An October 2014 fire at a Vector electricity substation in Auckland caused a three day outage across the city’s eastern suburbs with consumer losses estimated at between $47 million and $72 million. Damages totalling nearly $300,000 awarded to three consumers by the Utilities Dispute Commissioner were quashed by the High Court; lines companies like Vector are under no obligation to provide a continuous power supply.
The fire started in a Vector cable following a power arc across a cable joint. The cable lay in an open trench, alongside 37 other supply cables. Open to the air, with a plentiful supply of oxygen, the fire quickly spread throughout the trench leading to a comprehensive power outage. Food retailers Progressive Enterprises Ltd and Wendco (NZ) Ltd together with cool store operator Americold NZ Ltd claimed through the Utilities Disputes Commissioner against lines company Vector Ltd for their losses: stock losses and generator hire. This disputes procedure is intended as a relatively quick and informal process to settle claims against utilities. Claims are limited to $50,000, unless the utility agrees to a higher limit. Progressive made multiple claims, one for each of its seven retail stores and its separate meat plant, all affected by the outage.
When awarding damages, the Commissioner decided Vector owed a duty of care in tort to consumers and was in breach of this duty. This decision was quashed by the High Court. The Commissioner had misunderstood the law when reaching her decision; there is no common law rule that lines companies owe customers a duty to provide a continuous supply of power. Justice Courtney declined to rule on whether such a duty should exist, since the High Court was being asked simply to rule whether the Commissioner had correctly applied the law as it stands. Her Honour ruled that any potential liability owed by power distributors such as Vector to end consumers is further limited by the terms of retailers’ supply contracts with their customers. Distributors provide power to retailers. Retailers’ supply contracts with consumers typically include terms limiting not only their own liability, but also lines company’ liability. With this clause in retailers’ supply contracts described as being for the benefit of and enforceable by lines companies, a line company can claim the benefit of liability limitations in retail consumers’ contracts despite not being a party to the contract. The traditional rule that only parties to a contract can claim the benefit of the contract was changed by the Contracts (Privity) Act.
Vector Ltd v. Utilities Disputes Commissioner – High Court (28.11.18)
19.014