BODY CORPORATE 344862 AND ORS V E-GAS LIMITED AND ANOR HC WN CIV 2007-485-2168

BODY CORPORATE 344862 AND ORS V E-GAS LIMITED AND ANOR HC WN CIV 2007-485-2168 15 May 2008IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2007-485-2168BETWEEN BODY CORPORATE 344862 First Plaintiff AND ALAMIR COMPANY LIMITED Second Plaintiff AND NOVA GAS LIMITED Third Plaintiff AND KOPI 2 GO LIMITED Intended Fourth Plaintiff AND E-GAS LIMITED First Defendant AND E-GAS 2000 LIMITED Intended Second Defendant Hearing: 11 April 2008 Appearances: TM Stevens and GJ Robins - Counsel for Plaintiffs LJ Taylor and G Shaw - Counsel for Defendants Judgment: 15 May 2008 at 4.00 pmJUDGMENT OF ASSOCIATE JUDGE D.I. GENDALLThis judgment was delivered by Associate Judge Gendall on 15 May 2008 at 4.00 p.m. pursuant to r 540(4) of the High Court Rules 1985.Solicitors: Izard Weston, Lawyers, PO Box 5348, Wellington Kensington Swan, Lawyers, PO Box 10246, WellingtonIntroduction[1] On 4 February 2008 the plaintiffs brought four applications which are now before the Court: a) An application for costs in relation to an injunction originally sought in this proceeding and other related matters ("the Costs Application"); b) An application for leave to add Kopi 2 Go Limited ("Kopi") as a further plaintiff ("the Application to Add Kopi"); c) An application for leave to add E-Gas 2000 Limited ("E-Gas 2000") as a further defendant ("the Application to Add E-Gas 2000"); and d) An application for leave to pursue a summary judgment application ("the Summary Judgment Leave Application"). [2] The Application to Add E-Gas 2000 is not opposed by that company or the defendant. [3] An order is now made therefore granting leave to the plaintiffs to add E-Gas 2000 Limited as a second defendant in this proceeding. [4] The Costs Application, the Application to Add Kopi and the Summary Judgment Leave Application are opposed.Background Facts[5] The third plaintiff Nova Gas Limited ("Nova Gas"), the first defendant E-Gas and E-Gas 2000 are gas retailers operating in what the plaintiffs describe as a competitive market place.[6] Nova Gas was originally a 25% shareholder in E-Gas 2000. E-Gas 2000 and later E-Gas originally adopted the same terms and conditions for a supply of gas to customers as those used by Nova Gas. [7] Nova Gas is part of the Todd Energy Group which has upstream interests in the gas industry and other retail interests including Bay of Plenty Energy and Auckland Gas. E-Gas, however, is solely a gas retailer. [8] As I understand the position, almost all of E-Gas's commercial customers are on fixed term contracts which apparently are the norm in the commercial gas retail industry. [9] The first plaintiff ("Bolton Hotel") and the second plaintiff ("Alamir") are former customers of E-Gas who have endeavoured to "switch" and become customers of Nova Gas. Nova Gas argues that Bolton Hotel, Alamir and many other of E-Gas' customers had paid or currently pay E-Gas accounts substantially higher than the rates they would be obliged to pay if they were Nova Gas customers, (such customers described as the "Transferring Customers") and in many cases they have expressed the wish to transfer. [10] According to E-Gas, this was due in part because in 2007 Nova Gas began what is described as "a campaign" targeting E-Gas customers. E-Gas alleges, however, that in mounting this "campaign", Nova Gas has used tactics which involve misleading and deceptive conduct and, in so doing, Nova Gas has unlawfully defamed E-Gas and damaged its reputation and business. The catalyst for the present litigation would therefore seem to be this disagreement between Nova Gas and both E-Gas and E-Gas 2000 (together called "the E-Gas Group") as to whether the retail gas supply arrangements of about 153 "Remaining Transferring Customers" have been, or should be, switched from the E-Gas Group entities to Nova Gas. [11] By way of further response, the E-Gas Group also contends that Nova Gas in encouraging E-Gas customers to sign up to Nova Gas, procured those Transferring Customers to breach their fixed term contracts with the E-Gas Group.[12] E-Gas goes on to maintain here that Nova Gas has continued to mislead and deceive E-Gas customers since the original campaign was launched and further it has actively encouraged E-Gas customers not to pay their outstanding supply invoices. E-Gas says also that Nova Gas is wrongly invoicing E-Gas customers including for gas which is being supplied by and for costs which are incurred by E-Gas. [13] It is said that an industry practice exists that requests from customers to switch suppliers are able to be declined by a gas retailer if the customer is subject to an exclusive fixed term contract. According to E-Gas that is the position here. Notwithstanding that, E-Gas contends that Nova Gas has repeatedly told E-Gas customers that they are entitled to switch suppliers and in order to procure E-Gas customers to breach their contracts, Nova Gas is offering to pay an "early termination charge" set out in clause 48 of the standard supply contract. [14] As I have already noted with regard to Bolton Hotel and Alamir, and additionally with regard to the added fourth plaintiff Kopi, all are individual former E-Gas and/or E-Gas 2000 retail gas customers that sought to "switch" to Nova Gas. Bolton Hotel and Alamir have apparently been switched to Nova, so for them the only remaining issues in this proceeding relate to costs. Kopi has sought to join this proceeding to clarify that its gas supply arrangements with the E-Gas Group ended in July or August 2007, to enforce the switch from that date, and thereby to clarify that no further sums are due from it to the E-Gas Group. [15] Nova Gas maintains that a Reconciliation Code ("the Code") has existed since 2000 which Nova Gas says obliges the E-Gas Group to take steps to switch the Remaining Transferring Customers when properly requested to do so. It maintains the obligations under the Code are enforceable pursuant to an agreement known as the "2004 Allocation Agreement". Nova Gas, and the E-Gas Group were parties to the 2004 Allocation Agreement and the Code and Nova Gas seeks to confirm and enforce those obligations. [16] As an alternative, Nova Gas says that by failing to effect the switch requests and by taking other steps to similar ends, the E-Gas Group interfered with Nova's contracts with the Remaining Transferring Customers.[17] Finally, Nova Gas and Kopi seek declarations that E-Gas Group's existing retail gas supply contract terms and conditions remained in force and had not been changed. [18] In turning now to the three remaining applications before the Court, it is appropriate to look first to the summary judgment leave application.Leave to Apply for Summary Judgment[19] Rule 138(2) High Court Rules provides that an application for summary judgment must be filed:"at the (same) time the statement of claim is served on the defendant, or later with the leave of the Court."[20] Before me counsel for Nova Gas submitted that leave is not required by Kopi as fourth plaintiff nor for the claims by Nova Gas against E-Gas 2000 as the new second defendant. [21] This is because, so far as Kopi is concerned the reference to "the statement of claim" in r 138(2) must be construed to refer to the amended statement of claim in which Kopi is intending to be named as a party and not the plaintiffs' initial statement of claim. This amended statement of claim has not as yet been filed or served. [22] In my view there is substance in this argument. Under the circumstances I accept that leave is not required for Kopi as the new fourth plaintiff to pursue an application for leave to bring this summary judgment application when the amended statement of claim is filed and served. (This is, of course, on the basis that the application shortly to be considered to add Kopi as a further plaintiff succeeds. I will deal with this aspect later in this judgment). [23] Similarly, the amended statement of claim identifying E-Gas 2000 as a defendant has not as yet been served on that company. Again under thecircumstances prevailing here I accept that leave is not required to pursue an application for summary judgment against E-Gas 2000. [24] I turn now, however, to consider the question of whether leave is required for Nova Gas to pursue the application for summary judgment against E-Gas Limited the existing first defendant. [25] On this it is clear that r 138(2) recognises that the Court has a discretion to allow an application for summary judgment that is not filed at the same time as the initial statement of claim, although the rule provides no guidance as to the basis upon which the discretion might be exercised. [26] McGechan on Procedure at para. HR138.01 deals with this aspect and provides:"it is permissible to make an application at any later time with the leave of the Court. No guidelines are laid down for the granting of leave. The question is clearly a discretionary one, and it will be up to the party applying for leave to show why it should be granted. If the absence of a defence has only become apparent after discovery or the exchange of briefs, this may well be an adequate reason for granting leave. In many cases, as with appeals, the leave question will be bound up with the merits, and it may be sensible to resolve the two together."[27] In Tip Top Ice Cream Company Limited v Polarland Limited & Anor (High Court, Auckland, 1 February 2002, CP527sd99 Master Faire (as he then was) at paras. 27-28 held:"Rule 138 provides no specific guidelines for the granting of leave. The question is a discretionary one. The party applying for leave must show why it should be granted. [T]he exercise of the discretion depends on the facts of individual cases. Having said that, three factors assume importance where a matter of discretion is raised by the Rules, namely: a) Has the delay been satisfactorily explained; b) Are the merits of the applicant's case (in this case, the defendants) for the relief sought (that is, summary judgment) particularly strong and therefore deserving of determination at a later time by the Court than is prescribed by the Rules; c) Is there any risk of a miscarriage of justice by determining the application at a later point in time."[28] Turning to the "delay" issue, in my view this has been satisfactorily explained in the present case. These proceedings and the statement of claim were filed as a matter of urgency seeking an injunction to preserve gas supplies to the first plaintiff Bolton Hotel and the second plaintiff Alamir as two of the Remaining Transferring Customers. I am satisfied that this urgency in itself went some way to explaining why the summary judgment application was not filed contemporaneously. Further, it is suggested by Nova Gas that despite customer requests, E-Gas refused to provide copies of the E-Gas contracts to its own customers and that as a result when these proceedings were originally filed Nova Gas could not distinguish between customers that had a written E-Gas Group contract and those that did not. [29] According to Nova Gas it was not until after discovery of the E-Gas Group contracts that it was in a position properly to assess and to plead the detailed customer by customer allegations contained in the amended statement of claim and to properly assert that there was no arguable defence to the pleaded claim. [30] It is contended therefore that the summary judgment application was made at the first available opportunity after Nova Gas was able to assimilate the effect of the discovered E-Gas Group contracts and before E-Gas took any further action. [31] In my view these aspects provide a reasonable explanation for the delay of just over 4 months (from 27 September 2007 when the proceedings were issued and4 February 2008 when the summary judgment leave application was filed) in bringing the summary judgment application. [32] Next, I turn to the question of whether the present case has sufficient merit to be deserving of "late determination" by way of summary judgment. At present it is clear that the Court does not have the benefit of an opportunity to consider all the evidence as to the plaintiffs' claims for summary judgment itself, the defences raised and the plaintiffs' responses to those defences. [33] But, before me counsel for E-Gas endeavoured to argue that the material facts in the current proceeding are hotly in dispute and the conduct of Nova Gas surrounding what is described as the improper "poaching" of E-Gas's customers is firmly in issue. As a result, counsel contended that the legal and factual issues involved are multiple and complex and that therefore this proceeding would be quite unsuitable for the summary judgment procedure. [34] Although that may ultimately prove to be the case, at this early stage and without considering full argument on these questions, in my view these are issues better determined in a full consideration of the summary judgment application. [35] On this aspect, the comments noted above at para. [26] from McGechan on Procedure at para. HR138.01 are relevant and they were echoed in Corporate Jet Services Limited v Ward High Court, Auckland CIV 2006-404-357, 18 May 2007. There, it was noted at para. 29:"[29] In the present case, I am satisfied that the merits of the plaintiff's claim against the second defendants will indeed impact upon the leave issue and it is therefore sensible for these to be resolved together."[36] The present case as I see it mirrors this situation. In my view it is appropriate for leave to be granted in order that a proper consideration of the merits of the summary judgment application can be undertaken by this Court.[37] In any event, in the present case an essential issue appears to be the disputed contention by both Nova Gas and the E-Gas Group that each of them has a contractual relationship with the customers in question. There is a reasonable argument in my view that the Court should determine this point in the dispute first. Nova Gas takes the position that this is essentially a contractual issue on the documents and the interests of justice require that this issue should, if possible, be determined at the summary judgment stage. To a significant extent, I agree. [38] And finally, weighing up all these matters, I need to say that in the present case, I am quite satisfied that there is no risk of a miscarriage of justice or significant prejudice to E-Gas occurring by determining the summary judgment application at what may be seen as a later point in time than might normally happen. [39] As I understand the position, E-Gas was made aware even after this proceeding was first filed that Nova Gas intended to pursue an application for summary judgment and that a further plaintiff or plaintiffs might be substituted. On this, a memorandum dated 5 October 2007 from counsel for the plaintiffs signalled this intention to pursue summary judgment. And, as I have already noted, the leave application was filed only a little over 4 months after the substantive proceeding itself was brought. This is not a case of long delay. [40] Further, I am satisfied here that to deal with the core substantive issues in this proceeding by way of summary judgment would not unnecessarily delay the resolution of those issues and that E-Gas has been unable to definitively identify particulars of significant prejudice that may suffer as a result of granting leave. [41] For all these reasons, leave is now granted to the plaintiffs, Nova Gas, Bolton Hotel, Alamir and (if it is required) Kopi to pursue the current application for summary judgment. [42] The fixture (2 days) for the hearing of this summary judgment application on 18 and 19 June 2008 is confirmed. The standard directions in r 251A for the provision of submissions for that hearing are to apply.Joinder of Kopi 2 Go Limited as a Fourth Plaintiff[43] E-Gas and E-Gas 2000 oppose the application to add Kopi as an additional plaintiff to this proceeding. [44] The Court's jurisdiction as to which parties should properly be plaintiffs is governed by Rule 73(1) of the High Court Rules."73 Plaintiffs (1) All persons may be joined in a proceeding as plaintiffs, in whom any right to relief in respect of or arising out of the same transaction, matter, event, instrument, or other document, or series of the same, or of the same statute, regulation, or bylaw, is alleged to exist, whether jointly, severally, or in the alternative, where if such persons brought separate proceedings any common question of law or fact would arise."[45] The Court's jurisdiction to add parties is governed by Rule 97(1)(b) of theHigh Court Rules:"97 Striking Out and Adding Parties (1) The Court may at any stage of a proceeding, either upon or without the application of any party, and on such terms as appear to the Court to be just, order - (b) That the name of any person who ought to have been joined, or whose presence before the Court may be necessary to enable the Court effectually and completely to adjudicate upon and settle all questions involved in the proceeding be added, whether as plaintiff or defendant."[46] In considering whether a plaintiff should be added under r 97, consideration should be given to r 73.[47] The key point is that for joinder to be granted it is required that the applicant for the joinder show only that Kopi's "presence before the Court may be necessary"to settle all questions in issue. The plaintiffs need not prove in this application that Kopi's presence is necessary; merely that its presence may be of assistance to the Court in disposing of the substantive proceedings. [48] It is clear from decisions such as that made by the Court of Appeal inWestfield Freezing Company Limited v Sayer & Co (NZ) Limited [1972] NZLR137 that it is in the broad interests of justice that all parties who could be parties to a dispute or contract in question should be joined to a proceeding. Throughout, the New Zealand Courts approach to joinder has also clearly been accepted as a liberal one – Technic Bitumen Pacific Limited v Shell New Zealand High Court, Wellington, CP 192/99 and Chan v The Seyip Association of New Zealand Limited High Court, Wellington, 18 October 2007 CIV 2006-485-558. [49] The decision of Lord Denning MR in Gertner v Circuit [1968] 2QB 587 (CA) is relevant here too, and in particular his comments at page 595:"It seems to me that when two parties are in dispute in an action at law, and the determination of that dispute will directly affect a third person in his legal rights or in his pocket, in that he will be bound to foot the bill, then the Court in its discretion may allow him to be added as a party on such terms as it thinks fit."[50] In the present case it appears that Kopi seeks to be included as a plaintiff to clarify its own position in relation to essentially the same issues as the existing proceeding. Kopi is one of the Remaining Transferring Customers and it is said that its claims arise out of the same factual matrix as Nova Gas' claims in respect of the other Remaining Transferring Customers. [51] Counsel for Nova Gas has indicated that at the time the initial proceedings were filed it was not contemplated that Kopi would need to be added as a party as the immediate focus was on preserving the gas supplies for Bolton Hotel and Alamir.[52] With issues regarding Bolton Hotel and Alamir now resolved, in effect, Kopi is now seeking to be substituted for them as plaintiffs in this proceeding. Nova Gas claims that materially Kopi's circumstances broadly mirror those of Alamir and the core substantive issues are essentially the same. [53] It is said also that Kopi's circumstances are materially typical of many of the Remaining Transferring Customers. On this the core factual points are submitted as: a) Kopi was under contract to the E-Gas Group (E-Gas 2000). b) Kopi signed a Nova Gas supply contract, a request for copy contract and a clause 48 termination (of E-Gas supply) letter. c) Switch requests were made on Kopi's behalf and the Clause 48 Termination Letter was sent to the E-Gas Group. d) The E-Gas Group did not action the switch requests at the relevant time. [54] Although it seems that E-Gas 2000 has endeavoured retrospectively from 31 December 2007 to take steps to complete the Kopi switch, this should not preclude Kopi from being joined to this proceeding. It is said that Kopi's substantive claims remain "live" – that is to establish that its gas supply arrangement with E-Gas 2000 ended in July/August 2007, to enforce the switch from that date and to clarify that no further sums are due to E-Gas 2000 in respect of its 2007 gas supply. [55] For these reasons it is contended that Kopi's involvement in the present proceeding is, or at least may be, necessary to enable the Court effectually and completely to adjudicate upon the issues arising. [56] In particular, Kopi as an individual customer plaintiff should be added as a party to enable the Court to determine particular issues concerning the Remaining Transferring Customers. To this extent, it is suggested that Kopi's particular circumstances and a determination regarding those would be likely to comprise a useful "test case" on issues before the Court. [57] In my view there is substance in all these contentions.[58] In response, before me counsel for E-Gas endeavoured to suggest that joinder was inappropriate first because any dispute between E-Gas and Kopi should be resolved in terms of an outside dispute resolution process under an arbitration clause provided for in the contract and thus a stay of any proceedings issued could be sought, and secondly, because, as Kopi had been switched to Nova Gas with effect from 1 January 2008, the contractual relationship between Kopi and E-Gas 2000 is effectively at an end and thus various intended causes of action are affected. [59] Further, counsel for E-Gas suggested that the real issues in this proceeding are those between the gas retailers Nova Gas and E-Gas Group and Kopi's joinder simply would not assist in determining those issues. It is said the addition of Kopi would simply incur further unnecessary time and expenditure in this proceeding and would not assist in clarifying the rights of other affected E-Gas Group customers. [60] I have some difficulty in accepting these submissions advanced for E-Gas. Kopi is clearly a Remaining Transferring Customer from E-Gas and thus is someone in the same position as Bolton Hotel and Alamir, customers who as I understand it have effectively withdrawn as plaintiffs. In my view what is proposed here is, in effect, a substitution of Kopi as a plaintiff in place of Bolton Hotel and Alamir. I see this as perfectly appropriate, given also the Court's liberal approach to joinder, and the fact that determination of the Nova Gas – E-Gas dispute would seem to directly affect the legal rights of Kopi. [61] For all these reasons the application to join Kopi as a fourth plaintiff succeeds. [62] An order is now made granting leave to add Kopi 2 Go Limited as a fourth plaintiff in this proceeding.Costs on the Injunction[63] The plaintiffs Nova Gas, Bolton Hotel and Alamir all seek costs in respect of their Interim Injunction Application in this proceeding. According to E-Gas, Boltonand Alamir are seeking costs in this proceeding up to 27 September 2007, but it may be that in fact they seek costs beyond this point. [64] According to counsel Bolton Hotel, Alamir and Nova sought an urgent interim injunction against E-Gas here to preserve the continuity of gas being supplied to Bolton Hotel and Alamir. It is said that this Injunction Application was filed following threats by E-Gas to discontinue the gas supply to Bolton Hotel and Alamir. It seems that a "Notice to Disconnect Gas Supply" was received by Bolton Hotel on 26 September 2007. [65] Then, on 27 September 2007 Bolton Hotel, Alamir and Nova filed and served the urgent interim injunction proceedings. That evening, E-Gas responded and as I understand the position, it gave the supply assurance that was requested and agreed to the switch of Bolton Hotel and Alamir to Nova Gas. This effectively dealt with the injunction application as E-Gas had given appropriate undertakings not to interfere with the gas supply to Bolton Hotel and Alamir. [66] Subsequently, on 8 October 2007, Clifford J issued a Minute in this proceeding where he reserved "all questions of cost" . It is the suggestion of E-Gas that this statement precludes costs being dealt with now. Counsel for Nova Gas, Bolton Hotel and Alamir disagrees however. He states that the question of costs has remained "live" throughout. He maintains that costs should be dealt with now, in particular so that the involvement of both Bolton Hotel and Alamir in this proceeding may be brought to a conclusion. [67] Costs are therefore sought by Bolton Hotel, Alamir and Nova Gas with respect to the interim injunction as it is contended they were the successful parties in that application. Costs are sought by these parties generally on a Category 2C basis. [68] At the outset, I note that counsel who appeared for Bolton Hotel and Alamir with regard to the interim injunction matters is the same counsel who throughout has appeared, and continues to appear, for Nova Gas. Indeed, counsel for E-Gas before me suggested that issues must arise here as to the likelihood that Nova Gas has funded the entire proceeding for Bolton Hotel and Alamir.[69] Those plaintiffs contended here however that "costs should follow the event"in the normal way. They advanced this submission on the basis that they said that in effect Bolton Hotel, Alamir and Nova Gas were wholly successful in their claims with respect to gas supplies to Bolton Hotel and Alamir. [70] That contention is disputed entirely by E-Gas. Counsel for E-Gas advises that no hearing on that issue was required and no hearing took place. The injunction proceedings simply did not proceed because E-Gas agreed not to exercise what it says was its right to disconnect the defaulting customers, but importantly without prejudice to its rights in the current proceedings – see E-Gas letter to the Court dated 27 September 2007 attached as "SLH15" to the Hunt affidavit. As a result E-Gas contends that the plaintiffs have not "succeeded" here. [71] Be that as it may, in my view, it is proper here for costs on these matters to continue to be reserved as signalled by Clifford J on 8 October 2007. As I see it nothing has changed effectively since that time. [72] The proper course is for costs which are effectively sought here (for its counsel) by Nova Gas who continues in this proceeding, to be reserved until the ultimate outcome at trial and then to be considered at that point. At that stage all the necessary material to make an informed decision on this costs question will be before the Court and have been properly considered. [73] Costs therefore in relation to the interim injunction sought by the various plaintiffs are reserved to be dealt with on final disposal of this proceeding.Costs on the Present Applications[74] Nova Gas and the other plaintiffs have been partially successful and partially unsuccessful with regard to the applications which are before the Court.[75] That said, in my view, it is appropriate for costs here to lie where they fall. No order for costs is to be made.'Associate Judge D.I. Gendall'