IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2017-404-000605
[2018] NZHC 3096	

BETWEEN	VECTOR LIMITED
Applicant	
AND	UTILITIES DISPUTES COMMISSIONER, UTILITIES DISPUTES LIMITED
First Respondent

AMERICOLD NZ LIMITED
Second Respondent

PROGRESSIVE ENTERPRISES LIMITED
Third Respondent

WENDCO (NZ) LIMITED
Fourth Respondent	

Hearing:	5-7, 9 March 2018	
Appearances:	J A Farmer QC, B H Dickey and M P Hardy for Applicant
J W H Little and R Hourigan-Johnston for First Respondent K Anderson and K E F Morrison for Second Respondent No appearance for Third and Fourth Respondents
R G Cahn for Commerce Commission – Intervener
W M Irving for Electricity Networks Association – Intervener J F Anderson QC as Amicus Curiae	
Judgment:	28 November 2018	

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 28 November 2018 at 3.30 pm
pursuant to R 11.5 of the High Court Rules Registrar / Deputy Registrar Date………………………

VECTOR LTD v UTILITIES DISPUTES COMMISSIONER & ORS [2018] NZHC 3096 [28 November 2018]

Introduction	[1]
Approach to judicial review
Error of law	[6]
Materiality	[13]
Evidence adduced for purposes of judicial review	[15]
Some background: the electricity industry and the Scheme
The electricity industry	[22]
The Electricity and Gas Complaints Commissioner’s Scheme	[27]
The Commissioner’s decisions	[34]
First ground of review – error of law in finding that Vector owed a duty of care to electricity consumers
A novel duty	[41]
The Commissioner’s reasoning	[46]
The Commissioner’s approach to foreseeability	[49]
The Commissioner’s proximity analysis	[55]
The contractual context	[61]
The nature of the loss	[78]
The regulatory context as a policy consideration	[85]
Summary: first ground of review	[98]
Second ground of review – error in finding negligence by Vector	[99]
The cause of the power outage	[101]
The finding that Vector was negligent in failing to identify the risks
associated with the cable trench	[105]
Reliance on the Electricity Authority’s report regarding fire hazard
systems and what mitigation steps should have been taken	[119]
Third ground of review – the Commissioner acted unreasonably and made an error of law in finding that Vector’s alleged breach caused
the claimed loss	[126]
Fourth ground of review – contractual limitations on the extent of liability [129] Contact’s Standard Terms with Americold and Wendco	[132] Contact’s Special Terms with Progressive (Cabinet Ready Meat Plant/
Mount Wellington/Greenlane)	[141]
The Spot Supply Agreements between Mercury and Progressive
(Newmarket, St Johns, Sylvia Park, Meadowbank and Onehunga)	[143] Fifth ground of review – exceeding the jurisdictional limit by considering multiple complaints by Progressive
The issue	[145]
The Commissioner’s decisions	[151]
Relief	[161]
Result	[168]

Introduction

[1]	In October 2014, a faulty joint in an electrical cable at an Auckland substation failed. The cable ignited. The fire spread to other cables. The result was an electricity outage affecting several Auckland suburbs for three days.

[2]	Vector Limited (Vector) owned the cables. Americold NZ Ltd (Americold), Progressive Enterprises Ltd (Progressive) and Wendco (NZ) Ltd (Wendco) owned businesses affected by the outage. They made claims against Vector under the Energy Complaints Scheme, a dispute resolution scheme established pursuant to the Electricity Industry Act 2010 (EIA). The Utility Disputes Commissioner1 concluded that Vector owed a duty of care to the complainants “to maintain the security and integrity of its network”, that it had failed to do so and that the failure caused the losses claimed. She required Vector to pay the complainants a total of $297,156.90.

[3]	Vector seeks judicial review of the Commissioner’s decisions. It says that the Commissioner:

(a)	made an error of law in concluding that Vector owed the complainants a duty of care;

(b)		made an error of law or acted unreasonably in finding that Vector had breached the duty;

(c)	made an error of law or acted unreasonably in finding that Vector’s breach caused the complainants’ loss;

(d)	made an error of law in failing to apply limitation provisions in the complainants’ supply contracts, on which Vector was entitled to rely; and

(e)	exceeded the scope of her jurisdiction in respect of the claims by Progressive.

[4]	Only Americold took an active role as contradictor in the proceedings. The Commissioner, Progressive and Wendco abide the decision of the Court. Progressive’s

1	Known at the time as the Electricity and Gas Complaints Commissioner.

position left the jurisdictional issue at [3(e)] without a contradictor. Ms Anderson QC was appointed amicus curiae to address that issue.

[5]	The Commerce Commission and the Major Electricity Users Group (MEUG) appeared as interveners.

Approach to judicial review

Error of law

[6]	The major plank of Vector’s case was the asserted error of law by the Commissioner in finding that a duty of care existed between Vector and electricity consumers.
[7]	The standard of review for error of law in a tribunal’s decision is correctness.2 In Peters v Davison the Court of Appeal said:3

Is it fundamental to the judicial role that in deciding disputes between parties it is concerned only with the enforcement of the rights of one and the duties of the other, or do the courts as a matter of constitutional principle have the power to see that public authorities do not make material errors of law? Earlier in this judgment we noted the established ability of the Court to review for error of law … Those judicial review powers of the High Court are based on the central constitutional role of the Court to rule on questions of law: as Cooke J said in Bulk Gas Users’ Group at p136: “The Courts of general jurisdiction have ultimately the function of interpreting Acts of Parliament”. The essential purpose is to ensure that public bodies comply with the law.

[8]	The position is the same in relation to common law as for the interpretation of statutes. It is an error of law for a decision-maker to depart from the correct position at common law.4
[9]	However, as I come to later, the Commissioner was not actually required to apply the law, merely to have regard to it. The obligation to “have regard to” a specified matter is commonly imposed on administrative decision-makers and its

2	Vodafone NZ Ltd v Telecom NZ Ltd [2011] NZSC 138, [2012] 3 NZLR 153 at [50]–[51]; Major Electricity Users’ Group Inc v Electricity Commission [2008] NZCA 536 at [54]; Major Electricity Users’ Group Inc v Electricity Commission HC Wellington CIV-2007-485-2508, 14 March 2008 at [80]; Peters v Davison [1999] 2 NZLR 164 (CA) at 188; Bulk Gas Users’ Group v Attorney- General [1983] NZLR 129 (CA) at 133.
3	Peters v Davison, above n 2, at 188.
4	McNally v Attorney-General [2010] NZCA 571, [2011] 2 NZLR 137.

meaning is well settled as requiring the decision-maker only to give genuine attention and thought to the specified matter, rather than actually give effect to it.5
[10]	Ms Anderson,6 for Americold, argued that the Commissioner did have regard to the law which was, in any event, merely a relevant but not determinative factor in resolving complaints. She pointed to the nature of the Scheme, which is not intended to be a quasi-judicial process but only a practical and cost-effective dispute resolution process.7 She identified, in particular, the limited precedent value of the Commissioner’s determinations, the fact that parties are generally not represented by legal counsel in oral hearings and the existence of a “test case” procedure which allows important or novel points of law to be considered outside the disputes resolution process. She also referred to the 2017 five-yearly independent review of the Scheme8 which highlighted the emphasis on fair and reasonable outcomes over technical legal processes as a core feature of the Scheme.

[11]	Mr Farmer QC, for Vector, argued that, although the Commissioner clearly endeavoured to have regard to the law, she failed to do so because she misdirected herself as to what the law was. Mr Farmer acknowledged that the Scheme is designed to encourage the efficient resolution of relatively modest complaints by way of a relatively quick and informal process, but argued that ordinary principles of law and liability nevertheless apply to the resolution of such disputes. He relied on Miller J’s statement in Contact Energy Ltd v Jones that:9
… The Commissioner must determine complaints by deciding what is fair and reasonable after observing and applying any applicable law, including the Consumer Guarantees Act. …

[12]	In my view, where one of the matters to which regard must be had is a question of law, the tribunal must correctly identify the relevant principle before deciding what weight to ascribe to it. The position is well illustrated by Chiu v Minister of

5	New Zealand Fishing Industry Association Inc v Minister of Agriculture and Fisheries [1988] 1 NZLR 544 (CA) at 551; J & C Vaudery Ltd v Canterbury Medical Officer of Health [2016] NZCA 539, [2017] 2 NZLR 334 at [41].
6	Not Ms J Anderson QC who is amicus curiae and whose submissions are reviewed in the discussion about the fifth ground of review; all other references are to Americold’s counsel, Ms K Anderson.
7	“Government Policy Statement on Electricity Governance” (29 May 2008) 92 New Zealand
Gazette 2468 at [32].
8	Required by the Electricity Industry Act, sch 4, cl 15.
9	Contact Energy Ltd v Jones [2009] 2 NZLR 830 (HC) at [7].

Immigration in which the Court of Appeal set aside the decision of an Associate Minister of Immigration not to interfere with the declinature of a residency application.10 The decision had been made in the mistaken belief that the applicant’s failure to declare a minor conviction (which the applicant believed had been erased) amounted to an offence against s 142(a) of the Immigration Act 1987. In judicial review proceedings, the Associate Minister acknowledged that he had not realised that s 142(a) required knowledge by the maker of the statement that it was false in a material respect, and so did not turn his mind to whether the applicant knew that his residence application was false or misleading in a material respect. The Associate Minister’s misinterpretation of s 142(a) amounted to an error of law.11

Materiality

[13]	It is uncontentious that the Court will not interfere with a tribunal’s decision unless the error is material.12 Ms Anderson argued that the test for materiality in the present context should be whether the resultant decision by the Commissioner was manifestly unreasonable. For this proposition, she drew on the wording of s 97(3) of the EIA which provides that the District Court may modify the terms of a binding settlement if it is satisfied that they are “manifestly unreasonable”. She stated it would be anomalous if a lower threshold could be applied in review proceedings challenging the Commissioner’s decisions. She also drew an analogy with s 52 of the Legal Services Act 2011, which permits review of the Legal Services Commissioner’s reconsideration of a decision relating to legal aid applications. I do not find either helpful.

[14]	Under s 97(3) of the EIA, the District Court is entitled to approach the question of modifying a binding settlement on the basis that the settlement is free of any error of law; it follows that “manifestly unreasonable” in the context of s 97(3) alludes to the requirement that a decision be reasonable in the Wednesbury sense. It is not directed towards errors of law. Likewise, s 52 of the Legal Services Act identifies the two grounds being either that the decision was “manifestly unreasonable” or “wrong in law”, making it plain that manifest unreasonableness is entirely separate from error

10	Chiu v Minister of Immigration [1994] 2 NZLR 541 (CA) at 549–550.
11	At 550.
12	See Peters v Davison, above n 2, at 168.

of law. In my view, a material error of law is, as Hammond J described it in Lumber Specialties Ltd v Hodgson, one that “affected the actual making of the decision, and affected the decision itself”.13

Evidence adduced for purposes of judicial review

[15]	The Commissioner filed an affidavit explaining the dispute resolution process under the Scheme and producing the record of her decisions. Further affidavits were filed by Vector, Americold and the Electricity Network Association (ENA). These affidavits included information not available to the Commissioner. There was no objection to the ENA evidence, nor to the Americold evidence. Americold objected to the evidence filed by Vector.

[16]	In general, judicial review hearings proceed on the basis of the evidence available to the decision-maker at the time the decision was made. Further evidence, not available to the decision-maker, is usually regarded as irrelevant and therefore inadmissible. The Court of Appeal made this clear in Roussel Uclaf Australia Pty Ltd v Pharmaceutical Management Agency Ltd:14
… New opinion evidence, not presented to the decision-maker, can seldom help to demonstrate that a decision on what is essentially an evaluation exercise was unreasonable when made. It is not appropriate to allow in this material which was not before the decision-maker, and was largely brought into existence after the impugned decision was made, and to do so essentially for the purpose of casting doubt on the substantive reasonableness of the decision.

[17]	The affidavits filed by Vector came from Brendan Kevany, Senior Corporate Counsel of Vector, Duncan Malcolm, Manager of Customer Experience at Vector and James Mellsop, an independent economist. Mr Kevany’s affidavit simply records the progress of the various complaints and Vector’s responses. In a sense, it mirrors the Commissioner’s own affidavit. I allow that affidavit to be adduced.

[18]	Mr Malcolm’s affidavit covers Vector’s role as a lines company/distributor, the structure and design of Vector’s network, Vector’s asset management and risk management programmes, the cause of the fire and factors relevant to the alleged

13	Lumber Specialties Ltd v Hodgson [2000] 2 NZLR 347 (HC) at [140].
14	Roussel Uclaf Australia Pty Ltd v Pharmaceutical Management Agency Ltd [1997] 1 NZLR 650 (CA) at 658.

breach of the duty of care and the impact of the duty of care on Vector. A good deal of this evidence is already available in the form of the joint Contact/Vector report, the independent report and the Electricity Authority’s report on the causes of the outage. To that extent, the evidence does not really add very much. But Mr Malcolm goes on to address the cost to Vector of dealing with a duty of care of the kind articulated by the Commissioner. I consider this evidence to be inadmissible and exclude the affidavit entirely.

[19]	Mr Mellsop’s affidavit addresses aspects of the regulatory regime and, more significantly, contains an extensive assessment of the probable additional costs that would be required for electricity distribution businesses such as Vector’s to address the perceived obligations consequent on the duty of care found to exist by the Commissioner. This information goes well beyond anything the Commissioner was asked to take into account in reaching her decision. It is not appropriate for me to take account of it in deciding whether the Commissioner made an error in the way she reached her decision. I therefore exclude Mr Mellsop’s affidavit. I acknowledge that, in doing so, I will be depriving Vector of the evidential basis of one aspect of its submissions, but the nature of Mr Mellsop’s evidence is such that it would be wholly unfair and inappropriate to reach a conclusion as to the validity of the Commissioner’s decision on the basis of it.

[20]	Americold filed an affidavit by one of its directors, Peter Brice. It mostly describes the progress of the Americold complaint. I allow it to be relied on.

[21]	I also allow the affidavit of Lynne Taylor on behalf of ENA. This is on the basis that the ENA was given leave to participate in this hearing as an interested party and did not have the opportunity to provide information to the Commissioner.

Some background: the electricity industry and the Scheme

The electricity industry

[22]	The electricity industry in New Zealand is heavily regulated, notably by the EIA (which is administered by the Electricity Authority) and Part 4 of the Commerce Act 1986. The main participants in this highly regulated industry are the generators, which produce electricity from sources such as wind, gas and water; Transpower,

which transports high-voltage electricity from the generators to distributors through the national grid; distributors (of which Vector is one), which are local monopolies that deliver electricity from the national grid to consumers; and retailers, who buy electricity from generators on the wholesale market and sell it to consumers.

[23]	The objective of the Electricity Authority, established under the EIA, is “to promote competition in, reliable supply by, and the efficient operation of, the electricity industry for the long-term benefit of consumers”.15 The Electricity Authority is responsible for creating and enforcing the Electricity Industry Participation Code, with which all participants must comply.16 Electricity distributors are regulated by Part 4 of the Commerce Act, ss 52 and 52A of which state that:

This Part provides for the regulation of the price and quality of goods or services in markets where there is little or no competition and little or no likelihood of a substantial increase in competition.

…

The purpose of this Part is to promote the long-term benefit of consumers in markets referred to in section 52 by promoting outcomes that are consistent with outcome produced in competitive markets such that suppliers of regulated goods and services –

(a)	Have incentives to innovate and to invest, including in replacement, upgraded, and new assets; and

(b)	Have incentives to improve efficiency and provide services at a quality that reflects consumer demands; and

(c)	Share with consumers the benefits of efficiently gains in the supply of the regulated goods or services, including through lower prices; and

(d)	Are limited in their ability to extract excessive profits.

[24]	The Commerce Commission achieves these objectives through the mechanism of “default price-quality paths” (DPP).17 The DPP set by the Commission must specify the maximum price that can be charged for the service, the maximum revenues that may be recovered and the quality standards that must be met.18 A DPP may include provisions for a supplier to maintain or improve its quality of supply, including penalties by way of reduction of maximum prices or revenues, rewards by way of

15	Electricity Industry Act 2010, s 15.
16	Electricity Industry Act 2010, s 16(1) and subpart 3.
17	Commerce Act 1986, Part 4 subpart 6.
18	Section 53M(1)(a).

increases in the maximum prices or revenues and consumer compensation schemes that set minimum standards of performance.19 By these means the statutory regime seeks to address both the needs of consumers and the need to hold distributors to an achievable standard.

[25]	Vector is the distributor for Auckland. It takes electricity from the national grid and feeds it into its sub-transmission local network. The substations are owned by Transpower. Vector distributes electricity through overhead or underground distribution networks to distribution transformers via feeders. These step the high voltage down to a lower level suitable for end consumers. Vector distributes electricity from these transformers to the end consumer’s installation control point through overhead lines or underground cables.

[26]	Vector does not generally sell electricity directly to consumers because the EIA requires separation between distributors and consumers. Instead, it contracts with electricity retailers under Use of System Agreements (UoSAs) to deliver electricity to the retailers’ customers.20 The retailers in this case were Contact Energy (in respect of Americold, Wendco and some of Progressive’s sites) and Mercury Energy21 (in respect of other Progressive sites).

The Electricity and Gas Complaints Commissioner’s Scheme
[27]	The EIA provides for a complaints resolution scheme.22 Transpower, distributors and retailers are all required to be members of the Scheme, which allows anyone (except members of the Scheme) to make a complaint about a member. The dispute resolution scheme is governed by Schedule 4 of the EIA. Relevantly, the purposes of the Scheme include ensuring that any person who has a complaint about a Scheme member has access to a scheme for resolving the complaint and that the scheme is “accessible, independent, fair, accountable, efficient and effective”.23

19	Section 53M(2).
20 Vector has standard terms and conditions that it now seeks to impose on consumers.  Although  these were posted to consumers in September 2014, Vector did not seek to rely on them either before the Commissioner or in this Court.
21	Previously known as Mighty River Power.
22	Electricity Industry Act 2010, s 95 and sch 4, cl 3.
23	Electricity Industry Act 2010, sch 4, cl 1.

[28]	The deed establishing the Scheme provides for its board to appoint a commissioner, whose principal role is to consider complaints and facilitate their resolution.24 The “founding principles” of the Scheme largely reflect its statutory purpose; it must be accessible, independent, fair, accountable, efficient, free to complainants and known in the community. The Commissioner decides the procedures to be adopted for considering complaints but those procedures must provide, among other things, that “legal representation is to be discouraged at any face-to-face hearings before the decision-maker except in special circumstances” and “any party [is] to have legal representation if they wish”.25
[29]	The Commissioner’s terms of reference include:

B.3	In considering any Complaint and in granting any remedy under these Terms of Reference the Commissioner must determine what the Commissioner considers is fair and reasonable in the circumstances having regard to all relevant information including:

B.3.1	good industry practice; and

B.3.2	relevant codes of practice; and

B.3.3	model contracts; and

B.3.4	the law

B.4	In making decisions the Commissioner will seek to achieve consistency of determinations. However, the precedent value of determinations is limited to interpretation of the Scheme.

(emphasis added)

[30]	The Commissioner’s jurisdiction is limited. Relevantly, the Commissioner cannot consider:26

Any matter where it appears to the Commissioner that the Complaint is part of, or is related to, another Complaint which the Complainant has made.

[31]	There is also a monetary jurisdictional cap. For the purposes of this case, where the act or failure to act that gave rise to the complaint first occurred on or after 1 October 2012, that limit is $50,000.27

24	The Electricity and Gas Complaints Commissioner Scheme 1 October 2015, cl B.1.
25	Clauses B.17.6 and B.17.7.
26	Clause B.9.2.
27	Clause B.11.3.

[32]	The path towards resolution of a complaint starts with the Commissioner either sending the complaint back to a Scheme member for settlement or seeking to promote a settlement by agreement between the complainant and the Scheme member.28 If agreement cannot be reached, the complainant or Scheme member may request that the Commissioner make a recommendation for settlement. Both the complainant and the Scheme member may make representations.29 The Commissioner is not obliged to make a recommendation but if she does so, she must include a summary of her reasons.30
[33]	If the Commissioner makes a recommendation that the complainant accepts but the Scheme member does not, the Commissioner may nevertheless make a binding decision against the Scheme member.31 Where the amount of the claim exceeds the cap of $50,000, any binding decision cannot exceed that amount. An exception is when the Scheme member concerned has agreed to extend the Commissioner’s jurisdiction to allow her to make a recommendation or a binding decision up to the value of the extended amount and to allow the Commissioner to make a finding of fact.32

The Commissioner’s decisions

[34]	Americold sought $58,263.18, which it reduced to $50,000 to bring it within the Commissioner’s jurisdiction. Its claimed loss was for the cost of hiring generators to keep its three affected distribution centres operational, and to avoid the loss of millions of dollars worth of frozen food.

[35]	Progressive sought $251,147.92 in relation to seven of its Countdown supermarkets and one meat plant. The claim was made up of stock losses ($197,855.72), generator costs ($39,748.34) and the cost of hiring engineers to re- programme software on machinery at its cabinet-ready meat plant ($13,543.86).

28	Clause B.31.
29	Clause B.32.
30	Clause B.33.
31	Clause B.34.
32	Clauses B.37 and B.38.

[36]	Wendco claimed $8,967 in relation to three of its chain restaurants for discarded food, labour and mileage costs to transport food, wasted wages, administration costs, rental costs and loss of sales.

[37]	In each case the Commissioner acknowledged the complaint, obtained information from Vector and from the complainants and provided a “proposed recommendation”. In each case her proposed recommendation was that Vector owed the complainants a duty of care to maintain the integrity and security of its network, that it breached that duty and that the breach caused the complainants’ losses, with the result that Vector should compensate the complainants.

[38]	Vector filed submissions in response to the proposed recommendations. The Commissioner considered the submissions and provided final recommendations that largely confirmed her preliminary conclusions.

[39]	Vector rejected the final recommendation and filed further submissions. The Commissioner considered these further submissions and issued binding decisions which confirmed her previous views. I refer, for convenience, to the proposed and final recommendations and the binding decisions generically, save for the aspects that relate to a specific complainant.

[40]	The Commissioner’s binding decisions, which incorporated the proposed and final recommendations, required Vector to pay:

(a)	Americold $50,000 for generator costs;

(b)	Progressive $244,786.99 made up of:33

(i)	$47,700 for stock losses and the service level guarantee payment in respect of its Meadowbank supermarket;34

33 Some of the sums awarded are less than those claimed. These are  as a result of inadequate  evidence being produced to support the original claims or, in some cases, were the result of reductions being made to reflect contributory negligence.
34	The total sum originally claimed was $50,000.

(ii)	$47,148.13 for stock losses, generator costs and the service level guarantee payment in respect of the St Johns supermarket;35
(iii)	$13,095.70 for stock losses and generator costs in respect of its Greenlane supermarket;

(iv)	$26,647.91 for stock losses and the service level guarantee payment in respect of its Newmarket supermarket;36

(v)	$11,215.36 for technical costs in respect of its cabinet-ready meat plant;37

(vi)	$46,798.81 for stock losses and generator costs in respect of its Mount Wellington supermarket;38

(vii)	$2,181.08 for stock losses and the service level guarantee payment in respect of its Onehunga supermarket;39 and

(viii)	$50,000 for stock losses in respect of its Sylvia Park supermarket;

(c)	Wendco $2,369.91 for the cost of damaged goods, labour and mileage to transport goods and a service level guarantee payment. She found that the other amounts claimed were lost profits which were excluded by the terms of Wendco’s contract with Contact, on which Vector was entitled to rely.

35	The original sum claimed was $48,997.73.
36	The total sum originally claimed for this supermarket was $26,597.70.
37	The total sum originally claimed for this facility was $13,543.86.
38	The total original sum claimed for this supermarket was $46,931.87.
39	The original sum claimed for this supermarket was $1,981.07. The additional $200 arises from the service level guarantee payment.

First ground of review – error of law in finding that Vector owed a duty of care to electricity consumers

A novel duty

[41]	The Commissioner found that Vector owed a duty of care to the complainants, as consumers, to “maintain the security and integrity of its network”.40 It was common ground that this was a novel duty; no such duty had previously been imposed on an electricity supplier arising from a power outage in New Zealand.

[42]	Since a common-law duty can only be imposed by the courts, it is immediately clear that the duty described by the Commissioner did not exist in New Zealand at the time she made her decision (or now). She was required to proceed on that basis. It was not open to her to reach her decision based on a common-law duty of care. There was, therefore, a material error of law in her decision. The case on appeal was not argued that way, however. Instead, the parties focused on the Commissioner’s substantive reasoning, to which I now turn.

[43]	The general approach to assessing whether a novel duty of care should be imposed involves two broad enquiries; whether there is a sufficiently proximate relationship between the parties and whether, despite proximity, policy considerations tell against a duty or limit the scope of the duty found to exist.41 Paraphrasing Tipping J in Body Corporate No 207624 v North Shore City Council (Spencer on Byron), this is viewed from two perspectives, the parties’ relationship and the wider public interest. These are conventionally described as proximity (which encompasses foreseeability) and policy.42

[44]	In North Shore City Council v Attorney-General (The Grange), the Supreme Court said of this approach:43

40 Although expressed in absolute terms, the parties proceeded on the basis that the duty was one merely requiring Vector to exercise reasonable care to maintain the security and integrity of its network.
41 South Pacific Manufacturing Co Ltd v New Zealand Security Consultants and Investigations Ltd [1992] 2 NZLR 282 (CA) at 305–306; North Shore City Council v Attorney-General [2012] NZSC 49, [2012] 3 NZLR 341 [The Grange] at [149]–[152] and [161]; Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [14].
42	Body Corporate No 207624 v North Shore City Council [2012] NZSC 83; [2013] 2 NZLR 297
[Spencer on Byron] at [24].
43	The Grange, above n 41, at [149].

A difficulty with a staged formulation is that some matters may be relevantly assessed at either stage, or may even need to be examined at both. They cannot always be pigeon-holed into one or the other. Nevertheless, the usual approach in this country has increasingly been to look first at factual and policy aspects of the relationship between the parties and, after that, at external considerations. The latter, may, however, require a re-visiting of some matters already considered at the first stage. For example, where the defendant is exercising a statutory function the relationship may in whole or part derive from it. But the nature of the function will also be relevant to the second stage of the inquiry … the focus is on two broad fields of inquiry but they provide only a framework rather than a straightjacket.

[45]	And later:44

… when a court is considering foreseeability and proximity, it is concerned with everything bearing upon the relationship between the parties and that, when it moves to whether there are policy features pointing against the existence of a duty of care – that is, whether it is fair, just and reasonable to impose a duty – the court is concerned with externalities – the effect on non- parties and on the structure of the law and society generally. But, as already remarked, aspects of some matters may require to be considered more than once.

The Commissioner’s reasoning

[46]	The Commissioner clearly intended to approach the question of duty in accordance with the recognised two-stage enquiry relating to proximity and policy. Vector says that she made errors at both stages.

[47]	At the first stage, the Commissioner concluded that Vector and Americold had a proximate relationship for two reasons; reliance by Americold on Vector’s network and Vector’s monopoly position:45
I believe Vector and Americold have a proximate relationship. Because of this proximate relationship, Vector can reasonably foresee its actions or omissions in regard to the security and integrity of the network are likely to injure Americold.

Vector’s relationship with Americold is proximate because Americold relies on Vector’s network. Without Vector’s network, Americold would not be able to operate commercially within the Auckland area. Americold pay (sic) for line function services through its electricity retailer, Contact Energy.  Additionally, Vector is a monopoly. This removes Americold’s choice to rely on another network in Auckland.

44	At [156].
45	Proposed recommendation between Americold NZ Ltd and Vector Ltd, dated 4 August 2016 at [7(a)].

[48]	The Commissioner then turned to policy considerations, using as a guide the matters set out in The Law of Torts in New Zealand, finding that none precluded a duty being imposed.46 Specifically, she found: first, the duty would not interfere inappropriately with Vector’s autonomy because Vector was already contractually obliged and required by Commerce Commission price-quality regulation and industry standards to maintain the security and integrity of its network; secondly, the burden imposed by the duty was proportionate because a failure to maintain the security and integrity of the network could potentially affect all who rely on it but, on the other hand, that is a finite number so the burden is not open-ended; thirdly, in the absence of a duty, Americold would have no protection from the loss caused by the outage and others like it; fourthly, the duty would operate within the legal system as a whole with no overlap between negligence and contract and would not undermine the statutory regime.

The Commissioner’s approach to foreseeability

[49]	Vector says that the type of loss sustained was not foreseeable and that the contractual context pointed away from a duty.

[50]	In The Grange, the Supreme Court regarded foreseeability as “at best a screening mechanism” that would exclude claims which must obviously fail because no reasonable person in the position of the defendant would have foreseen the loss. The more significant and difficult issue tends to be whether the foreseeable loss occurred within a relationship that is sufficiently proximate to give rise to a duty of care.47 The Supreme Court described that inquiry as a means of identifying whether the defendant was someone most appropriately placed to take care in the avoidance of damage to the plaintiff”.48 It also referred to Richardson J’s observation in Fleming v Securities Commission that the concept of proximity allowed the balancing of the moral claims of the parties: the plaintiff’s claim for compensation for avoidable harm and the defendant’s claim to be protected from an undue burden of legal responsibility.49

46	Stephen Todd “Negligence: The Duty of Care” in Stephen Todd (ed) The Law of Torts in New Zealand (7th ed, Thomson Reuters Wellington, 2016) at [5.4].
47	The Grange, above n 41, at [157]–[158].
48	At [158].
49	At [159], citing Fleming v Securities Commission [1995] 2 NZLR 514 (CA) at 532.

[51]	The Commissioner did not treat foreseeability as a screening mechanism that might lead onto the question of whether there was a proximate relationship between Vector and Americold. Instead, she found that there was a proximate relationship (based on the complainants’ reliance and the fact that Vector operated as a monopoly) and treated foreseeability as a consequence of that relationship. However, as I come to next, that error could not have affected the ultimate question of whether it was fair and reasonable to impose a duty of care because, in my view, the losses claimed were foreseeable.50
[52]	In Hamilton v Papakura District Council, the Privy Council described damage as being foreseeable:51

… only when there is a real risk of damage, that is one which would occur to the mind of a reasonable person in the position of the defendant and one which he would not brush aside as far-fetched.

[53]	Vector accepted that, at a very general level, it could have anticipated that some commercial electricity consumers in Auckland would sustain loss in the event of a major electricity outage. But it did not accept that the type of loss claimed by Americold – costs incurred to restore power in order to avoid damage to property – was a type of loss it could reasonably have been expected to foresee.52 It identified several reasons for this: electricity supply is not guaranteed so that commercial users face the risk of outage as a matter of course; conversely, users for whom the risk of outage is unacceptable can contract specifically (at a price) for guaranteed supply; the kind of losses claimed for are not caused directly by an outage; and there are means available to commercial users to avoid the economic consequence of outages.

[54]	In my view, these factors do not make the type of losses claimed unforeseeable. Rather, they are factors relevant to the broader question of proximity.  I consider that

50     Although I pose the question in this way, it is important not to lose sight of the fact that, as noted at the outset, this question was outside the scope of the Commissioner’s jurisdiction because she was required to have regard to the law; it was not for her to make law.
51 Hamilton v Papakura District Council [2002] UKPC 9, [2002] 3 NZLR 308 at [39], citing  Overseas Tankship (UK) Ltd v Miller Steamship Co Pty (Wagon Mound No 2) [1967] 1 AC 617 (PC) at 643.
52 In its submissions to the Commissioner, Vector had accepted that economic losses  were  foreseeable (but that all other factors pointed away from a duty of care). Mr Farmer argued that the apparent inconsistency in Vector’s position was one of form only. I do not need to be concerned with this; since the Commissioner did not refer to that aspect of the submissions and in view of the unorthodox approach she took to the issue of foreseeability, any inconsistency in Vector’s position on this point is of little moment.

the risk of end users suffering loss of product or having to incur expense to avoid such loss as a result of a power outage was foreseeable. Therefore, the Commissioner’s failure to treat foreseeability as a screening mechanism, although an error, made no difference to the outcome.

The Commissioner’s proximity analysis

[55]	The Commissioner identified two factors as justifying her conclusion that a proximate relationship existed between Vector and the complainants, namely reliance by consumers on Vector’s network and Vector’s monopoly position. The latter, although relevant, is properly viewed as a policy consideration within the broader regulatory context, and I consider it later.

[56]	On the issue of reliance, Mr Farmer cited Chambers J’s observation in Spencer on Byron that reliance has only a limited role in the tort of negligence (as opposed to negligent misstatement).53 That statement was made in the context of policy considerations rather than the issue of proximity; the Court emphasised that reliance, not being an element of the tort of negligence, was a policy factor only. However, the statement clearly applies equally to the proximity inquiry for the reason explained by Tipping J in his separate judgment:54
… The centrality of reliance in negligent misstatement cases should not be transported wholesale into other cases of negligence. In misstatement cases reliance is necessary before there can be causation. That is not necessarily so in other cases of negligence such as the present.

[57]	The proximity necessary for a duty of care must arise from Vector’s own position and knowledge, not from a consumer’s subjective expectation. In my view, the Commissioner’s identification of reliance as a basis for finding a proximate relationship between Vector and the complainants was misplaced.

[58]	This is a convenient point to consider Ms Anderson’s submission that proximity also existed because Americold was part of a class of consumers who were

53 Spencer on Byron, above n 42, at [199].  In Spencer on Byron, a local authority asserted that no  duty of care should be imposed on it in relation to commercial building owners for building inspections. This was because they could not be regarded as vulnerable vis-à-vis the Council in comparison with residential home owners and therefore could not be said to have relied on the Council for building inspections.
54	At [34].

vulnerable to the effects of a major outage. This may, in fact, have been what the Commissioner meant when referring to reliance, given her comment that without Vector’s network, Americold would not be able to operate commercially in the Auckland area. That, however, would be a flawed approach. The vulnerability of potential plaintiffs is a policy consideration not relevant to the relationship between individual parties. The position of an individual plaintiff, whether vulnerable or not, does not assist in determining whether a duty of care exists.55
[59]	In any event, there is no basis on which to regard commercial electricity users as a vulnerable class for the purposes of imposing a duty of care. This is mainly because of the readily available options for protecting against power outage. In that sense, the position has not changed since Lord Denning’s observation in Spartan Steel v Martin & Co (Contractors) Ltd:56
… The cutting of the supply of electricity … is a hazard which we all run. It may be due to a short-circuit, to a flash of lightning, to a tree falling on the wires, to an accidental cutting of the cable, or even to the negligence of someone or other. And when it does happen, it affects a multitude of persons: not as a rule by way of physical damage to them or their property, but by putting them to inconvenience, and sometimes to economic loss. The supply is usually restored in a few hours, so the economic loss is not very large. Such a hazard is regarded by most people as a thing they must put up with – without seeking compensation from anyone. Some there are who install a standby system. Others seek refuge by taking out an insurance policy against breakdown in the supply. But most people are content to take the risk on themselves.

[60]	In this case, for example, some of the complainants had generators. Others were able to hire generators and/or would have been insured against the risk of power outage. Some may have regarded a power outage, even one of some days, as an inconvenience to put up with. The main point is that all commercial users understand that power outages can occur (whether from negligent or non-negligent conduct or external forces) and that there are means of protecting themselves against the consequences.

55 Spencer on Byron, above n 42, at [197]–[198], per McGrath and Chambers JJ. Elias CJ expressed general agreement with their judgment at [6]. Compare with cases involving latent defects such as Carter Holt Harvey Ltd v Minister of Education, above n 41, at [52]–[55].
56	Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd [1973] 1 QB 27 (CA) at 38.

The contractual context

[61]	The supply of electricity to Americold occurred in the context of a chain of contracts: Vector supplied Contact and Mercury under the UoSAs who, in turn, supplied Americold and the other end users under individual agreements. It was common ground that the contractual context was relevant to the question of whether a duty of care existed (or should be imposed).

[62]	However, although the Commissioner was aware of the existence of these contracts, she did not regard them as relevant to the question of whether Vector owed a duty of care to the complainants because:57
I believe there is no overlap between the boundaries of negligence and contract in this case. [The complainant] does not have a contract with Vector for line function services.

[63]	This statement did not reflect the true position. There were limitation provisions in the contracts between the complainants and the retailers, which purported to exclude liability for Vector in negligence and which were specified to be for the benefit of and enforceable by Vector under the Contracts (Privity) Act 1982.
[64]	The UoSAs required Contact and Mercury each to:58

… include in its Consumer Contracts clear and unambiguous clauses to the effect that:

…

(b) to the extent permitted by law, the Distributor [Vector] will have no liability to the Consumer in contract, tort (including negligence) or otherwise in relation to the supply or non-supply of electricity to the Consumer.

[65]	Contact and Mercury complied with this obligation; their contracts with the complainants contained extensive exclusion and limitation clauses to this effect. Americold, Progressive59 and Wendco all had Standard Form contracts on “Contact Energy terms and conditions for residential and business customers” (Contact

57 Later the Commissioner also referred to Vector’s Standard Terms & Conditions: Effective September 2014 but rejected the statement that Vector did not promise uninterrupted supply as not specific enough to limit its liability in negligence. However, Vector no longer relies on those terms and conditions.
58	Clause 26.14.
59	In respect of its Cabinet-Ready Meat Plant and its Mount Wellington and Greenlane supermarkets.

Standard Terms).60 Progressive also had Special Terms with Contact which amended the Standard Form contract. The particulars of the exclusion clauses in both the Standard Form contract and the Special Terms are referred to later, in relation to the fourth ground of review.
[66]	Under the heading “energy supply” the Standard Terms stated:61

The supply of energy to you may not be continuous and uninterrupted. We do not guarantee the continuous supply of energy to your premises.

[67]	Under the heading “liability” there were a number of limitation provisions including:62

The limitations of liability set out in this section and elsewhere in these terms and conditions extend to our employees and agents, the network operator and meter owner for the purposes of the Contracts (Privity) Act 1982.63 The other provisions in these terms and conditions that refer to the network operator or meter owner are intended to be for the benefit of, and are enforceable by, the network operator and meter owner, respectively, under the same Act.

...

Except as expressly set out in these terms and conditions our liability and the liability of the network operator, including any liability in tort (including negligence), contract, breach of statutory duty, equity or otherwise, is excluded to the maximum extent permitted by law. In addition, except as expressly set out in in these conditions, all warranties, guarantees or obligations imposed on us, or the network operator, in relation to goods or services provided by us or the network operator, by the Consumer Guarantees Act 1993 or any other law, are excluded to the maximum extent permitted by law. …

(emphasis added)

[68]	Progressive also had a contract with Mercury Energy for the supply of electricity to its Newmarket, St Johns, Sylvia Park, Meadowbank and Onehunga stores which comprised “Mercury Energy’s Terms  and Conditions 2014” (Mercury’s Standard Terms) as well as “Mercury Energy’s Spot Supply Agreement” (Spot Supply Agreement), which replaced the liability provisions of the Mercury Standard Terms.

60 In addition, each held a separate and slightly different “Special Terms Business Energy Supply Agreement” (Contact/Americold Special Terms and Contact/Wendco Special Terms) which related to matters of pricing.
61	Contact Standard Terms, effective 26 December 2013, at 12.
62    At 36.  Progressive’s Special Terms with Contact in respect of its Cabinet-Ready Meat Plant and its Mount Wellington and Greenlane supermarkets do not include the second paragraph referred to.
63	Since replaced by the Contract and Commercial Law Act 2017 (footnote added).

Clause 19 of the Spot Supply Agreement contained extensive limitation provisions which replaced the equivalent clause (cl 15) of the Standard Terms. Those specifying the extent of exclusion are referred to in relation to the fourth ground of review below. However, cl 19.3 provided that:

We will not be liable to you and you will not be liable to us for any loss, liability, cost, claim, charge, expense or damage suffered by you or us which arises as a result of any acts or omissions of any third party, including (but not limited to) the network operator. Notwithstanding the foregoing, we and you will be liable to the other to the extent that losses or damages suffered by the other are recovered from that third party, provided that you or us will indemnify the other for the cost of attempting to recover those losses or damages.

[69]	Clause 19.9 provided that:

This paragraph 1564 is also for the benefit of, and is enforceable by, Our Representatives pursuant to the Contracts (Privity) Act 1982.

[70]	The term “Our Representatives” is defined in the Standard Terms as including the “lines company’s employees, contractors or agents” and “lines company”, in turn, is defined as “the company that operates the electricity distribution network …”.

[71]	Following the proposed recommendations, Vector made further submissions that included an analysis of the contractual context, which it said pointed away from a duty of care. It relied on Tipping J’s observation in Spencer on Byron:65
… where the parties have allocated, or have had the opportunity to allocate, risks by contract, tort law should be slow to impose a different allocation from that expressly or implicitly adopted by the parties.

[72]	Vector outlined the contractual arrangements, referring to the requirements of the UoSAs and setting out the relevant limitation provisions in the retail contracts. It submitted that “[t]he back-to-back liability provisions under the UoSA and the Consumer Contract demonstrate a clear intention for the relationship between the parties to be structured through this contractual chain”. It then referred to Rolls Royce NZ Ltd v Carter Holt Harvey Ltd, in which the Court of Appeal said that: 66

64	Presumably the reference to “paragraph 15” was intended to be a reference to cl 19.
65	Spencer on Byron, above n 42, at [40].
66	Rolls Royce NZ Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 at (CA) [110] and [118].

… a plaintiff should not be allowed to circumvent either a contractual bargain between the plaintiff and the defendant or even a non-contractual but clear understanding between parties as to where the risk would lie. …

The main policy factor militating against a duty of care is the need for commercial certainty. Commercial parties are normally entitled to expect that the risk allocation they have negotiated (and paid for) will not be disturbed by the Courts. …

[73]	In her binding decisions, the Commissioner made no mention of the terms of the contracts and referred only to Vector’s reliance on Rolls Royce:

Vector submits on the specific contractual context of this complaint. To do this Vector relies on Rolls Royce NZ Ltd v Carter Holt Harvey …

I do not believe this is a situation like Rolls Royce NZ, where the contractual regime and the allocation of risk were carefully calibrated by the parties. I remain satisfied the contractual context does not undermine the need for a duty or the fairness and reasonableness of [the complainant’s] claim.

[74]	Ms Anderson argued that the Commissioner was correct to reject Rolls Royce NZ as analogous. I agree. Factually, it was very different from the present case in that it involved bespoke contracts between three commercial parties in respect of a specific project. Indeed, subsequent cases have suggested that, because of the unusualness of the contractual arrangements, its general application is in doubt.67
[75]	But setting Rolls Royce aside could not, in itself, explain why the limitation provisions of the contracts did not affect the proposed duty of care. It is not clear whether the Commissioner maintained her earlier view that there was no contract between the complainants and Vector (which would have been unsupportable in the face of the information provided by Vector) or whether she had accepted that Vector took the benefit of the limitation provisions but nevertheless considered that the standard form nature of the contracts took the case outside the scope of the comments in Rolls Royce.

[76]	In my view, the interlocking contractual arrangements purporting to exclude liability in negligence were highly relevant in determining whether it was fair and reasonable to impose a duty of care on Vector. The Commissioner had to give reasons that were sufficient to demonstrate that she had identified the contractual provisions as relevant and explain why a duty should nevertheless be imposed, even allowing for

67	Carter Holt Harvey Ltd v Minister of Education, above n 41, at [26] and fn 26.

the relatively informal nature of decision making under the Scheme. In my view, she failed to do so and this amounted to a material error of law.

[77]	It is unnecessary for me to express a view on whether, ultimately, the contractual terms would tell against a duty. In the context of judicial review proceedings, the focus is on the decision-maker’s process and I am satisfied that the process was flawed as a result of a failure, or at least an apparent failure, to have regard to a highly relevant factor.

The nature of the loss

[78]	The claims made to the Commissioner covered three general types of loss; food that had spoiled or had to be discarded; mitigation costs such as generator hireage; and software costs associated with the re-programming of software following the outage. Vector argued that the nature of the losses consequent on the outage was relevant to the existence and scope of the duty, given the generally recognised difference between direct physical damage to property and economic loss, though it acknowledged that this was not a decisive factor.68
[79]	The Commissioner described the claims for loss of stock through spoilage or food being discarded as “a standard claim(s) for property damage”.69 Mr Farmer argued that this wrongly characterised the damage claimed as either direct physical damage or akin to direct physical damage. In fact, it was indirect physical damage and therefore a form of economic loss.

[80]	Ms Anderson relied on Johnson Tiles Pty Ltd v Esso Australia Pty Ltd, in which Gillard J treated food that spoiled as a result of a gas stoppage as property damage, relying on Spartan Steel.70 Ms Anderson argued that there was no sharp divide in New Zealand between physical damage and economic loss and that a duty of care was not precluded by reason of the loss being economic.71 Whilst correct, the nature of the loss is still relevant in considering whether a novel duty should be imposed.

68	South Pacific Manufacturing Co Ltd v New Zealand Security Consultants and Investigations Ltd, above n 41, at 296.
69	Only Progressive and Wendco suffered loss of this kind.
70	Johnson Tiles Pty Ltd v Esso Australia Pty Ltd, [2003] VSC 27 VSCA) at [622].
71	Relying on [Spencer on Byron], above n 41, at [12] per Elias CJ and [45] per Tipping J.

[81]	Mr Farmer argued that the approach taken in Johnson Tiles was incorrect and that a distinction should be drawn between direct and indirect physical damage, citing Murphy v Brentwood District Council,72 Coleridge v Miller Construction Ltd73 and Marc Rich & Co AG v Bishop Rock Marine Co Ltd.74 In Murphy, Lord Oliver, rejecting the distinction between physical loss caused indirectly and economic loss, said:75
Nor is it self-evident logically where the line is to be drawn. Where, for instance, the defendant’s careless conduct results in the interruption of the electricity supply to business premises adjoining the highway, it is not easy to discern the logic in holding that a sufficient relationship of proximity exists between him and a factory owner who has suffered loss because material in the course of manufacture is rendered useless but that none exists between him and the owner of, for instance, an adjoining restaurant who suffers the loss of profit on the meals which he is unable to prepare and sell. In both cases the real loss is pecuniary. …

[82]	Vector’s reasoning was that the only direct physical damage done as a result of Vector’s alleged negligence was the physical damage sustained to its own cables. Loss of stock was properly viewed as an indirect consequence of the alleged negligence and, indeed, whether such loss occurred depended on what steps Progressive and Wendco had taken to avoid or mitigate the impact of any power outage.

[83]	I accept that that is the correct way to view the position. That it is correct can be seen from the proper characterisation of the second type of loss the Commissioner considered, which was the mitigation costs. They were mostly for the cost of generator hireage. The Commissioner described these claims as “standard claims for mitigation losses” and treated them as being in the same category as the stock losses. The Commissioner did not cite any authority for that approach but rather focused on the general recoverability of mitigation costs. However, the recoverability of mitigation costs does not assist in identifying the nature of the loss. In my view, the costs of mitigation, although recoverable if reasonably incurred, are plainly economic loss. There is no basis on which to treat such undeniably pecuniary losses as a form of property damage. That being so, nor is there any basis for treating the stock losses as

72	Murphy v Brentwood District Council [1991] 1 AC 398 (HL) at 485.
73	Coleridge v Miller Construction Ltd 1997 SLT 485 (OH).
74	Marc Rich & Co AG v Bishop Rock Marine Co Ltd [1996] AC 211, [1995] 3 WLR 227.
75	Murphy v Brentwood District Council, above n 72, at 486.

direct property damage; each is a side of the same coin and which side lands upwards is simply a consequence of whether steps were taken to avoid physical loss.

[84]	The third form of loss was the cost of re-programming software. This loss was claimed only by Progressive. The Commissioner described this type of loss as physical damage because “the machinery’s physical processes are determined by its control systems. The machinery cannot physically operate in the way Progressive needs it to without the control systems being in sync”. I accept Vector’s submission that this approach is wrong. Whether or not the software could be regarded as damaged by the changes resulting from the power outage, it is not possible to regard the cost of remedying the problem as direct physical damage.

The regulatory context as a policy consideration

[85]	The supply of electricity by Vector to the complainants occurred in the context of the highly regulated environment described earlier. Since tort law ought not, ordinarily, to cut across a statutory regime, the existence of the comprehensive statutory regime was undoubtedly a factor relevant to whether a tortious duty should be imposed.76 Mr Farmer submitted that the statutory regime pointed away from a duty on Vector.

[86]	The Commissioner, clearly, was alive to the regulatory context and referred to it in her proposed recommendations:

Vector is already obligated to maintain the security and integrity of its network. I believe this obligation comes from self-imposed contracts, Commerce Commission price-quality regulation and industry standard of good practice.

…

The self-imposed obligation includes a contract Vector entered with Transpower in regard to the Penrose substation. This contract requires Vector to comply with operating standards related to safety, security, access and operating practice.

The Commerce Commission price-quality regulation is designed to ensure Vector, as a monopoly, is incentivised to innovate and improve its efficiency. It also aims to limit Vector’s ability to earn excessive profits and ensure consumer demands on service quality are met.

76	See, in the context of ACC claims, South Pacific Manufacturing Co Ltd v New Zealand Security Consultants and Investigations Ltd, above n 41, at 297.

The Electricity Authority said Vector’s network design is required to comply with “good industry practice”. The Electricity Authority said good industry practice is essentially the same as defined in part one of the Electricity Industry Participation Code 2010:77

… generally accepted to be the exercise of that degree of skill, diligence, prudence, foresight and economic management that would reasonably be expected from a skilled and experienced electricity network owner engage in New Zealand in the distribution of electricity.

[87]	In her final recommendations, the Commissioner responded to Vector’s submission that a tortious duty of care would undermine the statutory regime:

I am satisfied Vector has not identified any sections in Part 4 of the Commerce Act which supports [the view that] it should not be liable for negligently causing property damage. I believe it is not possible to read into Part 4 of the Commerce Act any intention to modify or remove any liability network companies may have to electricity users in tort.

…

Vector says the Electricity Industry Code and the Electricity Authority’s oversight mitigates the need for the imposition of a duty. I disagree because the Electricity Authority has made clear it is not the appropriate forum for determining liability for compensation. The Electricity Authority left it open for customers to either approach providers or my office directly or to seek remedies through court action.78

[88]	It is evident that the Commissioner approached her consideration of the regulatory context under a misapprehension as to the significance of this factor. Rather than considering whether the existence and nature of the statutory regime governing Vector’s business pointed away from the existence of a duty, she assumed the existence of a duty and regarded the statutory regime as significant only if it disclosed an intention to modify or remove that duty. Approaching the matter in this way precluded genuine consideration of the regulatory context as a policy consideration.

[89]	Likewise, the Commissioner’s last statement rejecting Vector’s position on the basis that the Scheme had been provided as an alternative source of remedies to court

77 In fact, at the time of the proposed recommendation, the definition was: good electricity industry practice in relation to transmission, means the exercise of that degree of skill, diligence, prudence, foresight and economic management, as determined by reference to good international practice, which would reasonably be expected from a skilled and experienced asset owner engaged in the management of a transmission network under conditions comparable to those applicable to the grid consistent with applicable law, safety and environmental protection. The determination is to take into account factors such as the relative size, duty, age and technological status of the relevant transaction network and the applicable law.
78	Electricity Authority “Questions and Answers” (media release, 26 November 2015).

action suggests a misunderstanding of the legal position. The Commissioner was required to have regard to the law as it stood. The law as it stood did not impose a tortious duty of care on an electricity distributor. It was, of course, open to the Commissioner to make a finding that Vector should compensate the complainants notwithstanding that fact. But she had to direct herself correctly as to what the law required before concluding that it would be fair and reasonable to do so.

[90]	The Commissioner therefore erred, first, in treating the statutory regime as relevant only if it disclosed an intention to exclude or modify a tortious duty, rather than considering whether a duty was appropriate given the nature of the regime and, secondly, in wrongly assuming that because responsibility for resolving the claims fell to her under the Scheme, the statutory regime was not a factor in determining whether a duty existed. These errors are sufficient to find that this ground is made out.

[91]	However, much of Vector’s extensive submission on this aspect was based in Mr Mellsop’s affidavit, which I have excluded because it was not available to the Commissioner. Although some aspects were also covered by Lynne Taylor, whose evidence I have allowed to be adduced, the scope of Vector’s argument was beyond what the Commissioner could have been expected to address on the information before her. I therefore think it appropriate to simply record the essentials of Vector’s argument, without embarking on any consideration of it.

[92]	Vector argued, first, that in terms of the economic efficiency achieved by spreading economic loss, as discussed in Takaro Properties v Rowling79 and Spencer on Byron,80 the current regulatory Scheme is more effective than the imposition of a tortious duty. In that regard, Ms Taylor considered that the imposition of a duty on Vector made Vector effectively an insurer, which it is not well-placed to be and in fact the consumers are best placed to make decisions about how they wish to mitigate the risk of electricity outages.

[93]	Secondly, the imposition of a duty of care does not encourage business consumers to protect their own interests and disadvantages those that do.

79	Takaro Properties v Rowling [1978] 2 NZLR 314 (CA) at 323.
80	Spencer on Byron, above n 42 at [32]–[33] and [50] and [52].

[94]	Thirdly, the duty contemplated by the Commissioner would risk imposing an unfair burden on Vector, given the significant number of consumers, and therefore potential complainants, in the Auckland region and the unknown nature of their circumstances and possible losses. To do so would be inconsistent with the approach taken both here and overseas.81
[95]	Fourthly, the cost of imposing a tortious duty is likely to lead to increased costs to consumers. After referring to these relevant statutory provisions, Ms Taylor referred to the requirement for electricity distribution businesses to demonstrate consumer expectation needs and demands by undertaking consumer consultation. In her experience, these consumer consultations consistently demonstrated very little consumer willingness to pay for additional reliability. She considered that because most electricity consumers suffer no or only minimal loss in the event of an interruption in supply, the overall advantage to them is to keep prices low.

[96]	Fifthly, the current statutory regime strikes a careful balance between addressing the needs of consumers and holding distributors to an achievable, appropriate standard of electricity delivery. Imposing a tortious duty, although not prohibited by that regime, would be a clumsy and counter-productive means of attempting to improve Vector’s performance.

[97]	Finally, because the statutory regime imposes deterrents such as fines and pecuniary penalties, tort is not required as a deterrent.

Summary: first ground of review

[98]	The Commissioner’s imposition of a duty of care on Vector did not reflect the correct legal position. Moreover, even if it had been open to the Commissioner to impose a duty of care, her approach was erroneous as a result of failing to properly consider the relevance of reliance, the contractual context and the true nature of the losses being claimed, and failing to approach the significance of the regulatory regime correctly.

81 New Zealand Forest Products v Attorney-General [1986] 1 NZLR 14 (HC) at 20; Canadian National Railways v Norsk Pacific Steamship Co 1992 1 SCR 1021 at [34]; Conestoga Meat Packers Ltd v Fehr [2007] OJ No 3150 at [30]–[33].

Second ground of review – error in finding negligence by Vector

[99]	The Commissioner concluded that Vector had breached its duty of care by (1) failing to identify the risk of ignition from the failure of a power cable in the Penrose cable trench (2) failing to identify the risk posed by multiple cables co-located in the trench and (3) as a result of the previous failings, failing to take steps that could have prevented the widespread supply disruption or mitigated the extent of the disruption. In reaching these conclusions, the Commissioner relied on the report produced by the Electricity Authority following an inquiry under s 18 of the EIA.

[100]	Vector’s criticisms of this aspect of the Commissioner’s decision can be summarised as being: first, the Commissioner was not entitled to rely on the Electricity Authority’s report as a basis for a finding of negligence because the report did not actually consider the question of whether Vector had been negligent and, secondly, there was insufficient evidence to support the Commissioner’s conclusions regarding the steps a reasonable network company would have taken. In particular, the Commissioner was not entitled to move from the Electricity Authority’s finding that Vector had failed to identify generic risks associated with the cable trench to conclude that Vector had been negligent in failing to take steps to minimise the risks.

The cause of the power outage

[101]	Before considering Vector’s submissions, I briefly describe the cause of the power outage, which is not in dispute and which was comprehensively considered in a report by independent expert, Cable Consulting International Ltd (CCL), a joint Transpower and Vector report and the Electricity Authority’s report. The following summary is based on those reports.

[102]	The power outage was preceded by a fire that started in a cable known as the Remuera K10 cable. That cable ran through the Transpower substation in Penrose. Part of the cable lay in a concrete cable trench alongside 37 other power cables, four pilot cables and a number of ducts and optical fibre cables.

[103]	In 2001, a maintenance contractor noticed bitumen leaking from a joint in the Remuera K10 cable. He cut out the leaking section and spliced in a new section. The new portion of cable was a more modern type, necessitating a “transition joint” at each

end of the new section to join it to the existing cable. The result was a longer cable which lay in a bow shape rather than straight.

[104]	A power arc in one of the new transition joints caused the insulation material to ignite. But the fire itself was not the immediate cause of the extended power outage. The immediate cause of the outage was the spread of the fire to the other cables in the trench. The trench was an “in-air” cable trench, so-called because it was not back- filled with solid material; the cables were therefore laid “in-air”. The co-location of so many other cables in the in-air environment of the cable trench, rich in oxygen and fuel, was the main cause of the fire spreading.

The finding that Vector was negligent in failing to identify the risks associated with the cable trench

[105]	Among the questions the Electricity Authority was asked to address was:

What caused the loss of supply or contributed to it, including potentially systemic factors such as risk management systems, asset health monitoring and maintenance practices, network design and regulatory incentives and controls?

[106]	The Electricity Authority concluded that Vector should have identified and assessed the risk to electricity supplies from several supply-critical cables being disabled simultaneously. In her proposed recommendations, the Commissioner adopted the Electricity Authority’s conclusions as the basis for her own findings:

A reasonable network company would have identified risks and then taken steps to prevent and mitigate the extent of the disruption. This is because an electricity network company has a high standard of specialty knowledge. This standard of specialty knowledge applies to Vector. I believe this because 5.34 of the EA Report says:

the Authority considers that both Vector and Transpower should have been aware of the factors that had the potential to affect the integrity of the cable trench and the cables that it contained and therefore should have identified the risk to electricity supplies and to the integrity of the substation.

(emphasis added)

[107]	In her final recommendations, the Commissioner summarised her reasons slightly differently, but to substantially the same effect:

I believe Vector breached its duty of care to Americold. This is because the independent Electricity Authority report says Vector should have identified the risk of the Penrose trench.

Vector submitted it was not negligent because its joint investigation with Transpower determined the cable trench design and practices were in line with industry practice. Further, Vector submitted it could not have been expected to have the knowledge to specifically identify the risk.

…

The Electricity Authority’s report found Vector should have identified the risks to the integrity of the cable trench and its cables.

The Electricity Authority’s report said Vector’s asset and risk management systems documentation are consistent with good industry practice. The Electricity Authority says Vector did not apply its risk identification stage sufficiently to the cable trench.

[108]	Vector argued that the Electricity Authority’s finding that Vector “should have” identified generic risks associated with the cable trench was not tantamount to a conclusion that it was negligent in failing to do so. It submitted that the Electricity Authority’s findings were concerned with a normative assessment of best practice, whereas the Commissioner needed to be concerned with blameworthiness in the sense of whether Vector fell short of the expectations imposed on a reasonable distributor by law. Therefore, the Commissioner was not entitled to rely on that conclusion to find that Vector had been negligent.82

[109]	Vector emphasised that the standard of care, measured in terms of the reasonable person in the defendant’s position, had to be determined in light of the particular circumstances of the case. These circumstances might include the magnitude of the risk; degree of probability of it occurring; the expense, difficulty and inconvenience of taking action to avoid the risk occurring; and any other conflicting responsibilities the defendant may have.83

82 Vector also submitted that, in any event, it did not fall below the standard expected of a reasonable distributor. It relied on Mr Malcom’s affidavit as showing that in 2014 the risk posed by an in-air cable trench containing several cables was not one that a reasonably competent and diligent network operator could have been expected to identify. I have, however, excluded Mr Malcolm’s evidence; had Vector wished to challenge the Electricity Authority’s report by reference to this material it could have done so at the time.
83 Wyong Shire Council v Shirt (1980) 146 CLR 40 (HCA) at 47–48; Wilson & Horton Ltd v Attorney- General [1997] 2 NZLR 513 (CA) at 521.

[110]	It is correct that the Electricity Authority was not asked to consider whether Vector had been negligent. However, the nature of the inquiry required by the question posed for the Electricity Authority could reasonably have been expected to, and did, result in findings that indicated the conduct expected of a reasonable distributor and whether Vector had met that standard.

[111]	Vector uses the Joint Australian New Zealand International Standard ISO 31000:2009 Risk Management – Principles and Guidelines as a reference and guide on good practice risk management.84 The definition of risk in ISO 31000 specifically deals with uncertainty of risk. Risk assessment includes consideration of the system components, including asking what could happen to introduce uncertainty for the safety, security and reliability of electricity supplies (for example, a fire could introduce uncertainty). One such part of Vector’s system was the cable trench and its contents.

[112]	The Electricity Authority found that by properly applying ISO 31000 guidelines, Vector could have identified the crucial role the composition of the cable trench played. Each time a cable was added to the cable trench following its installation in 1966, an opportunity arose to review the risk posed by the increasing concentration of cables in the trench. But Vector’s focus each time it added a new cable was on the risk of the individual cable project, rather than the whole. It failed to consider the co-location risk implications of the overall cable installation.85

[113]	There were also opportunities to identify the risk during periodic maintenance inspections and during the biennial reviews of the state of the network. The Electricity Authority noted that in two of the biennial reviews, reviewers had, in fact, identified a risk relating to installing two cables in common trenches at zone substations, but none of the reviews identified or discussed the Penrose cable trench specifically.

[114]	Vector’s risk management framework required both the probability and consequences of a potential risk to be considered. The Electricity Authority

84    Electricity Authority Penrose substation fire 5 October 2014 – Report on the inquiry conducted  by the Electricity Authority under section 18 of the Electricity Authority Act 2010 (20 November 2015) at [5.27].
85	At [1.36].

considered that, had the risks associated with the co-location of cables in the cable trench been identified, the risk of ignition would have been assessed as “high impact/low probability” (HILP). Assessment of the risk as a HILP event would have led to further consideration of specific risk controls and mitigations.86

[115]	Finally, the Electricity Authority found that the Penrose cable trench was quite different to other cable trenches, including because of its criticality to electricity supply. For that reason, there should have been specific consideration given to it, particularly when changes were made to the trench over a long period of time.

[116]	The Electricity Authority was less focused on the ignition risk posed by the transition joints than on the risk arising from the co-location of supply-critical cables in the “in-air” trench. It undertook only limited research into the fire risk associated with transition joints. This was because it considered that Vector did not need to appreciate that risk for it to have identified the broader risks associated with the co- location of the cables in the cable trench. Although there was evidence that other participants in the electricity industry were aware of an issue with transition joints, the Electricity Authority concluded from its limited research that there was insufficient evidence to support a conclusion that Vector should have been aware of the specific risk from transition joint fires.

[117]	The Electricity Authority summarised its findings as follows:87

… Because co-location risk is commonly managed in the industry, and Vector’s and Transpower’s design standards show that both were aware of this type of risk, the Authority has concluded that they should have identified the co-locations risks associated with the Penrose Cable trench.

Accordingly, the Authority’s view remains that the identification and assessment of the co-location of supply-critical components based on the consequences and probability of failure is appropriate and consistent with the guidance in ISO 31000.

The Authority considers that, when applying risk management practices, it would not have been necessary for Vector and/or Transpower to have knowledge of a specific source of ignition to manage the risk of fire – it is only necessary to know that fire is a possibility. The evidence set out in this report shows that both Vector and Transpower knew about the risks and consequences associated with co-located cables and therefore could have

86	At [5.46].
87	At [5.78]–[5.81].

managed the risks and avoided, or least reduced, the impact the fires had on electricity supplies to consumers.

The Authority’s view is that, by applying the ISO 31000 guidelines:

a) it was possible for Vector to have identified the criticality of the cable trench contents to maintaining reliable and secure electricity supplies to a large number of its customers. It was also possible to identify potential event other than a transition joint fire that could cause such an event.

…

[118]	In my view, the Electricity Authority report provided an adequate evidential foundation for the Commissioner’s conclusion on these aspects of negligence. This part of Vector’s argument fails.

Reliance on the Electricity Authority’s report regarding fire hazard systems and what mitigation steps should have been taken

[119]	In relation to fire hazard systems, the Electricity Authority was asked “[w]hat fire hazard mitigation systems were in place; and did they operate as intended?”. The Authority reported that no fire hazard systems were installed in the cable trench and that, although fire hazard mitigation systems are not routinely installed in cable trenches, the Penrose cable trench was sufficiently unusual that such systems should have been considered. The Penrose cable trench was unusual in that it contained so many supply-critical circuits in an in-air set-up, and distribution cables that were run to failure were co-located with sub-transmission cables that were managed to a higher security standard.

[120]	The Authority said:88

Fire hazard mitigation measures are likely to have been economically viable given the potential consequences of a fire …

The Authority considers that a fire hazard mitigation system would have led to early detection and extinguishment of the fire, possibly eliminating (or at least reducing) the damage to the adjacent cables and substation equipment.

…

88	At [6.18]–[6.21].

The Authority considers that the Penrose fire provides important lessons about asset management, relevant to all network businesses. The lessons should be reviewed by network businesses for relevance to their individual situations.

For existing installations where cable joints are installed in in-air situations, interim fire protection measures should be considered, such as sandbagging. Longer term fire hazard mitigation approaches, such as segregation of cables, application of fire retardant paint and cable sheaths and periodic inspection and monitoring should also be considered.

[121]	Later in its report the Electricity Authority estimated that the economic cost to customers due to the loss of supply was between $47 million and $72 million.89 It considered that $3.3 million of investment in prevention actions could have been economically justified in the cable trench given the cost to customers on the basis of a failure and fire every 40 years.90 However, this is to be compared with the statement early in the report that:

It is neither feasible nor efficient to eliminate all risk from electricity network businesses. Identified risk controls and mitigations should undergo analysis of costs and benefits. Treatments for identified HILP risks in particular can accrue high costs.91

[122]	The Commissioner did not identify what steps she considered that Vector should have taken, finding only that:92

I accept the expert view taken by the Electricity Authority. A reasonable network company would have identified risks and taken steps to mitigate the extent of the disruption.

[123]	Vector argued that the Electricity Authority’s report did not provide an adequate basis for the Commissioner to conclude what a reasonable distributor in Vector’s position ought to have done by way of mitigating the risk of interruption to the supply. It pointed to the Electricity Authority’s acknowledgement cited above regarding the cost of addressing HILP risks. It also submitted that the Electricity Authority’s view that “fire hazard mitigation measures are likely [to] have been economically viable given the potential consequences of a fire … [and it] would have led to early detection … possibly eliminating (or at least reducing) the damage to the adjacent cables …”93 were merely speculative.

89	At [1.5] and chapter 8.
90	At [8.22].
91	At [1.45].
92	As described in the proposed recommendations for some of Progressive’s sites.
93	At [6.18]–[6.19].

[124]	Vector emphasised that determination of what steps, if any, a reasonable distributor would have taken required consideration of the magnitude of the risk and degree of probability of its occurrence, the expense, difficulty and inconvenience in taking mitigating steps and any other conflicting responsibilities the defendant might have.94 Vector relied on the survey it had conducted showing that, internationally, no other network company had fire mitigation systems for cable trenches.

[125]	The Electricity Authority’s comments on this aspect were brief compared with its consideration of whether Vector should have identified the co-location risk, and seem more in the nature of generic observations made largely with the benefit of hindsight than an analysis of what specific steps could or should have been taken. There are no specific findings as to what Vector ought to have done, having regard to the likely cost involved. It may well be that low-cost steps could and should have been taken, but that was beyond the scope of the Electricity Authority’s inquiry and its report did not provide a sufficient basis for a finding by the Commissioner to that effect. I therefore consider that it was an error to rely on the report in the way the Commissioner did.

Third ground of review – the Commissioner acted unreasonably and made an error of law in finding that Vector’s alleged breach caused the claimed loss

[126]	Vector argued that the Commissioner’s finding of negligence failed to identify the requisite causative relationship between Vector’s failure to identify the co-location risk and the losses caused by the outage. This issue overlaps with the question of whether Vector was negligent in failing to take steps in mitigation.

[127]	As part of her discussion on the breach of duty, the Commissioner specifically turned her mind to the issue of causation, explaining her view that Vector’s breach of its duty of care had caused the complainants loss “because the requirement to hire generators was caused by the Penrose outage and was reasonably foreseeable”. This analysis failed to address the obvious question: even if Vector had negligently failed to take steps to address the co-location risk, how likely is it that the steps would have been effective in avoiding the outage either at all or to the extent suffered?

94	Wyong Shire Council v Shire, above n 83; Wilson & Horton Ltd v Attorney-General, above n 83, at 521.

[128]	Given my conclusion that there was an insufficient basis on which the Commissioner could have identified what steps Vector should have taken to mitigate the risk of a power outage, it follows that there was an insufficient basis for the Commissioner’s conclusion as to causation.

Fourth ground of review – contractual limitations on the extent of liability

[129]	All the contracts between the complainants and the retailers contained terms purporting to exclude or limit the retailers’ liability for certain types of loss. These clauses were expressed to be for the benefit of, and enforceable by, Vector, pursuant to the Contracts (Privity) Act 1982. The Commissioner was aware of these clauses.

[130]	With one limited exception, however, the Commissioner did not consider the application of these clauses in the reasons she gave for her decisions.95 Vector says that this was an error of law because the clauses would have either excluded liability for the losses claimed or limited its liability to a level less than that it was required by the Commissioner to pay by way of compensation.

[131]	In submissions to the Commissioner in response to the proposed recommendations, Vector only referred to an aspect of the terms that it said excluded any duty of care. It did not identify the effect of the clauses as excluding liability for certain types of loss or limiting its liability. Nevertheless, contractual exclusion and limitation clauses are factors capable of affecting the extent of a party’s liability in negligence, and so failure to have regard to them would amount to an error of law. I note that the relevant contractual terms were discussed in the context of the first ground of review, but I repeat them here for ease of reference.

Contact’s Standard Terms with Americold and Wendco

[132]	The Contact Standard Terms between Contact and Americold/Wendco included the following:

Subject to the maximum amount stated below, any liability we have to you, in contract or tort, is limited to direct physical loss or damage to property, premises or goods. That loss or damage needs to have been reasonably foreseeable and caused directly by:

95	The proposed recommendation relating to the Wendco claim considered and applied one aspect of the exclusion clause in that contract. It did not consider the limitation clause.

•	a breach of these terms and conditions by us, and/or

•	our negligence

•	We will not, in any event, be liable to you or anyone else:

•	for any indirect or consequential losses

•	for any loss of profits or other similar losses, or

•	in an event or circumstance beyond our control (a force majeure event).

If we are liable to you, the maximum amount we will pay to compensate you for any event or related series of events is $10,000. This is subject to a maximum cap of $50,000 in any 12-month period for all events or series of events, starting from the first event.

…

Except as expressly set out in these terms and conditions, our liability and the liability of the network operator, including any liability in tort (including negligence), contract, breach of statutory duty, equity or otherwise, is excluded to the maximum extent permitted by law. In addition, except as expressly set out in these terms and conditions, all warranties, guarantees or obligations imposed on us, or the network operator, in relation to goods or services provided by us, or the network operator, by the Consumer Guarantees Act 1993 or any other law, are excluded to the maximum extent permitted by law. If you on-sell energy to another person, you must ensure that all agreements you have with the end-consumer include provisions to this effect.

(emphasis added)

[133]	In relation to Americold, Vector says that the cost of hiring generators was not direct physical loss or damage caused directly by negligence. As a result, Americold’s claim was completely excluded. Alternatively, Vector’s liability was limited to
$10,000.

[134]	Ms Anderson did not resist the argument that the Commissioner’s failure to have regard to the exclusion and limitation clauses could amount to an error of law. Her position was that the exclusion clauses would not have been effective.

[135]	Ms Anderson argued that because Americold’s loss (generator hireage) was not specifically excluded as being indirect or consequential loss and was incurred in preventing a type of damage specifically covered (direct physical damage to property)

it was to be regarded as damage for which Vector was liable. Ms Anderson supported and relied on the Commissioner’s finding that:96

… Americold hired generators to mitigate the direct physical damage it would have suffered as a result of the electricity outage.

I am satisfied Americold is entitled to claim for all costs reasonably incurred in mitigating losses resulting from the electricity outage …

[136]	Alternatively, Ms Anderson argued that the exclusion clause should be read down by reference to the contra proferentem rule, though she was not specific as to what the narrower meaning would be. This is not a case in which the contra proferentem rule assists. Generally, exclusion clause provisions are read strictly and (depending on their nature) limitation clauses less so.97 If the words or meaning are unclear or uncertain, resort may be had to the contra proferentem rule. But the overarching aim is to ascertain what the parties intended.98
[137]	In this case, there is no uncertainty about the meaning of the words, which are straightforward. The terms in the agreements make it plain that both Contact’s and Vector’s exposure to the consumers, either in contract or tort, is limited to “direct physical loss or damage to property, premises or goods”. The adjectival phrase “direct physical” qualifies the phrase “loss or damage to property”. There is no means by which one could interpret those words as encompassing the cost of generator hireage because it is not physical damage to property; to the contrary, it is a cost incurred to avoid physical loss or damage to property.

[138]	Whether such costs are properly viewed as “indirect or consequential loss” does not arise as an issue because, even if they are not, they will still not fall within the description of “direct physical loss or damage to property”. Nor is the fact that costs of mitigation are generally recoverable in tort relevant; the question is not one of recoverability in tort but of contractual limitation.

96 Final recommendation between Americold NZ Ltd and Vector Ltd, dated 18 November 2016 at [2(a)], citing Taycal Holdings Ltd v BDO Hogg Young Cathie (1996) 17 NZTC 12,527 (HC) at 12,535.
97	Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd [1983] 1 WLR 964 (HL).
98 Dorchester Finance Ltd v Deloitte [2012] NZCA 226, [2012] NZCCLR 15 at [33] (footnotes omitted).

[139]	Moreover, the limitation as to the quantum of any claim is clearly stated to be
$10,000 “for any event or related series of events”. Clearly it was arguable that Vector’s maximum contractual liability to Americold was $10,000, significantly less than it was required by the Commissioner to pay. It is unnecessary to reach a firm conclusion on this; it is sufficient that I am satisfied that this aspect was likely to have affected the Commissioner’s conclusion as to what was fair and reasonable and her failure to consider it was therefore a material error of law.

[140]	Wendco’s position is different; the Commissioner gave effect to the clause that excluded liability for “indirect or consequential losses” and “loss of profits or other similar losses” by excluding from recovery Wendco’s claim for administration costs, restaurant rental and staff payroll. However, she failed to apply it to the balance of the claim, which related to stock losses. The limitation of $10,000 for “any event or series of related events” did not apply because the claim was for less than $10,000.

Contact’s Special Terms with Progressive (Cabinet Ready Meat Plant/Mount Wellington/Greenlane)

[141]	The Special Terms in the agreement between Progressive and Contact in respect of Progressive’s Cabinet Ready Meat Plant and Mount Wellington and Greenlane supermarkets provided that:

The parties agree that the following provisions of the Standard Terms … will not apply and/or will be amended as follows:

…

(d)	The section – “Liability” at pages 34 to 36 replaced with:

“Subject to the maximum amount stated below, any liability of a party to the other party (or to any other person), in contract or tort, is limited to direct physical loss or damage to property, premises, goods or injury. That loss or damage needs to have been reasonably foreseeable and caused directly by:

•	a breach of these terms and conditions which, for the avoidance of doubt, includes other special terms agreed by the parties, and/or

•	negligence.

A party will not, in any event, be liable to the other party or anyone else:

•	for any indirect or consequential losses.

•	for any loss of profits or other similar losses, or

•	in an event or circumstance beyond that party’s control (including a force majeure event).

If a party is liable to the other party, the maximum amount the liable party will pay to compensate the other party for any event or related series of events is $250,000.

(emphasis added)

[142]	Vector says that these provisions exclude its liability to Progressive because none of the losses claimed were for direct physical loss or damage to property, premises or goods. Progressive’s position is slightly different from that of Americold because its claims included the value of discarded stock. So there was a loss of property. However, for the reasons already discussed, stock loss is not “direct” physical loss or damage.99 Vector also submitted that it expects the nearly $250,000  it was ordered to pay was more than 50 per cent of the annual charges. In the absence of submissions from Progressive and, given my conclusions regarding other errors in the Commissioner’s decision, I find it unnecessary to resolve this particular issue.

The Spot Supply Agreements between Mercury and Progressive (Newmarket, St Johns, Sylvia Park, Meadowbank and Onehunga)

[143]	Progressive’s Newmarket, St Johns, Sylvia Park, Meadowbank and Onehunga stores were supplied electricity by Mercury under Spot Supply Agreements. These terms did not require direct damage to property, but simply limited the liability to “any direct, reasonably foreseeable, loss or damage”, specifically excluding “indirect or consequential loss” and “loss resulting from … damage to any computer or electronically stored data, software or hardware”:

19.4	Your and our liability under this Agreement will be limited to any direct, reasonably foreseeable, loss or damage. Neither you nor us will be liable for any:

(a)	indirect or consequential loss including (but not limited to) incidental or special damages; or

(b)	loss resulting from loss or corruption of or damage to any computer or electronically stored data, software or hardware,

99	At [83] of this decision.

provided the party causing the damage has used good industry practice.

19.5	Your and our liability under this Agreement will be limited to any direct, reasonably foreseeable, loss or damage. Neither you nor us will be liable for any:

(a)	for any one event or series of breaches arising from the same event or circumstances, 50% of the annual charges for any sites directly affected, payable by you to us; and

(b)	the maximum liability for all events or circumstances occurring in any 12 months period shall not exceed 100% of the annual charges for any sites directly affected, payable by you to us.

[144]	Vector says that the losses claimed were not “direct, reasonably foreseeable, loss or damage” (and therefore excluded) or alternatively, any compensation was limited to 50 per cent of the annual charges which, although not known, are expected to be less than the amount Vector has been ordered to pay. Once again, however, in the absence of submissions by Progressive on the point and given the failure of the Commissioner to even consider the application of the limitation clause, it is unnecessary for me to reach a final view on their effect.

Fifth ground of review – exceeding the jurisdictional limit by considering multiple complaints by Progressive

The issue

[145]	The Commissioner’s jurisdiction is limited by cl B.9.2 of the Scheme Document which, relevantly, provides that:100

B. 9	The Commissioner cannot consider:

…

B.9.2	any matter where it appears to the Commissioner that the Complaint is part of or is related to, another Complaint which the complainant has made; or

B.9.3	a Complaint that involves a claim in excess of the applicable amount set out in clause B.11 of these Terms of Reference, unless agreed to by the Scheme Member concerned in accordance with clause B.38 of these Terms of Reference and that Scheme Member has obtained any Lines Company’s agreement that is required by clause C.24 of the Code; …

100	The Electricity and Gas Complaints Commissioner Scheme 1 October 2014.

[146]	The Scheme Document defines complainant as “a person making a Complaint” or, where applicable, someone representing a person making the Complaint”. “Complaint” is defined as “an expression of dissatisfaction related to Services, or the complaints handling process itself, where a response or resolution is explicitly or implicitly expected”.

[147]	Vector asserted, without objection or correction by either the Commissioner or Progressive, that Progressive had initially made a single complaint relating to its eight sites and that the Commissioner treated them as separate claims.101 I proceed on the basis that this is what happened. Vector argued that the Commissioner’s treatment of the Progressive claim amounted to an error of law because it resulted in her exceeding her jurisdiction.

[148]	The decision whether a complaint falls within cl B.9.2, and is thereby excluded from the Commissioner’s jurisdiction, lies with the Commissioner herself to decide under cl B.10:

The Commissioner decides whether a Complaint is within the Commissioner’s jurisdiction. When making a decision as it relates to jurisdiction, the Commissioner must have regard to what the Complainant and the Scheme Member have to say. The Commissioner must ensure the Complainant and the relevant Scheme Member or Scheme Members are advised of the reasons a Complaint is outside the Commissioner’s jurisdiction or otherwise excluded.

[149]	Vector accepted that cl B.9.2 frames the jurisdiction as being within the Commissioner’s discretion to determine, but emphasised that the exercise of such discretion must be reasonable and lawful.102 The exercise of any judicial or administrative decision must be undertaken on a principled basis i.e. for the purpose for which it was conferred and in accordance with the relevant law. This was described by Lord Halsbury LC in Sharpe v Wakefield in the following terms:103
… when it is said that something is to be done within the discretion of the authorities … that something is to be done according to the rules of reason and

101 Progressive, which abides the decision of the Court, did not make submission on this issue but I heard from Ms J Anderson as amicus curiae on it, and record my gratitude for her assistance. Ms Anderson is not to be confused with counsel for Americold, Ms K Anderson. Since Americold did not make submissions on this issue, all references in this part of the judgment are to Ms J Anderson.
102	Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [16].
103	Sharpe v Wakefield [1886-90] All ER Rep 651 (HL) at 653.

justice, not according to private opinion … according to law, and not humour. It is to be not arbitrary, vague, and fanciful, but legal and regular.

[150]	The Supreme Court cited this passage in Shirley v Wairarapa District Health Board, when considering the exercise of the costs discretion under the High Court Rules.104 The exercise of a discretion will not be amenable to interference unless the decision-maker acted on a wrong principle, or failed to take into account some relevant matter or took account of some irrelevant matter or was plainly wrong.105

The Commissioner’s decisions

[151]	The first indication that the Commissioner had determined to treat the initial single Progressive complaint as eight separate complaints came at the proposed recommendation stage, with the Commissioner issuing a separate proposed recommendation in respect of each site. There was no mention of any determination under cl B.9.2.

[152]	Vector challenged the Commissioner’s approach. In each of her final recommendations the Commissioner addressed the issue, confirming her approach and explaining it in identical terms. Taking the Meadowbank site as an example, the Commissioner said:

I believe the Countdown Meadowbank complaint is within my jurisdiction. Vector has challenged my jurisdiction to consider this complaint relying on clauses B.9.2 and B.9.3. Vector submits all Progressive complaints should be considered one single complaint and therefore the total limit of my jurisdiction should be $50,000.

…

I am satisfied B.9.2 gives me discretion to determine whether a complaint is part of, or related to, another complaint. This is because the use of “appears to” is a phrase deliberately used to indicate I have a discretion. This can be compared to clauses which do not contain such a phrase for example clauses B.9.3, B.9.6 and B.9.7.

Using this discretion and taking into account the factors below I believe the Countdown Meadowbank complaint is independent from Progressive’s other complaints:

•	Countdown Meadowbank is a separate property from Progressive’s other locations. It does not share its address at 35 St Johns Road, Meadowbank, Auckland, with any other Progressive supermarket.

104	Shirley v Wairarapa District Health Board, above n 102, at [16].
105	At [15].

•	Countdown Meadowbank has its own ICP number and has an individual entry in the electricity registry. It does not share its ICP number 0253245443LCDB8 or its electricity registry entry with any other Progressive supermarket.

•	Countdown Meadowbank has its own account number with Mercury. It does not share its account number 111450349 with any other Progressive supermarket.

•	Countdown Meadowbank incurs its own lines charges. Progressive pays lines charges specifically incurred by Countdown Meadowbank.

•	Countdown Meadowbank experienced the Penrose Outage in a unique way. It was without electricity for 52.5 hours. Other Progressive locations affected by the Penrose Outage were without electricity for up to 70 hours.

•	Countdown Meadowbank experienced a different amount of loss compared to other locations. Countdown Meadowbank showed evidence of $105,181.08 worth of stock losses. Other Progressive supermarkets showed evidence of different amounts of stock losses.

(emphasis added)

[153]	Vector says that the Commissioner’s consideration was inadequate in that she failed to have regard to the nature and purpose of the Scheme, particularly the monetary cap.

[154]	In my view, it was open to the Commissioner to treat Progressive’s complaint as being a separate complaint in relation to each of the eight sites. The only expression of dissatisfaction possible in the circumstances was that Vector’s electricity supply had failed. But that was a complaint that could only be made in relation to each affected site; it is, for example, very likely that Progressive owned other stores that were unaffected by the outage and in respect of which no complaint could have been made. I therefore consider that cl B.9.2 was engaged and it was for the Commissioner to exercise her discretion as to whether each of the complaints were related and therefore outside the scope of her jurisdiction.

[155]	On the wording of cl B.9.2, the Commissioner was required to consider whether each complaint was “part of or related to” the other complaints by Progressive. It appears from the italicised words above that the question she actually asked was whether the Meadowbank complaint was independent of Progressive’s other complaints. I do not think, however, that this would have made any difference to the considerations that the Commissioner had to take into account.

[156]	Vector submitted that the purpose of limiting the Commissioner’s jurisdiction by way of cl B.9.2 is, clearly, to prevent a complainant from circumventing the cap by dividing its losses across multiple complaints in order to obtain compensation in excess of $50,000 in relation to the same event. As I have already discussed, the purpose of the Scheme is intended for the fair and efficient resolution of claims. It is clearly directed towards relatively modest claims; claims of more than $50,000 and claims that are related to other claims by the same complainant are excluded. For parties deciding whether to submit to the Scheme process, in which there are limited procedural protections, no right to an oral hearing, no right to cross-examine witnesses and no general right of appeal, the integrity of the cap is an important consideration.

[157]	I agree that this purpose and the integrity of the cap are therefore important considerations and ought to have been borne in mind by the Commissioner in the exercise of the discretion under cl B.9.2. But the Commissioner’s treatment of Progressive’s claims did not cut across this purpose. There is no suggestion of Progressive artificially dividing its losses across multiple sites; the losses claimed in respect of each site were genuinely related to that site.

[158]	Vector’s position was that the complaints were related because they involved the same complainant and in each case the complaint related to the Penrose outage. I accept Ms Anderson’s submission that the common identity of the complainant does not assist Vector. It is that factor that engages clause B.9.2 in the first place; the Commissioner is only required to exercise her discretion when confronted with more than one complaint by the same complainant so the Scheme clearly contemplates that one complainant may, legitimately, make more than one complaint. As a result, the complainant’s identity is unlikely to be the significant consideration. The issue for the Commissioner was whether the various complaints were related in some other way.

[159]	I agree that the fact that all complaints arose from the same cause is a relevant consideration. It is obvious that the Commissioner was aware of that and took it into account because it was at the heart of each of the complaints. But I do not accept that it necessarily overwhelmed the other factors identified as relevant by the Commissioner. In my view, the factors were ones that the Commissioner was entitled to take into account in making her decision. In these circumstances, I see no error in the Commissioner’s treatment of the Progressive claims.

[160]	This ground of review is not made out.

Relief

[161]	Vector seeks:

(a)	a declaration that it does not owe a duty of care imposed in the decisions;

(b)	an order quashing the decisions;

(c)	an order that the second, third and fourth respondents repay Vector any amounts paid to them by Vector in compliance with the decision;

(d)	interest on any amounts paid by Vector arising out of the decisions;

(e)	costs; and

(f)	any other order the Court thinks fit.

[162]	In judicial review proceedings, the Court may grant full relief, partial relief or no relief at all.106 Relief in judicial review is discretionary107 and while the granting of some form of relief is usually considered appropriate, the residual discretion to decline a remedy remains.108

[163]	Americold submits that the Court should exercise its discretion and decline to award relief. This is on the basis that by electing not to refer the dispute to the Court for determination and instead participating in the dispute scheme, but then seeking judicial review, Vector caused delays. In the alternative, it submits that the appropriate remedy is to refer the decisions back to the Commissioner, because in her broad discretion to determine what is fair and reasonable, it would remain open to her to reach the same result, which tells against the Court stepping in as decision-maker.

[164]	I consider it appropriate to grant relief in the circumstances.	Vector was entitled to proceed under the Scheme and to seek review of the Commissioner’s

106	Auckland City Council v Attorney-General HC Auckland CIV-2009-404-1761, 24 November 2009 at [75].
107	Bulk Gas Users Group v Attorney-General [1983] NZLR 129 (CA) at 136.
108	See Ngāi Tai ki Tāmaki Tribal Trust v Minister of Conservation [2017] NZCA 613 at [59].

decision. There has not been any prejudice as a result of it doing so. The Commissioner’s decisions were made on the basis of a number of errors that were material, including imposing a duty of care which has not previously been recognised and failing to have regard to whether the exclusion clauses and limitation clauses precluded recovery of all or part of the sums claimed. It would be inappropriate to allow those decisions to stand.

[165]	The Privy Council held in Phipps v Royal Australasian College of Surgeons that when a decision is flawed by serious procedural irregularity, the person prejudiced is normally entitled to have the matter considered afresh.109 I consider in this case that the right course is quash the Commissioner’s decisions and remit the matter back for re-determination in light of this decision.110
[166]	Given that the Commissioner may reach different results in terms of whether and what amount of compensation is appropriate in light of this decision, and the fact that Vector has made the payments that were required following the Commissioner’s decisions which I have set aside, I also order that the second, third and fourth respondents return the payments made under the Scheme as previously required by the Commissioner, including interest at a rate of five per cent per annum111 from the date of payment.

[167]	I decline to make the declaration sought. It is common ground that no duty of care of the kind found by the Commissioner existed at the time of the decisions. No declaration is necessary.

Result

[168]	The application for judicial review succeeds. I make the following orders:

109	Phipps v Royal Australasian College of Surgeons [2000] 2 NZLR 513 at 521 (PC).
110 See Air Nelson Ltd v Minister of Transport [2008] NZCA 26, [2008] NZAR 139 at [72]–[75]. Compare to Franz Josef Glacier Guides Ltd v Minister of Conservation HC Greymouth CP14/98, 13 October 1999 at [55].
111 See Judicature Act 1908, s 87 and Judicature (Prescribed Rate of Interest) Order 2011, cl 4. See  sch 1, part 1, cl 1 of the Interest on Money Claims Act 2016 regarding jurisdiction: because this proceeding commenced prior to the commencement of sch 1, part 1, cl 1 of the Interest on Money Claims Act, s 87 of the Judicature Act applies to this proceeding.

(a)	The Utility Disputes Commissioner’s decisions awarding the second to fourth respondents compensation for costs incurred as a result of the October 2014 Penrose substation fire are quashed.

(b)	The Commissioner is to reconsider the respondents’ complaints in light of the errors identified in this judgment.

(c)	The second to fourth respondents are to repay Vector any amounts paid to them in compliance with the Commissioner’s decisions, together with interest at a rate of five per cent per annum from the date of payment.

[169]	The  parties  did  not  address  me  on  the  issue  of  costs.	Parties may file submissions as to costs for the proceeding as follows:

(a)	On behalf of Vector, within 10 working days of the date of this judgment;

(b)	On behalf of the respondents, within a further 10 working days; and

(c)	Any reply within a further seven working days.

P Courtney J