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[2007] VSC 32
Supreme Court of Victoria
2007-02-26
HOLLINGWORTH J
Original judgment source is linked above.
Practice and procedure - Parties - Application by non-parties for joinder - Whether necessary or proper parties - Application refused
For Multinet Gas (DB No 1) Pty Ltd and Multinet Gas (DB No 2) Pty Ltd
1 The privatisation of various essential services has led to the introduction of new regulatory regimes. This proceeding raises questions as to the status and obligations, if any, of the plaintiff ("Alinta") under the regulatory regime for the gas industry. The defendant, the Essential Services Commission, is the regulator of the gas industry in Victoria.
2 Multinet Gas (DB No 1) Pty Ltd and Multinet Gas (DB No 2) Pty Ltd trading as Multinet Partnership ("Multinet") seek to be added as defendants to the proceeding. They assert that they are necessary or proper parties. The application is supported or not opposed by Alinta and opposed by the Commission. Before considering joinder, it is necessary to have regard to the issues raised by the existing parties.
The issues in the proceeding
3 The gas industry in Victoria is regulated by two principal statutes, the Gas Industry Act 2001 ("GIA") and the Gas Pipelines Access (Victoria) Act 1998. The latter Act enacts the National Third Party Access Code for Natural Gas Pipeline Systems ("the Code") and Schedule 1 to the Gas Pipelines Access (South Australia) Act 1997 (collectively, "the Access Law") as laws of Victoria.
4 A person may apply to the Commission for the issue of various licences under the GIA, including a licence authorising the person to "provide services by means of a distribution pipeline".[1] The Commission may grant or refuse such an application for any reasons it considers appropriate, having regard to the objectives of the GIA and the Essential Services Commission Act 2001.[2] It is an offence for a person to "provide services (other than the sale of gas by retail) by means of a distribution pipeline, either as principal or agent", unless the person is either licensed to do so or exempt from the licensing requirements.[3]
5 The Access Law forms part of a uniform national scheme for third party access to all gas pipelines, which was adopted in order to promote the development of a competitive national market for natural gas. In respect of covered pipelines, a service provider is required to establish an access arrangement to the satisfaction of the relevant state or territory regulator. The process of approval of access arrangements involves the provision of detailed information by an applicant and extensive public consultation, before tariffs and terms and conditions of supply are approved.
6 Since December 1997, Multinet has held a licence to distribute gas and provide services by means of gas distribution pipelines, pursuant to the GIA. The distribution network which it owns services almost 640,000 customers in certain areas of Melbourne. Multinet's current access arrangements for its covered pipelines have been approved by the Commission for the period to the end of 2007.
7 Alinta provides operations and management services to owners of infrastructure assets in various industries, including the gas industry. Multinet is one of its clients. In July 2003, Alinta entered into an operating services agreement ("OSA") with Multinet, under which Multinet appointed Alinta to operate, construct and manage, or procure the operation, construction and management of, the Multinet distribution system. The OSA was amended in late October 2006, so as to revoke a power of attorney which Alinta held for Multinet and to put in place alternative arrangements for Alinta to enter into certain contracts on behalf of Multinet.
8 The Commission asserts that the nature and range of services provided by Alinta under the OSA in relation to the Multinet distribution system are (or prior to the amendments in October 2006 were) such that Alinta:
(a) provides (or provided) services by means of a distribution pipeline, within the meaning of s22 of the GIA and is (or was) therefore required to hold a licence under that Act[4];
(b) is (or was) a "service provider" within the meaning of the Access Law and therefore is (or was) required to comply with the requirements of the Code.
9 Alinta disputes those assertions. In very general terms, Alinta says that its role is simply that of a contractor and is not as extensive as the Commission asserts. In this proceeding, Alinta and the Commission each seek declaratory relief which reflects their respective contentions.
10 The trial of this proceeding has been fixed for hearing commencing on 23 April 2007. At trial, it will be necessary for the court to determine what services Alinta has actually provided since July 2003, before making any findings as to whether or not its conduct falls within one or more of the GIA and Access Law provisions.
The joinder application
11 By summons dated 19 February 2007, Multinet seeks to be joined as a defendant under r9.06(b)(i) of the Supreme Court (General Civil Procedure) Rules 2005, which permits the court to add as a party "a person who ought to have been joined as a party or whose presence before the court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon." In its submissions, Multinet argues in the alternative that it ought to be joined as a "proper" party.
12 In Pegang Mining Company v Choong Soon[5], Lord Diplock expressed the relevant test of "necessity" in the following terms:
It has sometimes been said ... that a party may be added if his legal interests will be affected by the judgment in the action but not if his commercial interests only would be affected. While their Lordships agree that the mere fact that a person is likely to be better off financially if a case is decided one way rather than another is not a sufficient ground to entitle him to be added as a party, they do not find the dichotomy between 'legal' and 'commercial' interests helpful. A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?
13 That test has been cited with approval in this country.[6] The Full Federal Court in News Ltd v Australian Rugby Football League Ltd[7] noted that the test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. It is rights and liabilities, not some looser concept of "interests", which are relevant here. The focus must be on the relief sought:
Where, before trial, a question arises whether a necessary party has been joined, attention should be directed to the orders sought in the proceedings. It is the effect of the orders upon the third party that must be determined. The test is not whether the conduct of the third party is raised in the pleadings between the existing parties, or whether the third party is a party to a contract, the meaning or effect of which is pleaded as a matter relevant to the ascertainment of the rights between the parties.
14 Multinet seeks to rely on the fact that Alinta supports, or does not oppose, its joinder application. It argues as a matter of principle that a plaintiff's wishes ought to be persuasive. It is true that one of the matters to which a court will generally have regard is the wishes of the plaintiff, but a plaintiff's preference for or against joinder is not decisive. There is authority for the proposition that if a plaintiff wishes to join a defendant, then the court should be inclined to construe r9.06(b)(i) more liberally than it might otherwise do.[8] But those authorities involved joinder applications made by a plaintiff who wished to make a claim against a person not already a defendant; that is not the case here.
Multinet's arguments
15 Multinet says that it is a necessary party in the relevant sense, because the practical effect of any declaration that Alinta is prohibited from providing services without a licence will be to prevent Alinta from performing its obligations under the OSA until it is licensed. It is not sufficient for joinder purposes that Multinet is a party to the OSA, the meaning or effect of which is pleaded as a matter relevant to the ascertainment of Alinta's statutory liability. The relief sought by the Commission is not an injunction compelling Alinta to breach the OSA. If the court makes a declaration as sought by the Commission, it will reflect the facts as found up to the time of trial, applying the proper statutory construction.
16 Multinet says that it may be necessary for it to lead evidence as to the potential impact on it and its business if Alinta is effectively prevented from performing the OSA without a licence, and the problems it would have in locating a substitute contractor who is licensed. But those matters are not relevant to any pleaded issues. If, as a matter of statutory construction, Alinta is required to be licensed, then an appropriate declaration to that effect would be made, irrespective of the commercial impact on Multinet (or its customers or anybody else).
17 I do not accept Multinet's submission that it "ought to have been joined" by the Commission. The Commission makes no claim and seeks no relief against Multinet; nor does Alinta, for that matter.
18 That Multinet holds a current licence and has approved access arrangements are pleaded by Alinta as matters of fact, and admitted by the Commission. However, neither side's pleadings require the court to determine Multinet's rights or liabilities under the GIA or the Access Law. Multinet nevertheless argues that the orders sought by the Commission would raise the following issues, which may bear on the status of Multinet's licence or access arrangements.
19 The Code expressly provides that there may be more than one service provider in respect of a covered pipeline.[9] Nobody disputes that Multinet, as owner of the pipelines, is a "service provider". This proceeding raises the question whether Alinta is an "operator" of the pipelines, and therefore also a service provider. Multinet's status as a service provider will not be affected by the answer to that question. This case will not determine whether Multinet is an operator as well as an owner.
20 If Alinta is also a service provider, Multinet says that there would be all sorts of practical problems when the next access arrangements are submitted for approval. Multinet asks: would Alinta and Multinet submit one or more access arrangements, and would they do so collaboratively or competitively? The Access Law permits multiple service providers to submit one or more proposed access arrangements.[10] How Multinet and Alinta might choose to discharge their obligations is a matter for commercial negotiation by them, if that situation eventuates after this proceeding has been determined. It is not a reason for joining Multinet as a party to this proceeding.
21 Next, Multinet argues that it ought to be heard on the question of whether, as a matter of statutory construction, there can be more than one licensee under the GIA in respect of the same distribution pipeline. But this case only raises the question of whether Alinta provides services, either as principal or agent, which require it to be licensed. The court will not be considering the totality of the services which Multinet or any of its other contractors provide, and to what extent, if at all, they also need to be licensed.
22 Once again, Multinet raises some practical problems that may arise if it is held that Alinta is required to obtain a licence. Multinet asks: what happens if Alinta decides it does not want to be licensed and just walks away? Or what if Alinta applies for a licence, but its application is refused? No doubt there may be all sorts of commercial decisions to be made if this case is determined against Alinta. But they do not arise on the pleadings and are not a reason for joining Multinet to this proceeding.
23 The conclusion that Multinet has no real interest in any factual dispute between Alinta and the Commission is supported by the fact that, if joined, Multinet does not propose to plead to any allegation, to seek or provide discovery, or to cross-examine any witness without leave, if at all. That only highlights the extent to which this proceeding really involves a dispute between Alinta and the Commission.
24 For these reasons, I am not persuaded that Multinet is a person who ought to have been joined or whose presence is necessary to ensure that all questions in the proceeding are effectually determined and adjudicated upon.
25 If not a necessary party, Multinet argues that it is a proper party. It says that it has sufficient connection to the controversy that it might appropriately be joined. Its counsel cited Finkelstein J in Edge, in the Matter of Eco Panels Australasia Pty Ltd (in liq)[11] as authority for the proposition that a "proper party" includes a person who has no direct interest in the controversy between plaintiff and defendant, but who may be adversely affected by the order sought, such as by an injunction or the appointment of a receiver. With respect, the case relied upon by his Honour[12] is not authority for such a broad proposition. In any event, no such relief is sought here.
26 In relation to the issues raised in this proceeding, Multinet seeks to do no more than support Alinta's arguments. Of particular significance to me, in determining whether Multinet is a "proper party", is the fact that nothing has been identified which shows that there is some perspective which Multinet can bring to this case that Alinta or the Commission cannot bring.
27 Multinet's counsel foreshadowed at a directions hearing on 13 February 2007 that Multinet would be making the present application. In the course of discussion that day, I expressed surprise at the assertion that Multinet's concerns had only arisen in early February 2007, as a result of having learned at that time of the Commission's amended defence and counterclaim dated 24 November 2006. As a failure to act promptly may be relevant to a joinder application, and given the impending trial, I indicated that I would expect any supporting affidavit to specifically address the question of when Multinet first learned of this proceeding.
28 The supporting affidavit of Multinet's solicitor did not directly address my concerns. It deposed that Johnson Winter & Slattery, Multinet's regulatory solicitors, learned of this proceeding in early September 2006 and received the Commission's amended defence and counterclaim in early October 2006. It went on to say that Freehills, the solicitors who are acting for Multinet in another proceeding and in this application, only received the amended defence and counterclaim on 5 February 2007. There was a deafening silence as to when Multinet itself first learned of this proceeding, or why it had made no joinder application when it first learned that the Commission was asserting that its contractor, Alinta, needed a licence and was a "service provider".[13]
29 I accept that case management considerations should not overshadow the need to achieve justice, and would not refuse to join Multinet as a party on the basis of delay alone. But, combined with the other matters discussed above, I am not persuaded to join Multinet on a "proper party" basis.
Alinta's additional points
30 Alinta raises an additional argument in support of joinder. On 20 February 2007, Multinet issued a proceeding in the Common Law Division of this court against Alinta and the Commission. It is common ground that two of the issues raised in the Multinet proceeding have no possible connection with this proceeding.[14] However, Alinta (but not Multinet or the Commission) argues that the third issue will involve the consideration of issues which overlap with this proceeding, and should therefore be heard and determined at the same time.
31 I do not agree with that submission, for the following reason. The third issue in the Multinet proceeding is whether, under the OSA, Alinta is obliged and has failed to provide to the Commission or Multinet certain operational financial and other reports in relation to the Multinet gas distribution network. Whilst it is true that the determination of that issue in the Multinet proceeding will involve the construction of the OSA, the relevant provisions of the OSA[15] are not the subject of this proceeding.
32 Alinta says that if Multinet were joined as a party, it would wish to seek limited discovery from Multinet of certain documents between Multinet and other parties. But Alinta can easily obtain such documents from Multinet by subpoena, if Multinet is not able to provide them voluntarily because of commercial confidentiality. The fact that the documents could be obtained without subpoena if Multinet were a party is not a reason for joining Multinet as a defendant.
Conclusion
33 I am not satisfied that Multinet is either a necessary or a proper party. It follows that the joinder application should be dismissed.
[1] Section 25(1)(a) of the GIA.
[2] Section 26 of the GIA.
[3] Section 22(1) of the GIA.
[4] It is common ground that there is no applicable exemption from licensing requirements.
[5] [1969] 2 Malayan LJ 52 at 55-56.
[6] See for example Trade Practices Commission v Milreis Pty Ltd (1978) 18 ALR 17 at 23_; Emory University v Biochem Pharma Inc_ (1998) 86 FCR 1; Direct Factory Outlets Pty Ltd v Westfield Management Ltd [2003] FCA 1095 at [28].
[7] [1996] FCA 870; (1996) 64 FCR 410 at 524.
[8] Munro v O'Halloran [1889] VicLawRp 59; (1889) 15 VLR 300 at 303-4; Birtles v Commonwealth [1960] VicRp 39; [1960] VR 247 at 252.
[9] Section 10 of the Code.
[10] Ibid.
[12] Cretanor Maritime Co Ltd v Irish Marine Management Ltd [1978] 1 WLR 966.
[13] In fact, the only substantive changes in the Commission's amended pleading related to the October 2006 amendments to the OSA. There is nothing in the amendments which affects Multinet's position any more than the original pleadings.
[14] The unrelated issues are: whether or not Multinet and Alinta are "related parties" for the purposes of Multinet's regulatory reporting obligations; and whether guideline 17 published by the Commission and requiring the disclosure of certain costs is a valid guideline.
[15] Being paragraph 3(d) of schedule 1, clause 7.1, clause 7.4(a) and schedule 4 of the OSA.
Alinta Asset Management Pty Ltd
Essential Services Commission [2007] VSC 32
(1978) 18 ALR 17
(1998) 86 FCR 1
(1996) 64 FCR 410