Power Grid Cables Pty Ltd v Endeavour Energy

Power Grid Cables Pty Ltd, the plaintiff, applies by summons filed on 1 February 2016, for interim and final relief against Endeavour Energy, the defendant.

The following narrative of facts is derived from the plaintiff’s evidence, which was neither challenged nor tested for the purposes of the interlocutory hearing for interim relief. The facts are expressed in summary form because of the nature of the claim for interim relief and reflect the plaintiff’s evidence.

Since 2003 the plaintiff has supplied electrical lines to third party contractors for the distribution of electricity through the defendant’s network to consumers. The defendant’s network covers a geographical area of 24,500 square kilometres and includes greater western Sydney and midwestern New South Wales. In about 1995 Parliament amended the relevant legislation (including the Electricity Supply Act 1995 (NSW) (the Act)) in order to introduce market competition to works done to provide connections to networks, including the defendant’s. The relevant provisions are referred to in more detail below.

For some years, the defendant has published an “Approved Materials List” (AML) which sets out cables and other electrical products it “approves” for use in electrical works that are, or will be, connected to its network. The inclusion of a product on this list means, for present purposes, that the defendant’s customers can use those products to connect to the defendant’s network. The plaintiff’s underground distribution cables have been on the AML since 2003. According to the plaintiff’s evidence, seven out of the eleven cables listed are specifically designed for the defendant’s network and cannot be used anywhere else.

As a matter of practical commercial reality, the plaintiff can only sell products that are on the AML since its customers are, understandably, loath to run the risk that the defendant will otherwise refuse to supply electricity through cables that are made of products other than those on the AML. Moreover, the Model Standing Offer for a Standard Connection Service issued by the defendant in June 2015 obliges a developer to use goods which are “approved”, which I take to mean, or at least include, those goods contained on the AML (cl 6.3(b)(iii)).

In about 2013 the defendant, together with the other two electricity distributors for New South Wales (Essential Energy and Ausgrid), appointed Network NSW Pty Ltd (NNSW) as its agent, to procure products to be used in their networks throughout New South Wales. These products were to be used by the distributors themselves in carrying out work on their networks and were not, as far as the evidence established, intended to affect the products that could be used by third party contractors to perform such work. To that end NNSW issued a Request for Tender (RFT) on behalf of the three distributors. The plaintiff decided not to submit a tender for that work. In late 2015 Prysmian Aust. Pty Ltd (Prysmian) was appointed as the successful tenderer.

When the RFT was announced the plaintiff became concerned that the new specification issued as part of the RFT would affect the approval of its products listed on the AML. According to the plaintiff, the defendant assured it repeatedly that, notwithstanding the tender process, it would not change the status of products on the AML unless and until it amended the relevant specification and given to suppliers such as the plaintiff adequate notice and an opportunity to be heard as to the continued compliance of their products with the specification.

A tender briefing published by the defendant (through the NNSW forum on the internet) in July 2013 said in part:

The NNSW internet forum contained the following question and answer as at 24 July 2013:

The plaintiff’s case is that it understood by these representations that it did not have to participate in the tender process to protect its position with respect to the products it used to connect to the defendant’s network and relied on the representations to continue to order the cables that were listed on the AML.

By email sent on 30 December 2015 David Shepherd, the defendant’s Acting Network Mains Manager, wrote to the plaintiff (on behalf of the defendant) in the following terms:

In the letter which was attached to the email, the defendant, by notice dated 30 December 2015 (the Revocation Decision), purported to revoke the existing approvals of the plaintiff’s underground distribution cables. The Revocation Decision read as follows:

The table attached to the letter listed eleven of the cables sold by the plaintiff for the purposes of connecting premises to the defendant’s network. According to the plaintiff, it was not consulted before the Revocation Decision was made and was not given an opportunity to be heard as to why it ought not be made.

According to Mark Rukin (the plaintiff’s sole director) Mr Shepherd informed him on 11 January 2016 that the reason for the Revocation Decision was that the defendant “could not support the costs of unlimited suppliers”.

Since the Revocation Decision the plaintiff has applied for its products to be approved by reference to the new specification. This further application for approval has not yet been determined.

Of present importance, s 31 of the Act, which is contained in Part 3 (Network operations in a retail market), Division 4 (Requirements relating to customer connection services), provides:

The defendant is, relevantly, “the distributor”. The plaintiff is, for present purposes, “any other person” within the meaning of s 31(1)(a) and contends, in part, that the customer’s right to elect to have goods provided by someone other than the defendant (as provided for in s 31(1)(a)), confers a corresponding right on it to supply such goods to the customer, as long as they comply with the defendant’s specifications.

Section 26 relevantly provides:

The plaintiff claims relief on various bases. First, it contends that the Revocation Decision was an administrative decision and, accordingly, could be set aside as invalid if it was made for an improper purpose or involved the denial of procedural fairness. It alleges that if the decision to remove its products from the AML was made in order to reduce the number of suppliers (as appears from the alleged conversation between Mr Shepherd and Mr Rukin on 11 January 2016), this was an improper purpose, since s 31(1)(a) of the Act requires that a customer be permitted to obtain electrical goods from “any other person” in the context of a legislative intention to preserve market competition for such goods. It alleges that the Revocation Decision attracted the requirements of procedural fairness and therefore ought be set aside since it was given no opportunity to be heard before the decision was made.

Secondly, the plaintiff submitted that, as a result of representations the defendant made to it, on which it relied to its detriment, the defendant was estopped from making the Revocation Decision unless and until it had afforded procedural fairness to the plaintiff.

Thirdly, it submitted that the conduct of the defendant in effectively requiring customers to obtain cables from a single supplier (Prysmian, whose products already complied with the new specification by reason of its participation in the tender process), it was engaging in abuse of market power or third-line forcing in breach of ss 46 and 47 of the Competition and Consumer Act 2010 (Cth).

Whether interim relief ought be granted depends on whether the plaintiff has shown a sufficient likelihood of success to justify the preservation of the status quo pending the trial: Australian Broadcasting Corporation v O’Neill [2006] HCA 46; 227 CLR 57. The “governing consideration” is “that the requisite strength of the probability of ultimate success depends on the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought”: Australian Broadcasting Corporation v O’Neill at [72] per Gummow and Hayne JJ.

It is not appropriate for present purposes to say more than that I am satisfied that the plaintiff has shown that there are serious questions to be tried in relation to whether the defendant’s decision to remove its products from its AML:

In these circumstances, it is unnecessary to form, or express, any view about whether there is a serious question to be tried whether the defendant’s conduct is otherwise unlawful on the ground that it infringes the prohibition on third-line forcing. In any event, it will be necessary to consider whether the proceedings, or some aspect of the proceedings ought be transferred to the Federal Court as it involves a “special federal matter”: ss 3 and 6 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth).

The question of how the status quo could be preserved pending the determination of the proceedings is a more difficult one. The orders proposed by the plaintiff in its written submissions do not seem to me to be appropriate since the practical consequences that are likely to flow from them exceed what is required to preserve the status quo. In particular the proposal that I confer some protection with respect to products sold before the determination of the proceedings would tend to create the prejudice that, if the defendant were wholly successful, it would be burdened by equipment in its network that was installed after 30 June 2016 but which did not meet its current specification.

Although the plaintiff has established that it is likely to suffer loss arising from the Revocation Decision even if it is set aside or is found to ground an estoppel, and that such loss may be difficult to quantify, even were it compensable, I consider that the early determination of the dispute is the best that can be done to ameliorate the effects of the uncertainty created by the unresolved challenges to the defendant’s decision. To that end I have listed the matter for urgent final hearing before me to commence at 2pm on 2 March 2016 with a view to the hearing concluding by 4 March 2016. It will be necessary for directions to be made for the further conduct of the proceedings to achieve this end.

I have not heard the parties on costs. Although the defendant has successfully resisted the claim for interim relief, at least part of the hearing was necessary in the interests of justice to establish the grounds for the matter to be expedited. In these circumstances, I consider it to be appropriate to reserve the question of costs, which can be determined at the conclusion of the substantive hearing.

I make the following orders: