Court of Appeal decision: Commission's Kupe gas field case to continue against Fletcher Challenge companies, ECNZ and Genesis
Published31 Jul 2000
Court of Appeal decision:
Commission's Kupe gas field case to continue against Fletcher Challenge companies, ECNZ and Genesis
Following the Court of Appeal's decision today the Commerce Commission's Kupe gas field case continues against all four defendants, Fletcher Challenge Limited (FCL), Fletcher Challenge Energy Company Limited (FCE), Electricity Corporation of New Zealand Limited (ECNZ) and Genesis Power Limited.
The Court of Appeal's decision means that the case will return to the Auckland High Court, the Commission can continue to seek financial penalties against all four defendants and the High Court could also order FCL and FCE to divest assets or shares.
Commission Chair John Belgrave said that the Court of Appeal has clarified how this extremely complex case should continue. Particularly significant to the Commission is that all four causes of action continue to be live and the case will continue against all the defendants.
"The Commission is keen to proceed as directed by the Court of Appeal and to have the case come to trial as soon as possible," Mr Belgrave said.
The Commission alleges that transactions involving FCL, FCE, ECNZ and Genesis, and ownership of the Kupe natural gas field were anti-competitive and breached the Commerce Act.
Mr Belgrave said that the Commission's view is that the transactions strengthened FCL/FCE's dominance in the gas industry and substantially lessened competition in both the gas and electricity industries.
In the Commission's opinion, the transactions have left FCL/FCE with effective control of companies with interests in the majority of New Zealand's natural gas fields, including the majority of the as yet undeveloped fields.
The Commission filed its Statement of Claim in December 1997. The defendants have continued to launch several challenges, which have been opposed by the Commission, against the Statement of Claim.
The Court of Appeal's decision today simply requires the Commission to make three changes to its Statement of Claim and then the case will return to the High Court. The process to be followed is:
Commission files amended Statement of Claim
defendants' file their Statements of Defence
discovery, where the parties examine each others' documents
interrogatories, where the Court answers preliminary questions
trial
if the Court finds that the defendants breached the Act, a sentencing hearing would be held, and
after a sentencing hearing the Court could impose penalties of up to $5 million against each company and can order the divestment of assets and shares.
Challenges and appeals can be made at all stages of the process. The entire process is likely to take some time to conclude.
Background
The issues on which the Court of Appeal gave its decision today were:
Whether ECNZ has itself breached the Act and is liable to divest assets or shares. The Court of Appeal found that as ECNZ has already transferred its interest in Kupe to Genesis, ECNZ cannot be ordered to divest assets or shares. However, the court made no finding on whether ECNZ has breached the Act, and ECNZ, FCL and FCE can be ordered to pay penalties. In addition, FCL and FCE can still be ordered to divest assets or shares.
Can a court order Genesis, which was not involved in the alleged breach of the Act but has since acquired ECNZ's interest in Kupe, to divest those assets? The Court of Appeal found that such a divestment order cannot be made in this case but Genesis could be ordered to pay penalties.
Should one of the series of transactions, known as the "Norcen acquisition", be included in the case? The Court of Appeal has found that the Norcen acquisition should be included in the case. The Commission's action against the various transactions and all parties will continue in the High Court.
This case is continuing towards trial and the evidence is sub judice. The Commission will not make further public comment on the case.
