson and a contract construction argument. It
advances a further contractual limitation argument to support its applications
in
relation to period 2 and period 3.
[58] The Crown addresses each of these and, in addition, criticises what it calls
Contact's
"Janus-like stance", in which Contact is said on the one hand to accept the
"sweet" of the revisions but on the other hand not the
"bitter". As to this, the Crown
says:
"(a) Contact paid the invoices calculated in relation to the revised SN9 in
periods 2 and 3, where the collective effect of the revisions was to
Contact's benefit. It did not pay
the revised invoices for period 1
where the benefit is to the Crown.
(b) Contact contended for and received
the benefit of the revised link
factor (from 1014 to 1016), estimated to be worth $1.9 million to
Contact.
This was despite Goddard J's finding at para. [81](6)(e) of
the 2001 High Court judgment that the link factor denominator
was
1014.
(c) Contact's construction argument (see below paras. [103] to [118]) is
contrary
to its own conduct in accepting the benefits of the revisions
in periods 2 and 3 and of the revised link factor."
[59] In reply, Contact questions how any inconsistency on Contact's part would
assist the Crown and contends that the allegations
are groundless in any event. It
accepts that Contact benefited from the revision to the link factor, but argues that,
had the Crown
told the Court in 2001 of the revisions to SN9, the Court would have
used the revised link factor in any event. In my view, this
is not an entire answer
however as it seems the same could be said about the revisions to SN9 for the period
1 invoices.
[60]
So far as the acceptance by Contact of the benefit of the revisions in relation
to period 2 are concerned, Contact contends that
it has maintained its position
throughout that the proper approach was to use the unrevised index numbers, but
that, only having
received invoices using the revised numbers, it was unable to pay
on the proper, unrevised basis. As discussed below (at para.[123]),
Contact's
position in relation to the Crown's second cause of action is not that the Crown is
wrong when, in the alternative, it
seeks a declaration that the period 2 and 3 invoices
should have been issued on an unrevised basis, but simply that it is now too
late.
Cause of action estoppel/merger
[61] Diplock LJ summarised the principles of cause of action estoppel in Thoday v
Thoday
[1964] 1 AllER 341 (CA) at 352 as follows:
"...cause of action estoppel...prevents a party to an action from asserting
or
denying, as against the other party, the existence of a particular cause of
action, the existence or non-existence
of which has been determined by a
court of competent jurisdiction in previous litigation between the same
parties.
If the cause of action was determined to exist i.e. judgment was given
upon it, it is said to be merged in the judgment.
If it was determined not to
exist, the unsuccessful plaintiff can no longer assert that it does; he is
estopped
per rem judicatam."
[62] The cause of action sought to be estopped "must be precisely the same" as in
the earlier proceedings:
Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 (CA)
at 41.
[63] Contact submits that the cause of action relied upon by the Crown in relation
to its period 1 claim is the
same as that which it relied upon in the 2001 proceeding
whether or not it is correctly described as debt or breach of contract
to pay the sum
demanded. In the 2001 proceeding, judgment was given in the Crown's favour on
that cause of action for $2,253,185.90
(incl GST), and Contact says that the Crown
cannot now issue a second proceeding claiming further amounts under the same
cause of
action.
[64] In particular, Contact notes that the invoices sued upon here are for the same
period as those sued on in 2001
and are for the same quantity of gas supplied. It says
further that the invoices sued on, and on which judgment was obtained in the
2001
proceeding, have been withdrawn and revised invoices substituted. Contact says that,
while there is no general restriction on
a supplier, who has proper grounds for doing
so, revising an invoice, after obtaining judgment on an invoice, a supplier cannot
then revise the invoice and sue for the difference. Contact says that clause 12.6.2
(noted at para. [29] above) does not change this
that its purpose is not to vest a
right to revise invoices, but to provide for a two year limit within which revisions
may be made.
Contact contends that the Court in 2001 was being asked to say how
much Contact owed the Crown in respect of gas supplied in the
months in question
and that, having obtained its answer, the Crown cannot ask the question a second
time and seek a different answer.
[65] Contact notes that, had the Crown delivered the revised invoices and then
pleaded them in its amended statements of claim,
it would not have added a second
cause of action but would have sought an amendment to the existing cause of action
claiming the
total of the replacement invoices. Similarly, if the 2001 proceedings had
commenced after the invoices were reissued, the Crown would
have brought a single
cause of action. Contact submits that this illustrates that the Crown is here suing on
the same cause of action.
[66] Contact submitted that adjustments to invoices do not result in a new cause of
action unless there is a "separate and distinct
covenant": Security Retirement Pty Ltd
v Twibill Architects Pty Ltd [2005] NSWCA 325 at paras. [46] to [47], per Young CJ
in Eq; Spencer Bower et al at para. [411]. Further, Contact contended that merger of
the remedies
provided a complete answer to the Crown's period 1 claim.
[67] In response, the Crown contends that the 2001 proceeding was an
action for
declarations and for debt. Of the agreed statement of issues, the Crown says that
issues 1 to 6 concerned the means and
timing of transition to the SN9 index. It says
that issues 7 and 8 concerned the claims for debt and were "based on specific
invoices
issued..., delivered and denied". It says that the 2001 proceeding dealt with
the amounts owed by Contact on the original invoice,
in the context of a dispute as to
how and when to move to SN9. It argues that the issue was transition, not revision.
[68] Conversely,
the Crown submits that the present proceeding is based on the
reopened invoices (and not the originals) and concerns revisions to
the index, as
opposed to how to move to a replacement index. The Crown acknowledges there is,
again, a debt claim, but says that
it is a different debt (based on different invoices), a
different sum and a different denial. As such, the Crown submits that the
two
proceedings are entirely distinct, in terms of both the debt and declarations sought. It
must follow that the causes of action
are not precisely the same, and so there is no
cause of action estoppel.
[69] Cause of action estoppel prevents a party bringing
a second time a cause of
action already determined in an earlier proceeding. In these proceedings, the cause of
action alleges breach
of contract (or debt) in respect of Contact's failure to pay the
additional sums due on the revised invoices. In my view, this is
not "precisely the
same" cause of action as determined in the 2001 proceedings as I understand the
position, the issue of revision
was never mentioned, let alone determined there.
[70] Although the present cause of action relates to the same invoice period,
the
debt sought is different and arguably relies on different contractual provisions
(particularly clause 12.6.2 as to revising invoices).
In my view, where there is a
reasonable argument that intervening circumstances have occurred which are
provided for in the contract
and give a party a new contractual right, which it seeks
to exercise and enforce, this is not a situation where cause of action estoppel
will
apply. The very fact of the intervening circumstances and the new right at issue
mean that the cause of action is not identical
to that in the earlier proceeding.
[71] Under clause 12.6.2, it is arguable as I see it, that the Crown is entitled to
require
Contact to pay, after set-off, the appropriate adjustment to reflect the extent
to which it has been undercharged. In my view, it
is arguable that this is a "separate
and distinct covenant" per Security Retirement Pty Ltd v Twibill Architects Pty Ltd,
giving
rise to the present proceedings. I accept that, if the party exercises this right
before suing on original invoices, there will be
one cause of action. However, this
does not mean either that the subsequent application of clause 12.6.2 is precluded or
that, where
circumstances have changed, the party seeking to rely on this clause may
not have recourse to the Courts to enforce this provision.
There is a reasonable
argument in my view that clause 12.6.2 is not solely procedural in the sense that it is
directed solely at
regulating the time in which invoices may be corrected. Clause
12.6.2 on its face would seem to provide the means to enforce payment
of an over-
or undercharge where an error comes to light after the other party paid/received the
monthly amount. As such, I consider
that it is reasonably arguable here that clause
12.6.2 may form the basis of a separate cause of action. For these reasons, and given
the exacting test required for a defendant's summary judgment or strike out
application to succeed, Contact's cause of action estoppel/merger
arguments fail.
Issue estoppel
[72] Issue estoppel has a somewhat wider application. This is explained by the
Court in Joseph Lynch Land Co v
Lynch at 41:
"Issue estoppel is concerned with the prior resolution of issues rather than
causes of action. In [16
Halsbury's Laws of England (4 ed) (Estoppel) at
[977] , it is said that issue estoppel precludes a party from contending the
contrary of any precise point which, having once been distinctly put in issue,
has been solemnly and with certainty
determined against him. Cross on
Evidence (4th NZ ed, 1989) by Mathieson discusses issue estoppel at para
12.8 on p
315. The learned author cites the judgment of Lord Denning MR in
Fidelitas Shipping Co Ltd v V/O Exportchleb [1965] 2 All ER 4, 9:
`. . . within one cause of action, there may be several issues raised which
are necessary for the determination
of the whole case. The rule then is
that, once an issue has been raised and distinctly determined between the
parties, then, as a general rule, neither party can be allowed to fight that
issue all over again.'".
[73] Issue estoppel
is described by Diplock LJ in Thoday v Thoday at 198:
"There are many causes of action which can only be established by proving
that two or more different conditions are fulfilled. Such causes of action
involved as many separate issues between
the parties as there are conditions
to be fulfilled by the plaintiff in order to establish his causes of action; and
there may be cases where the fulfilment of an identical condition is a
requirement common to two or more different causes
of action. If in litigation
upon one such cause of action any of such separate issues as to whether a
particular condition
has been fulfilled is determined by a court of competent
jurisdiction, either on evidence or on admission by a party to the
litigation,
neither party can, in subsequent litigation between one another upon any
cause of action which depends
upon the fulfilment of the identical condition,
assert that the condition was fulfilled if the court has in the first litigation
determined that it was not, or deny that it was fulfilled if the court in the first
litigation determined that it
was."
(See further Spencer Bower, Turner & Handley The Doctrine of Res Judicata
(3ed 1996) at [182].)
[74] The
definitions in Thoday v Thoday and Spencer Bower et al were adopted
by the Court of Appeal in Talyancich v Index Developments Ltd
[1992] 3 NZLR 28,
37. McKay J, giving the judgment for the Court, continued:
"... an issue estoppel can only be founded on determinations
which are
fundamental to the decision and without which it cannot stand. Other
determinations cannot support an issue
estoppel however definite the
language in which they are expressed. What is emphasised in the judgments
cited is that
for the decision on any matter to give rise to an issue estoppel
that matter must be one which it was necessary to decide
and which was
actually decided. The authorities include the following statements of the
principle:
`. .
. the judgment concludes, not merely as to the point actually decided,
but as to a matter which it was necessary to decide,
and which was
actually decided, as the groundwork of the decision itself, though not then
directly the point
at issue' (per Coleridge J in R v Inhabitants of
Hartington Middle Quarter [1855] EngR 264; (1855) 4 El & Bl 780, at p 794).
...
The learned authors of Spencer Bower & Turner refer at p 182 para 211 to
the useful test
of asking whether it was possible to appeal against the finding
which is being put forward as founding an estoppel. If there
can be no
effective appeal against the particular determination, it is impossible to
regard it as fundamental to the
judgment. They continue at p 186 para 215:
`To recall the statement of principle from the judicial pen of Coleridge J,
set out in an earlier paragraph, the question as to findings or decisions
not expressly set out in the formal
record (ie the sealed judgment or order)
is as to what matters were necessary to decide, and actually decided, as
the groundwork of the decision itself. Not every finding of fact in a judge's
judgment, not every issue of fact determined
by a judge or jury, is res
judicata between the parties in later proceedings. Thus, a decision of fact
or law
against the party in whose favour the substantial dispute was
ultimately decided will not found an estoppel in a later
proceeding; and
this because it cannot have been necessary to the substantive
decision ...'".
[75] Again there
is a need for identity between the earlier and present proceedings
the issue in the earlier proceeding must be identical to the
issue in the present
proceeding. Thus Turner J stated in Craddock's Transport Ltd v Stuart [1970] NZLR
499 at 520:
"Issue estoppel depends entirely on the validity of the proposition that the
same question has been decided
between the same parties. ... It is not enough
that the questions are similar, or very similar, or almost the same; or that
they may be the same. They must necessarily be precisely the same. ... If the
measure of the duty owed by a party in
the first case is in law not identical
with the measure of the duty alleged to be owed by him in the second then,
though
the facts may be same in every respect in the two actions, and the
evidence may not alter by so much as one jot or one tittle,
yet no estoppel will
arise from one to the other, and the law must take its course." (Turner J's
emphasis.)
[76]
Unlike the situation that applies in cause of action estoppel, there is an
exception to the rule of issue estoppel where "further
material which is relevant to
the correctness or incorrectness of the assertion and could not by reasonable
diligence have been adduced
by that party in the previous proceedings has become
available to him": Mills v Cooper [1967] 2 QB 459, 468 per Lord Diplock; applied
in X v Y [1996] 2 NZLR 196. This exception was affirmed in the House of Lords in
Arnold v National Westminster Bank plc [1991] 3 All ER 41 at 50, per Lord Keith:
"there may be an exception to issue estoppel in the special circumstance that
there has become
available to a party further material relevant to the correct
determination of a point involved in the earlier proceedings,
whether or not
that point was specifically raised and decided, being material which could
not by reasonable diligence
have been adduced in those proceedings. One of
the purposes of estoppel being to work justice between the parties, it is open
to courts to recognise that in special circumstances inflexible application of
it may have the opposite result ...".
[77] Lastly, issue estoppel is to be applied cautiously so as not to exclude the
truth: X v Y at 217; Craddock's Transport Ltd
v Stuart at 514-515.
[78] Contact's argument here is that, if the Crown is suing on a different cause of
action, the Crown's proceeding
must fail to the extent that the relief sought depends
on findings inconsistent with the issues decided in the earlier proceedings.
[79] In this respect, Contact focuses on Goddard J's answers to agreed issue 6 in
para. [81] of the High Court judgment, as set
out at para. [22] above. It says that the
PPI index numbers identified in answer to issue 6 formed part of the calculation of
the
$2,253,185.90 debt (issue 8 at para. [22] above) and were the subject of
declarations obtained as relief in the 2001 proceedings.
Contact says that these
determinations were an unquestionably essential component of the Court's
determination on both the debt and
declaration claims.
[80] Contact says that the Crown is now trying to apply different PPI numbers as
to those determined in answer
to issue 6(a) to (c). Contact says that this offends
against the rule of issue estoppel that the rule requires the Crown to use
the index
numbers as found by the High Court. It contends that it is untenable for the Crown to
now argue that this issue has not
already been decided or that the judgment it now
seeks could be consistent with the 2001 declarations.
[81] Moreover, Contact
submits that the exception to issue estoppel does not
assist the Crown here because there is no new material relevant to the issue
that the
Crown, with reasonable diligence, could not have ascertained before the 2001
proceedings. It contends that the only material
relevant to whether the Crown would
revise the invoices was whether SI9 was also going to be revised. Contact submits
that there
is no evidence that the Crown did not know this fact prior to filing its
second and third amended statements of claim in the 2001
proceedings (dated 23
November 2001 and 10 December 2001), and that, in any event, the Crown could
certainly have obtained this information
with reasonable diligence.
[82] In response, the Crown says that Contact's argument is to divorce para. [81]
of the High Court
judgment from its context. It makes four points:
(a) Contact seeks to say that the answers to 6(a) to (c) are set in stone
and
that clause 12.6.2 is thereafter inapplicable, but it has readily accepted a
revision of the answer to
6(e), changing the link factor denominator from
1014, as determined by Goddard J, to 1016, with an estimated benefit to
Contact of $1.9 million. The Crown says that Contact cannot have it both
ways.
(b) The Crown argues
that this shows that the answers to issue 6 were not
intended to be exclusive of a later exercise of the power to reopen
and
revise invoices under clause 12.6.2. It says that the answers did not
consider the possibility of changes
to SN9, that such changes were not
before the Courts then but that they are before the Court in these
proceedings.
(c) Next, the Crown contends that the 2001 proceedings did not concern the
issue whether the term "PPI" as defined
in the contract included revisions
of the PPI made by SNZ (and if so, when), or whether the Crown could
reopen invoices under clause 12.6.2 so
as to account for such revisions.
Again, the Crown says that the focus in 2001 was on transition, not
revisions.
Moreover, the Crown says that the Courts in 2001 could not
have sensibly determined the issue because it did not formally
arise
between the parties until June 2002 (after Goddard J's decision dated 18
April 2002), when the Crown
reissued the invoices.
(d) The Crown's cause of action here is based on revised invoices, ie. fresh
materials.
That the materials were not in existence at the time of the
earlier proceedings points strongly against any issue estoppel:
Stream
Investments Ltd (in liq) & Ors v Strevens & Ors HC AK CP534-93 22
December 1994 at 11; The Commonwealth
Bank of Australia v White (No
4) [2001] VSC 511 at [44].
[83] As such, the Crown goes on to argue that it is not "reasonable to regard the
earlier decision as a final determination
of the issue which [the Crown] now wants to
raise", per Joseph Lynch Land Co v Lynch at 43.
[84] In final reply, Contact endeavours
to dispute the import the Crown places on
the revision of the link factor. It says that Contact's argument that 1016 had to be
used was unanswerable and that it does not put the Court's determination of the
index numbers at large.
[85] In considering these
issues, I find that the Crown's submissions that the
primary focus of the 2001 proceedings was the means and timing of transitioning
from SI9 to SN9 must be accepted. I also accept that the primary issues in the
present proceeding are whether "PPI" as defined in
clause 1.2 of the contract should
be interpreted as including subsequent revisions to the PPI and, if so, whether the
Crown can reopen
and reissue invoices on this basis under clause 12.6.2. As I see it,
neither of these matters were at issue in the 2001 proceedings.
[86] However, the question is more whether an essential element or question in
answering these issues was a determination fundamental
to the earlier proceeding; a
matter which it was necessary to decide, and which was actually decided, as the
groundwork of the decision
itself. Contact suggests that the ascertainment of the PPI
numbers for the period 1 dates was such an issue.
[87] I find that
Contact has not satisfied its onus to show that the Crown cannot
succeed or has no reasonable cause of action on the basis that it
is estopped from
bringing a proceeding contending for alternative PPI numbers for the period 1 dates.
I am of the view that the Crown
is not here contending the contrary of a precise point
which was distinctly put in issue in the earlier proceedings. The Crown is
not saying
that Goddard J's answers were wrong in their context at the time. Instead it is saying
that the intervening circumstances
namely the revision of SN9 by SNZ and the
reopening of the invoices have entitled the Crown under the contract to enforce a
different
debt. Although the question appears to be the same as in agreed issue 6 (ie.
the index numbers to use and the correct amount chargeable
under the contract for
the gas supplied in the months at issue) it is the effect of the intervening
circumstances that is actually
at issue. This issue was not determined in the earlier
proceedings and the Crown is therefore not estopped from putting it before
the Court
now for determination.
[88] I note also that Contact's argument here faces an additional hurdle in that it
alleges a
decision of fact against the party in whose favour the 2001 proceedings
were ultimately decided said in Spencer Bower et al, as
quoted in Talyancich
above (see para. [74]) not to found an estoppel because it cannot have been
necessary to the substantive decision.
[89] As such, it is not strictly necessary for me to consider the exception to issue
estoppel (noted at para. [76] above). However,
in the interests of completeness, I
simply note at this point that I would in any event have found it to be a material fact
in dispute,
unsuitable for determination on these applications, whether the relevant
information was available to the Crown prior to the 2001
proceedings. In this
respect, I acknowledge Contact's argument that, as Mr McKenzie had primary
responsibility for the Crown's negotiations,
there may turn out to be no basis for the
suggestion that an in-depth consideration of the factual matrix will assist the Crown.
Nevertheless, at this point, I am satisfied that examination and cross-examination of
the relevant parties is required to properly
determine this issue.
The rule in Henderson v Henderson
[90] The rule in Henderson v Henderson is essentially an extension to
the
previous forms of estoppel. Thus Sir James Wigram VC described the rule (at para.
[115]) in these terms:
"where a given
matter becomes the subject of litigation in, and of
adjudication by, a Court of competent jurisdiction, the Court requires the
parties to that litigation to bring forward their whole case, and will not
(except under special circumstances) permit the
same parties to open the
same subject of litigation in respect of matter which might have been brought
forward as part
of the subject in contest but which was not brought forward,
only because they have, from negligence, inadvertence, or even
accident,
omitted part of their case. The plea of res judicata applies, except in special
cases, not only to points
upon which the Court was actually required by the
parties to form an opinion and pronounce a judgment, but to every point
which properly belonged to the subject of litigation, and which the parties,
exercising reasonable diligence, might
have brought forward at the time."
(emphasis added)
[91]
The rule has been applied in New Zealand in, for example, Bank of New
Zealand Ltd v Savril Contractors Ltd [2005] 2 NZLR 475 (CA) at para. [109]; Tower
Insurance Ltd v Disputes Tribunal at Nelson (2000) 14 PRNZ 338; and Page & Anor
v BMH Ltd HC HAM CIV-2007-419-001584 19 February 2008.
[92] However, Johnson v Gore Wood & Co [2000] UKHL 65; [2001] 1 All ER 481 (cited by the
New Zealand Court of Appeal in Commissioner of Inland Revenue v Bhanabhai
[2007] 2 NZLR 478) indicates a slightly more restrictive approach to the rule. Lord
Bingham said at 498-499:
"Henderson v Henderson abuse of
process, as now understood, although
separate and distinct from cause of action estoppel and issue estoppel, has
much
in common with them. The underlying public interest is the same: that
there should be finality in litigation and that a party
should not be twice
vexed in the same matter. This public interest is reinforced by the current
emphasis on efficiency
and economy in the conduct of litigation, in the
interests of the parties and the public as a whole. The bringing of a claim
or
the raising of a defence in later proceedings may, without more, amount to
abuse if the court is satisfied (the
onus being on the party alleging abuse)
that the claim or defence should have been raised in the earlier proceedings
if it was to be raised at all. I would not accept that it is necessary, before
abuse may be found, to identify any additional
element such as a collateral
attack on a previous decision or some dishonesty, but where those elements
are present
the later proceedings will be much more obviously abusive, and
there will rarely be a finding of abuse unless the later proceeding
involves
what the court regards as unjust harassment of a party. It is, however, wrong
to hold that because a matter
could have been raised in early proceedings it
should have been, so as to render the raising of it in later proceedings
necessarily abusive. That is to adopt too dogmatic an approach to what
should in my opinion be a broad, merits based
judgment which takes account
of the public and private interests involved and also takes account of all the
facts of
the case, focusing attention on the crucial question whether, in all the
circumstances, a party is misusing or abusing the
process of the court by
seeking to raise before it the issue which could have been raised before. As
one cannot comprehensively
list all possible forms of abuse, so one cannot
formulate any hard and fast rule to determine whether, on given facts, abuse
is to be found or not. Thus while I would accept that lack of funds would not
ordinarily excuse a failure to raise
in earlier proceedings an issue which
could and should have been raised then, I would not regard it as necessarily
irrelevant, particularly if it appears that the lack of funds has been caused by
the party against whom it is sought to claim.
While the result may often be
the same, it is in my view preferable to ask whether in all the circumstances a
party's
conduct is an abuse than to ask whether the conduct is an abuse and
then, if it is, to ask whether the abuse is excused or
justified by special
circumstances. Properly applied, and whatever the legitimacy of its descent,
the rule has in my
view a valuable part to play in protecting the interests of
justice."
(emphasis added)
[93] Contact contends that the Crown was aware no later than 5 September 2001
that SN9 had been revised by SNZ,
and that its second and third amended statements
of claim were filed subsequently. As such, Contact says that the Crown was required
to bring into the 2001 proceedings all its claims in relation to Contact's liability in
relation to period 1 as now alleged. Contact
accepts that the Court has some
discretion here, but submits that the Crown should not be the beneficiary of such
discretion where
it was well aware of the revision of SN9 but chose not to advance
an increased claim in either of the amended statements of claim.
Contact says that
the Crown cannot change the fact that the Crown knew in 2001 that the matters it
was suing on were wrong.
[94]
As I understand it, the Crown accepts that it was aware of the revision to SN9
by 5 September 2001. However, it submits that it was not required to raise the
revision issues
in the 2001 proceedings for the following reasons:
(a) The 2001 and present proceedings do not concern "the same subject
of
litigation" or "the same matter" as per the above authorities. They are
"conceptually very different" (per
Bhanabhai at para. [62](b)). In short,
the ability to use revised indices, and the consequences thereof, were not
before the Court in the 2001 proceedings. The rule in Henderson v
Henderson does not preclude a party bringing
fresh proceedings founded
on a new or altered state of circumstances, including a different breach of
the same
term or different terms of a contract (citing Bristowe v
Fairclough [1840] EngR 552; (1840) 1 Man & G 143, 153-4; [1840] EngR 552; 133 ER 281, 286; Liverpool
Corporation v Chorley Waterworks Co (1852) 2 De GM & G 852, 866;
42 ER 1105, 1111; Calvert & Anor v PricewaterhouseCoopers (2006) 22
NZTC 20,013 at para. [74]).
(b) It was not reasonably necessary for the Court to put revision matters
forward for determination
in the earlier proceeding. The Crown gave
notice of its intention to reopen the invoices on 5 September 2001. The
delay until it in fact reissued the invoices (on 1 July 2002) is explained
by the Crown's expectation that SI9
would also be revised (which would
have been to ameliorate the effect of the revision to SN9 to Contact's
benefit).
The Crown says that Mr McKenzie informed Mr Love of this
explanation in his letter of 5 September 2001.
(c) To
the extent that Contact seeks to impugn Mr McKenzie's evidence on
this point, that is a matter going to potential conflict
of evidence and is
not properly ascertainable on the present applications.
(d) The rule in Henderson v Henderson
is about abuse of process and
therefore focuses not only on the plaintiff, but also on the defendant its
knowledge, actions, response and whether it was prejudiced by the
separation of the claims. The Crown says that Contact
was well aware at
or around 5 September 2001 of the Crown's intention to reopen the
invoices; that there is
no evidence that Contact made enquiries of SNZ as
to its intentions for SI9, insisted/suggested that the issue be brought
in to
the 2001 proceedings, or, most importantly, has been prejudiced in some
relevant way by this notified
issue being postponed. Further, the Crown
notes that, although the Crown did not bring the revision issue to the
Court in 2001, nor did Contact.
[95] As Lord Bingham notes in Johnson v Gore Wood & Co the essential question
is whether,
on a broad merits based approach, in all the circumstances including
the public and private interests involved and all the facts
of the case the Crown's
conduct is a misuse or abuse of the process of the Court by seeking to raise an issue
which could have
been raised before.
[96] For the reasons already canvassed, I am of the view that the present
proceedings concern different matters
to those in the 2001 proceedings. The present
issues are not inherently part of the transition matters that were at issue then.
Moreover, I consider that there is a reasonable argument that it is circumstances
which have since arisen which have led to the
present proceeding. On the "exacting
test" standard (enunciated by the Privy Council in Attorney General v Jones see
para. [49]
above) required under these applications, I am not convinced that in 2001
the Crown was in a position where it was required to bring
the revision issue before
the Court. Nor am I convinced that Contact has been prejudiced by this. As such, on
the pleadings and evidence
before me at this early stage of the proceeding, I am not
satisfied that the rule in Henderson v Henderson operates to exclude the
Crown's
cause of action such that Contact's applications ought to be granted.
Is Contact estopped?
[97] In addition to its arguments
in opposition under each of the estoppel heads
advanced by Contact, the Crown also contends that Contact is itself estopped from
invoking principles of estoppel against the Crown. This is explained by the Crown as
follows:
"Where A (here, Contact) has
established a good estoppel by res judicata
against B (here, the Crown), B may confess and avoid such estoppel by
alleging
and proving that A, by representation, has precluded himself from
relying upon the res judicata. B in this situation does
not deny that he is
estopped, but insists that A is estopped from saying so, thereby setting the
matter at large: Showlag
v Monsour [1995] 1 AC 431, 441 (PC)."
[98] The Crown says that the principle aims to prevent a party from `having his
cake and eating it too', and probably
originates in the equitable maxim that he who
comes into equity must do so with clean hands.
[99] Simply put, the Crown alleges
here that Contact's acceptance of the benefit
of the revisions in relation to periods 2 and 3 (collectively) and in terms of the
revised link factor means that it is estopped from saying that the Crown is
prevented from applying the revisions in relation to
period 1.
[100] In reply, Contact submits that there is nothing in the correspondence between
the parties that affects Contact's
conscience. In illustration of this, counsel provided
an analysis of this correspondence. Contact submitted that it made its position
that
it did not accept that revisions were to be taken into account under the contract
clear from the outset and consistently
maintained that position throughout. Contact
maintains that the Crown's difficulties now are of its own making. In addition,
Contact
says that there is nothing in the Crown's argument that comes close to
fulfilling the requirements of estoppel by representation
(as per Cross on Evidence at
[12.23]). This includes a complete absence of any evidence of belief or reliance.
Contact notes that
the Crown's submissions here speak only in generalities.
[101] It is important to emphasise again that in the applications before
the Court,
the primary onus is on Contact to show that none of the Crown's causes of action
can succeed or that the Crown's pleadings
show no tenable cause of action or are
otherwise an abuse of process. Of course, if the Crown's counter-estoppel argument
was seen
as utterly baseless or incredible, Contact might discharge this onus.
However, I am not of this view. I consider that there is a
material and real factual
dispute here as to what the parties intended and took from the communications in
and around 4 June 2003
and in respect of the revision of the link factor.
[102] As such, I am satisfied that Contact's applications should be dismissed
on
this ground also.
Construction of the contract
[103] Contact's last argument in relation to the Crown's period 1 claim is that
the
contract, properly constructed, does not permit an adjustment to the Crown Margin
on the basis of revised PPI index numbers.
[104] Contact acknowledges that clause 1.2 of the contract (which defines PPI)
does not specify the use of the index "first published",
as is included in some
contracts so as to require the parties to ignore any revisions. However, Contact says
that the mere absence
of these words does not by itself mean that the revisions must
be allowed instead, the answer depends on a careful analysis of
the words used.
Also, Contact submits that the existence of contracts specifying indices as "first
published" also indicates that
price adjustment clauses are quite workable without
incorporating revisions.
[105] Contact goes on to submit that the definition
of "PPI" in clause 1.2 requires
the use of the PPI number for the last quarter in respect of which the PPI index has
published and
publicly released not less than three months before the relevant
Adjustment Day. Contact says that on the Adjustment Days at issue
(1 April 2000, 1
October 2000 and 1 April 2001) the PPI numbers fitting this definition were the
unrevised numbers.
[106] Contact
contends that the question must be asked on the Adjustment Day
only, not at a later date, and here relies on clauses 9.5 and 12.5.1.
Clause 9.5 (headed
Crown Margin Adjustment) states that "On each Adjustment Date" the Crown
Margin payable shall be adjusted according
to the formula provided. Clause 12.5.1
(headed Payment for Base Gas) is quoted at para. [10] above. It states that the Crown
is to
calculate the Crown Margin payable "on each successive Adjustment Day".
[107] Contact contends that the Crown agreed with this interpretation
at the time of
the 2001 proceeding, referring to the agreed statement of issues dated 8 October
2001 at para. [12] and Mr McKenzie's affidavit dated 16 November 2001 at para.
[24], both of which refer to the adjustments being made on the Adjustment Dates.
Contact notes that both of these statements were
made after the SN9 was publicly
revised.
[108] Contact also says that clause 12.6 must be read as a whole. This clause states:
"Examination and Re-Opening of Accounts
12.6.1 Both the Crown and ECNZ shall have the right at any reasonable
time to examine the books and all other records of the other to the
extent necessary to verify the accuracy
of any invoice or statement
required to be given under this Clause 12.
12.6.2 If within 2 Years after the
date of any invoice or statement delivered
under this Clause 12 it is found that ECNZ has been either
undercharged or overcharged the matter may be reopened and after
any set-off the appropriate adjustment made by
ECNZ either paying
the amount of the undercharge of being given a refund by the Crown
of the amount
of the overcharge. This provision shall apply mutatis
mutandis if it is found that the Crown has been either undercharged
or overcharged under Clause 12.3." (my emphasis)
[109] It follows, according to Contact, that
when clause 12.6.2 (which allows for
revision of invoices) is read with clause 12.6.1, it becomes apparent that the
reopening of
invoices is directed at a reopening by one party following an
examination of the records of the other party. Contact says that this
explains the use
of the word "found" in clause 12.6.2. Contact also says that any other interpretation
would be to defeat the limitation
purpose of the clause in that, provided a party gave
notice of re-opening the invoice, that party may then take as long as it likes
to
actually demand payment.
[110] As such, Contact submits that the Crown has no right to revise the invoices
for period 1. And
Contact submits that determination of this simple construction
matter does not require a trial.
[111] The Crown takes issue with
Contact's interpretation of the contract. It makes
five points:
(a) PPI, as defined in clause 1.2, is a number derived from
"the Producers
Price Index Inputs (all Industries) as from time to time published". It
says the phrase
"not less than 3 months prior" serves to identify which
PPI quarter is to be used. As such, the PPI may be revised
in accordance
with the revision of SN9, and the invoices may then be re-opened and
reissued.
(b) There is no need to read the contract restrictively such that clause 12.6.2
is restricted to correcting clerical
errors or slips. The Crown says that
such a narrow, linguistic, non-purposive analysis of the contract was
rejected by each of the Courts in the 2001 proceeding.
(c) Contact's argument is inconsistent with the contract,
which allows for
revisions of the Crown Margin during a Pricing Period. Clause 12.5.4
provides for
the recalculation of the monthly amount in the event that the
Maui Gas Price changes during, or with effect during,
a Pricing Period.
It is noted that a worked example of this is provided in Schedule 7,
clause 4. The
Crown says that there would be no sense in allowing
changes in this instance but not when the PPI is subsequently
corrected
by SNZ.
(d) The parties themselves have treated the contract as allowing for revisions
to the PPI. Thus, the denominator in the link factor (1014) was revised
and with effect from 1 November 2001,
notwithstanding that it was
published in August 2001, after the original June 2001 PPI. Likewise, the
revisions for periods 2 and 3 were not published more than three months
in advance of the relevant Adjustment Dates, but their use (and the
consequent benefit to Contact)
was nevertheless accepted by Contact.
(e) Mr McKenzie's evidence in the 2001 proceedings is merely a description
of the contractual provisions (of whatever probative value that may be),
in the context of a case wholly unconcerned
with revision, and hardly
prevails over Contact's own subsequent conduct.
[112] In his detailed reply submissions,
Counsel for Contact again denies the
relevance of the revision to the link factor, submitting that this was an agreement
between
the parties in applying the High Court judgment that it is not a matter
going to interpretation of the contract as there is no
contractual provision referring to
the link factor.
[113] I accept that the reference to "3 months prior" in clause 1.2 is merely
to
identify which quarter is to be used. It is the quarter that is to be not less than three
months before the Adjustment Day; the
definition does not require the publication of
the PPI to have been done not less than three months earlier (see para. [8] above).
[114] Nor in my opinion is it a complete answer that the contract (as described in
the Crown's evidence in the 2001 proceeding)
refers to the calculation as being done
on the Adjustment Day. For example, I understand Contact to accept that, if a
clerical error
or omission in this calculation was subsequently discovered, clause
12.6.2 could be used to reopen and reissue the affected invoices.
I am not satisfied
that the present situation, where the `error' originates with SNZ, can be properly
distinguished. Moreover, in
my view this interpretation is strengthened by the
provision for revising the Crown Margin in the circumstances described in clause
12.5.4.
[115] Although clause 12.6.2 is preceded by clause 12.6.1 (giving a party the right
to examine the other party's books to
verify the accuracy of any invoice), at this
point I am not convinced that clause 12.6.2 is limited to correcting errors so
discovered.
In my view, there is nothing in the clause requiring such a restrictive
meaning, which, if intended, would have been simple to prescribe
(for example, by
inserting in clause 12.6.2 the words "by exercising the right in 12.6.1" after the word
"found"). The clause applies
to "any invoice" delivered under clause 12, as opposed
to "any invoice found to be inaccurate under clause 12.6.1". It does more,
in my
view, than merely prescribe a limitation period it confers the right to re-open
invoices.
[116] Lastly, although the link
factor itself was not specified in the contract (and
therefore the revision of the link factor is not direct confirmation that revision
was
permitted), the acceptance of revision in this respect also to my mind supports the
fact that the date of the calculation of
the Crown Margin was not an essential term of
the agreement.
[117] For all these reasons, Contact has failed to satisfy me that
the contract does
not permit the use of the revised SN9 numbers or the reissuing of invoices to have
regard to such a revision.
[118] In relation to the Crown's period 1 claims, it will be apparent therefore that
the summary judgment and strike-out applications
by Contact are dismissed.
Periods 2 and 3 contractual limitation
[119] I turn now to consider the Crown's claims for periods
2 and 3.
[120] On this, Contact argues that clause 12.6.2 precludes the reopening of an
invoice more than two years after the invoice
was delivered, that the Crown has
given no notice of the reopening of the invoices for periods 2 and 3, and that it is
now too late
to do so. Contact says that this renders the other declarations sought in
the alternative cause of action moot.
[121] Contact notes
that, in its fax of 4 June 2003, the Crown said it was reserving
its "right" to reopen the period 2 and 3 invoices and reissue them in relation to the
unrevised amounts.
However, Contact submits that a unilateral purported reservation
of rights by the Crown should not have the effect of entitling the
Crown to revise
invoices outside the contractual two-year period.
[122] Conversely, the Crown submits that it has met the contractual
time limit for
bringing the action. It says that it properly reserved its rights to reopen the period 2
and 3 invoices, and that
Contact treated the Crown's approach as an "offer" which,
being beneficial to it, Contact, was careful to "accept". The Crown says
that, having
received the benefit of that, Contact cannot now reverse track. The Crown also
submits that Contact cannot sensibly
argue for one approach for period 1 and another
for periods 2 and 3. It cannot argue for and accept positive variances from revised
invoices but reject any negative variances.
[123] On these last points, as I understand its argument, Contact does not say that
the Crown should have used the revised PPI numbers for periods 2 and 3 it accepts
that the proper approach is the same as it has
advocated for period 1. However,
Contact says that, because of what it maintains is the Crown's delay in bringing
these proceedings,
the Crown is now precluded from reopening the invoices and
recovering the amounts it may have been contractually entitled to.
[124]
Before me, counsel for Contact suggested that clause 12.6.2 is a purely
machinery provision, simply regulating the time in which
adjusted invoices can be
issued. Whether or not this may be the case, it is clear from clause 12.6.2 that it
applies if over or undercharging
in an invoice is "found" within two years of the date
of the invoice. To "find" something is to "discover information or a fact",
to
"recognise or discover to be present", or to "ascertain by research or calculation"
(Concise Oxford Dictionary (10ed, revised,
2001)). There is a possible argument
therefore, that on a literal reading, the clause requires the fact of the undercharging
of Contact
to have been discovered or determined within two years of the date of the
invoices. Whether or not a proper interpretation is that
the clause may not provide
for notification of the possibility or even intention of reopening within two years
remains for further
consideration. Suffice to say at this point that on its face the
limitation appears to focus on the date of the discovery of an error.
[125] Any interpretation of clause 12.6.2 might also need to be consistent with a
purposive meaning. The limitation in the clause
is no doubt to provide for certainty
a time period during which invoices can be amended. Where an error must be
discovered within
the time stated, the other party knows from the end of the two
years that the invoice as issued is correct or that it is to be revised
to reflect an
identified error. As such, the extent of that party's liability will be essentially clear.
[126] Here, the Crown
purports to reserve its rights to amend these invoices. The
Crown's position is that Contact "accepted" this reservation, particularly
as it
provided some benefit to Contact for the period 2 price reductions and Contact
cannot now "reverse track". Further, the intensely
factual issue in this proceeding of
when the over or under-charging of invoices for periods 2 and 3 was "found" no
doubt will be
the subject of considerable disagreement between the parties. In my
view it needs to be thoroughly tested at trial by a careful examination
of all the
evidence. Given this, I am satisfied that this cause of action also should not be
struck out and needs to proceed to a
full enquiry at trial.
Conclusion
[127] In light of my above findings, it will be apparent that Contact has failed to
discharge
its onus of satisfying the Court that none of the Crown's causes of action
in its statement of claim can succeed or that either the
Crown's first or second cause
of action is untenable. Contact's applications for summary judgment and strike out
are therefore dismissed.
Costs
[128]
The Crown having been successful in opposing the present applications
before the Court, I see no reason why it should not be entitled
to an award of costs
on the usual basis. This is notwithstanding that one of the applications before the
Court was for summary judgment
by the defendant. It is appropriate in my view that
under the circumstances here, costs on these interlocutory applications should
be
awarded now.
[129] That said costs are now awarded to the Crown here with respect to
Contact's unsuccessful summary judgment
and strike-out applications on a Category
2B basis together with disbursements as fixed by the Registrar.
`Associate Judge D.I. Gendall'
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