Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Tork v Parklea Operations Pty Limited t/as Gateway Lifestyle Residential Park – Stanhope Gardens [2019] NSWCATAP 299 Hearing dates: 20 November 2019 Date of orders: 18 December 2019 Decision date: 18 December 2019 Jurisdiction: Appeal Panel Before: Dr R Dubler SC, Senior Member L Wilson, Senior Member Decision: (1) The appeal is dismissed. (2) If any party seeks a costs order, the applicant for costs ("costs applicant") must file and serve any costs application, including submissions and any evidence in support, within 14 days of the date of these Orders (3) Any respondent to the costs application is to file and serve any submissions and evidence in reply within 14 days thereafter. (4) The costs applicant is to file any submissions in reply within 7 days after receipt of the respondent's submissions and evidence. (5) Any submissions are to include submissions on the issue of whether an order should be made pursuant to s.50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), dispensing with a hearing of the costs application. Catchwords: APPEALS – residential parks – electricity charges – recovery of amounts paid by homeowners for electricity that exceeded the amount the operator was permitted to charge – proper construction of s.77 of the Residential (Land Lease) Communities Act 2013 (NSW) Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Residential (Land Lease) Communities Act 2013 (NSW) Residential (Land Lease) Communities Regulation 2015 (NSW) Cases Cited: Silva Portfolios Pty Ltd t/as Ballina Waterfront Village & Tourist Park v Reckless [2018] NSWSC 1343 Reckless v Silva Portfolios Pty Ltd t/as Ballina Waterfront Village & Tourist Park [2018] NSWCATCD 59 Stewart v Raythel Holdings Pty Ltd t/as Colonial Tweed Holiday Home Park [2019] NSWCATCD 48 Texts Cited: None Category: Principal judgment Parties: Victoria Tork (First Appellant) The eleven people from Schedule 1 and one person each from Schedules 2, 3, and 4 named in the attached Schedule hereto (Second – Fifteenth Appellant) Parklea Operations Pty Limited t/as Gateway Lifestyle Residential Park – Stanhope Gardens (Respondent) Representation: Counsel: P. Batley (Appellants) J. Mack (Respondent) Solicitors: Tenants Union of NSW Co-op Ltd (Appellants) Law Quarter Pty Ltd (Respondent) File Number(s): AP19/37140 Publication restriction: Unrestricted Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 2 August 2019 Before: G Blake AM SC, Senior Member File Number(s): RC18/46379 and the file numbers referred to in Schedules 1, 2, 3 and 4 to the Decision REASONS FOR DECISION Introduction 1. The Appellant and the fourteen other persons named in Schedules 1, 2, 3 and 4 (hereinafter referred to as the Residents) live at Gateway Lifestyle Stanhope Gardens (the Community). The Community is operated by the Respondent (the Operator). The Operator has charged the Residents for the use of electricity. The Residents sought recovery of some of the moneys paid for such charges alleging the Operator charged more than the amount to which it was entitled under the Residential (Land Lease) Communities Act 2013 (NSW) (RLLC Act). 2. Orders were made by the Tribunal which required the payment of certain sums by way of refund of overpaid electricity charges. The Residents now appeal, claiming that the Tribunal wrongly interpreted the RLLC Act and ought to have ordered the refund of higher amounts than it did. 3. For the reasons which follow, the Appeal Panel has decided to dismiss the appeal and not disturb the orders made by the Tribunal at first instance. Background 1. Each of the Residents is, or was, a "homeowner" within the meaning of the RLLC Act. Under their site agreement with the Operator, they were required to pay utility charges, including electricity, to the Operator, including from 1 November 2015. 2. The Residents sought an order pursuant to s.85(3) of the RLLC Act against the Operator for the recovery of the moneys paid under a mistake of law for electricity charges alleging that the operator charged more than the amount to which it was entitled under s.77(3) of the RLLC Act at the Community. 3. The Tribunal, by its Decision of 2 August 2019 (the Decision), decided to make an order pursuant to s.85(3) of the RLLC Act that the Operator is to pay each of the Residents within 14 days the sum of money set out in the Schedule to the Decision by way of a refund of overpaid electricity charges up to the date specified in the Schedule to the Decision. The Residents have lodged a Notice of Appeal seeking greater sums of money by way of refund of overpaid electricity charges. The relevant background is set out in the Decision below at [5]-[11], which was not in dispute, as follows: "5 The Operator is the "operator" of the Community which is a "community" or "residential community" within the meaning of the RLLC Act. 6 Since 1 November 2015 the Operator has been supplied electricity by Origin Energy Electricity Limited (Origin) from 1 November 2015 to 31 August 2017, and form 1 September 2017 to 30 April 2019 by AGL Sales Pty Limited (AGL). 7 The Operator has received monthly invoices for the supply of electricity. The Origin invoice from 1 to 31 January 2017 includes the following components: (a) charges measured in "kWh" which encompass "Energy Charges" ("Peak", "Off Peak" and "Shoulder"), "Network Charges" ("Peak", "Off Peak" and "Shoulder"), and "Other Charges" ("ESC Charge", "LREC Charge", "AEMO Charge", "AEMO Ancillary" and "SREC Charge"); (b) charges measured in "kVa" which is a "Demand" charge; (c) charges measured on a daily or monthly basis which encompass "Access Charge"; "Meter Provider/Data Agent Charge" and "Service Charge". 8 The other invoices of Origin and the invoices of AGL contain similar components which have a variety of names. 9 The Operator has been supplied electricity at two connection points which are identified and metered by a separate electrical meter called an NMI (National Metering Identifier),and are interval or smart meters. These types of meters are able to record electricity usage (kWh) at 30 minute intervals and can also record electricity demand in real (kWh) and apparent power (kVA). Resident sites 2 to 190 are on NMI NEEE0008153. Resident sites 191 to 254A are on NMI NEEE0008161. 10 Each of the applicants has been supplied with electricity at 32 amps and has had accumulation meter which can only measure the total energy usage between meter readings. 11 Most of the applicants have been charged for utilities including electricity by the Operator fortnightly up to December 2018 and monthly from January 2019 up to 30 April 2019, and paid for those charges as follows: (a) from about 4 November 2015 to about 6 September 2017, an amount for "Electricity Usage" and an amount for ''Electricity Access Fee" which was the amount for supply of electricity to retail customers under the standing offer from time to time of Origin; (b) from about 6 September 2017 to 13 November 2018, an amount for "Electricity Usage" and an amount for "Electricity Access Fee" which was the amount for supply of electricity to retail customers under the standing offer of AGL; (c) in the period between 14 to 26 November 2018, no amount; (d) since 27 November 2018, an amount for "Electricity Usage" which is the proportionate amount of the amount it has paid to AGL." The Reasoning of the Tribunal 1. The primary issue for consideration on appeal is whether or not the Tribunal applied the correct methodology to determine the amount of the overpayment and whether the Tribunal correctly construed s.77(3) of the RLLC Act and the Residential (Land Lease) Communities Regulation 2015 (NSW) (RLLC Regulation). The Tribunal identified the applicable statutory provisions as follows: "37 Section 6 relevantly provides: 6 Application of Act to site agreements (1) This Act applies to all site agreements, whether existing immediately before or coming into existence after the commencement of this section, unless a provision of or under this Act provides otherwise. (2) Where this Act applies to a site agreement, it so applies despite the terms of the agreement or any other contract, agreement or arrangement, whether made before or after the commencement of this section. 38 Section 77 provides: 77 Utility charges payable to operator by home owner (1) This section applies if, under a site agreement, the home owner is required to pay utility charges to the operator for the use by the home owner of a utility at the residential site. (2) The home owner cannot be required to pay for the use unless: (a) the use is separately measured or metered, and (b) the operator gives the home owner an itemised account and allows at least 21 days for the payment to be made. (3) The operator must not charge the home owner an amount for the use of a utility that is more than the amount charged by the utility service provider or regulated offer retailer who is providing the service for the quantity of the service supplied to, or used at, the residential site. Maximum penalty: 20 penalty units. (4) The regulations may: (a) provide for a maximum utility charge payable by home owners to the operator, and (b) create an offence for an operator to request or receive more than that maximum charge (if any). (5) The regulations may provide that a service availability charge for electricity payable by home owners to the operator of a community is to be discounted in accordance with the regulations where less than 60 amps are being supplied. 39 In s 4, "utility" is defined to include "electricity" (para (a)); "utility charge" is defined to mean "a usage charge or service availability charge for the provision of a utility". RLLC Reg 40 Clause 13 relevantly provides: 13 Maximum service availability charge – electricity (1) The maximum service availability charge payable, in respect of any period, by a home owner to the operator for the supply of electricity at a residential site is the amount that would have been payable for the period if the electricity had been supplied to a small customer under a standard retail contract of the applicable local area retailer at standing offer prices. (2) Despite subclause (1), the service availability charge payable by a home owner to an operator of a community for supply at a residential site of less than 60 amps of electricity is to be discounted in accordance with subclause (3). (3) The maximum service availability charge payable by a home owner to an operator for supply at a residential site of less than 60 amps of electricity is: … (c) if 30 amps or more but less than 60 amps of electricity is supplied to the residential site--70 per cent of that service availability charge. (4) In this clause, local area retailer, small customer, standard retail contract and standing offer prices have the same meanings as in the National Energy Retail Law (NSW)." 1. The evidence before the Tribunal as to the correct methodology to determine what amount should be refunded was summarised by the Tribunal at [48]-[52] as follows: "48 There were differing opinions by Mr Harris and Ms Petkovic as to the correct methodology to determine the amount of the refund. Consequently, there were differing calculations of the amount of the refund by Mr Finlayson and Ms Petkovic. 49 In his expert witness report Mr Harris: (a) provides an explanation of the terminology that is used in the invoices of Origin and AGL to the Operator; (b) expresses the following opinions in relation to s 77(3) of the RLLC Act: If one considers that the quantity of the service supplied to, or used at, the residential site only relates to the consumption of electricity that is measurable at that site, then only charges that are denominated in kWh (e.g., energy charges, peak shoulder, off-peak network charges, LRET and SRES charges) would definitely be related to the quantity of the service supplied to, or used at, the residential site. If one considers that the service supplied to or used at the residential site not only relates to the actual consumption of electricity at that individual site, but also to the other services that are provided to the embedded network operator by the retailer (and which, one way or another, allow the operator to in turn provide electricity services to each individual site), then this would mean that all of the charges (on the invoices of Origin and AGL) would be related to the quantity of the service supplied to or used at the residential site. Having regard to the above, our reading of the Act is that because the service must be supplied to, or used at, the residential site, and this is defined as a "site in a community, …… used as a residence by an individual", then the costs that relate to the provision of services to the embedded network operator, which are not directly related to or attributable to an individual site's usage, should be excluded from the calculation. This would appear to be further supported by the reference in the Act that "the home owner cannot be required to pay for the use unless … (a) the use is separately measured or metered". This indicates to us that there is a direct nexus between "use by the home owner of a utility at the residential site" and the ability to actually "separately measure or meter" usage. (footnote omitted) (c) expresses the following opinion in relation to the most appropriate methodology that is compliant with s 77(3) of the RLLC Act: Assuming no change in metrology at customers' premises, and on the assumption that implementing a load profiling approach, as outlined in the last section of this report, is not adopted, we believe that the most appropriate methodology for calculating electricity usage charges that is compliant with s77(3) of the RLLC Act and the RLLC Regs would be to: • Total all of the per kWh30 denominated components of the operator's retail bill, and divide that by the kWh's recorded on the operator's meter (which will be in the operator's retail bill), over the time period that aligns with when each homeowners accumulation meter is read (e.g., if homeowners' meters are read every month, then the calculation would be done over that same period); and • Apply the results of the above calculation (which effectively gives an average cost per kWh for kWh denominated retail components) to the usage recorded on each homeowner's accumulation meter over that same period. 50 In her expert witness report Ms Petkovic: (a) expresses the following opinion as to the methodology for charging electricity to homeowners: After considering the unique characteristics of the Stanhope community, my expert opinion is that the methodology that I developed for the Reckless matter (and that has been further accepted in the Bell and Stewart matters) is the most appropriate here as well. There is one small variation for the Stanhope community to account for the two connection points to the grid. This is explained further in the next section. The aim of the methodology is to allow the Community Operator to pass through the cost of the use and supply of electricity to the home owners' sites within the embedded network, and to divide this cost as fairly as practical among each of the sites. The methodology is designed to reflect the actual costs incurred by the Community Operator, and hence the Community Operator will neither profit nor lose out from the methodology. Note that due to the differences in metering equipment described in the next section, it is not possible to create a methodology that guarantees a cost neutral pass through to any individual site. However, what the proposed methodology can achieve is a cost neutral pass through across the total portfolio of sites within the embedded network. My expert opinion is that a methodology that achieves cost neutrality on an aggregate basis is the most fair and reasonable approach in this situation for all parties involved. 4.1 Formula for the methodology The methodology involves a two-step process: Step 1: Calculate the relevant rate to be charged to home owners on each NMI First, we need to calculate the electricity charge rate (dollars per kWh) that should be charged to home owners on each NMI. For each NMI, we need to separately calculate the rate as follows: Electricity charge rate for individual home owners ($/kWh) Total dollar value of current charges in electricity bill for Community Operator (for the relevant NMI) - any credit card or late payment fees = Total energy usage (kWh) metered by the relevant NMI in the same billing period Step 2: Calculate the dollar amount to be charged to each individual home owner In Step 2, we need apply the relevant rate from Step 1, to each individual home owner within that particular NMI. Dollar amount charged to each home owner = Electricity charge rate calculated in Step 1 for the relevant NMI x Energy usage metered at the home owner's site for the same billing period (b) sets out the amount of compensation payable to each applicant using this methodology for each of the following time frames: (i) from April 2018 to April 2019 (inclusive); (ii) from November 2015 to April 2019 (inclusive). 51 At the hearing oral evidence was given by Mr Harris and Ms Petkovic together, and Mr Finlayson. Mr Harris and Ms Petkovic essentially repeated their opinions. Mr Finlayson explained the methodology he used for the calculation of the amount of compensation payable to each applicant. 52 Ms Petkovic gave evidence that for the purpose of her methodology she had converted all charges in the invoices of Origin and AGL to the Operator to a kWh measurement." 1. The Tribunal summarised the submissions below in respect of the correct interpretation of the applicable legislation at [53]-[54] as follows: "53 In their written submissions dated 8 July 2019 the applicants contend that: (a) s 77(3) of the RLLC Act is concerned with the usage charges permitted under the RLLC Act. The inelegant expression "supplied to, or used at" does not expand the reach of s 77(3) into "supply charges" or service availability charges. Rather, "supplied to" enables s 77(3) to operate effectively to allow charges for a quantity of a utility, such as bottled gas, which is measured at the time of supply, not the time of use. This interpretation is consistent with the right of the operator to impose a service availability charge on the home owner for electricity which may exceed the amount payable by the operator to the electricity service provider as countenanced by cl 13 of the RLLC Reg; (b) the judgment of the Supreme Court in Silva Portfolios Pty Ltd trading as Ballina Waterfront Village & Tourist Park v Reckless does not deal with the distinction between usage charges and supply charges, and should not be understood as bundling up service availability charges with usage charges; (c) s 77(3) of the RLLC Act restricts operators to charging home owners no more than the electricity supplier charges for the quantity of electricity used at each individually metered site. This means that electricity charges imposed by a retailer with reference to quantity may be passed on to home owners provided the quantity used by each home owner is measured so as to allow the amount charged by the electricity retailer to be accurately passed on. The prohibition in s 77(3) on charging more than the retailer charges for the amount used means that, where the electricity retailer's charge varies with time of use, but time of use is not measured at the site, no more than the retailer's minimum time of use charge may be passed on to the home owner; (d) the only method of charging for electricity in the Community that is consistent with s 77(3) of the RLLC Act is: (i) home owners are charged for electricity used at their sites by their individual meters at the off peak kWh rate plus the kWh rates for items that do not vary with time of use; (ii) home owners are not charged as part of the usage component of their electricity bill any amount of fixed charges or demand charges; and (iii) home owners may be charged a service availability charge based on the amount that would have been payable under a standing retail contract offered to a small customer consistent with cl 13 of the RLLC Reg (discounted for 32 amps supplied to each site). 54 In its submission dated 14 June 2019 the Operator contends that: (a) despite the drafting of s 77(3) of the RLLC Act the legislature did not intend to change the way that home owners are charged for electricity in residential land lease communities; (b) s 77(3) of the RLLC Act allows it to pass through the full cost of electricity it has incurred to the sites within its embedded network, and to divide this cost reasonably and practically among each of the sites; (c) the categories of energy charges in the proposed methodology outlined by Ms Petkovic cover all of the recognised costs to the Operator for the use by the applicants of the quantity of the service supplied to, or used at, the residential site.'' 1. The Tribunal upheld the Operator's submissions by its reasoning as follows at [57]: "Having regard to the definitions of "utility" and "utility charge" in s 4(1) the expression "utility charges to the operator for the use by the home owner of a utility at the residential site" in s 77(1) of the RLLC Act may refer to one or both of a usage charge and a service availability charge for the provision of electricity. The word "use" in this subsection may apply equally to the usage, or the availability, of electricity. If this expression were limited to a usage charge, then the operator would not be entitled to charge a service availability charge for electricity which is contemplated by s 77(5). The words "for the use" in s 77(2) clearly refer back to the expression "utility charges to the operator for the use by the home owner of a utility at the residential site" in s 77(1). Similarly, the words "for the use of a utility" in s 77(3) clearly refer back to this same expression. This means that the expression "the amount charged by the utility service provider or regulated offer retailer who is providing the service for the quantity of the service supplied to, or used at, the residential site" in s 77(3) must refer to the total amount charged by the applicable provider or retailer for both the usage and availability of electricity at the residential site. I do not consider that the presence of the word "quantity" in s 77(3) requires a different interpretation. Quantity refers to "a particular, indefinite, or considerable amount of anything"; "amount or measure": Macquarie Dictionary. It makes sense to refer to a "quantity" of electricity whether measured in "kVa", on a daily or monthly basis, and in "kWh". Clause 13 of the RLLC Reg provides a further limitation on the maximum amount an operator can charge a home owner for a service availability charge. For these reasons I reject the interpretation of s 77(3) of the RLLC Act submitted by the applicants." Notice Of Appeal – Ground 1 1. Ground 1 of the Appeal is in the following terms: "1. The Tribunal erred in law in its construction of s 77(3) of the Residential Land Lease Communities Act (the RLLC Act) by failing to give effect to the requirement that the operator must not charge the home owner an amount for the use of electricity that is more than the amount charged by the electricity supplier who is providing the electricity for the quantity of the electricity supplied to, or used at, the residential site as follows: a. By failing to distinguish between service availability charges and usage charges; and b. By using an averaging methodology which had the effect that some home owners were charged a higher price for electricity they used than had been charged by the supplier for that use." The Residents' Submissions 1. The Residents' submissions were as follows: "31. Both the cost of use of a utility and the cost of making a utility available are encompassed within the concept of "utility charge" as defined in the Act. However, the Act also distinguishes between usage and service availability. This distinction is maintained in s 77. Subsection 77(1), in effect, permits utility charges to be imposed if the site agreement provides that the home owner is to pay for the use of a utility. Section 77(2) restricts the capacity of the operator to charge for the use of the utility by insisting that the use must be separately measured or metered. The restrictions on the imposition of service availability charges for the provision of utilities are in the Regulation: reg 11 (for utilities other than electricity), reg 12 (additional limits for water and sewerage) and reg 13 (for electricity). 32. Subsection 77(3) is concerned with the usage charges permitted under the Act. This is made clear by the requirement for usage to be separately metered at each site and the restriction of cost recovery by the operator to the amount charged by the utility service provider for the "quantity of the service supplied to, or used at, the residential site." 33. The expression "supplied to, or used at" does not expand the reach of s 77(3) into "supply charges" or service availability charges. Rather, "supplied to" enables s 77(3) to operate effectively to allow charges for a quantity of a utility, such as bottled gas, which is measured at the time of supply, not the time of use. 34. This interpretation of s 77(3) is consistent with the right of the operator to impose a service availability charge on the home owner for electricity which may exceed the amount payable by the operator to the electricity service provider as countenanced by reg 13 of the Regulation. Regulation 13 regulates electricity service availability charges with reference to an electricity retailer's standing offer, rather than its actual charges and does not require the amount of the service availability charge to be divided among the number of sites. This position may be contrasted with the way in which reg 11 of the Regulation approaches service availability charges for utilities other than electricity. 35. In Silva Portfolios Pty Ltd t/as Ballina Waterfront Village & Tourist Park v Reckless [2018] NSWSC 1343 Davies J observed (at [42]): In my opinion, s 77(3) is intended to ensure that the operator may not pass on to the home owner a charge for electricity greater than that which the operator has effectively been charged in respect of that home owner. 36. This is, with respect, correct but it should not be understood as setting the limits of s 77(3) for all purposes or as a substitute for the words of the legislation. Davies J was making an observation about the meaning of s 77(3) that disposed of the issue before him. He was not asked to deal with the distinction between usage charges and supply charges because the issue on appeal was not about recovery of mistaken payments but about whether the operator was permitted to charge an amount for electricity measured at a home owner's site based on a hypothetical charge of a hypothetical supplier rather than the actual charges of the actual supplier. Davies J's comments were not an interpretation of s 77(3) which bundled up service availability charges with usage charges. 37. Section 77(3) restricts operators to charging home owners no more than the electricity supplier charges for the quantity of electricity used at each individually metered site. This means that electricity charges imposed by a retailer with reference to quantity may be passed on to home owners provided the quantity used by each home owner is measured so as to allow the amount charged by the electricity retailer to be accurately passed on. 38. On the charging method adopted by the Tribunal there is no way of knowing whether the maximum service availability charge under the Act and regulations has been breached because the usage charge and the availability charge are rolled together as a proportion of the overall bill to the site operator from the electricity supplier. The amount charged for the quantity of electricity used at the residential site 39. The Appellants contended that s 77(3) restricts operators to charging home owners no more than the electricity supplier charges for the quantity of electricity used at each individually metered site. This means that electricity charges imposed by a retailer with reference to quantity may be passed on to home owners provided the quantity used by each home owner is measured so as to allow the amount charged by the electricity retailer to be accurately passed on. 40. The prohibition in s 77(3) on charging more than the retailer charges for the amount used means that, where the electricity retailer's charge varies with time of use, but time of use is not measured at the site, no more than the retailer's minimum time of use charge may be passed on to the home owner. 41. The Tribunal adverted to this argument at Reasons [53(c)] and [53(d)] but did not otherwise address the argument in its Reasons. The failure to consider the argument is a separate ground of appeal, discussed below. 42. The Tribunal's decision failed to deal with the problem of cross-subsidisation between home owners and between home owners and the operator. The Appellants submitted that if electricity was charged at the off-peak rate for kWh charges that varied with time of use and the flat rate for other usage items, there would be no risk of some home owners paying more for electricity they had not used and some paying less for electricity they had used. The Respondent's method based on averaging the use means that some owners will necessarily pay more for their electricity bill than the supplier has charged for the quantity used at the site. Some will necessarily pay less." The Operator's Submissions 1. The Operator's Submissions remained essentially the same as that before the Tribunal below. It contends that: 1. s.77(3) of the RLLC Act allows it to pass through the full cost of electricity it has incurred to the sites within its embedded network, and to provide this cost reasonably and practically among each of the sites; 2. the categories of energy charges and the proposed methodology outlined by Ms Petkovic cover all the recognised costs to the Operator for the use by the Residents of the quantity of the service supplied to, or used at, the residential site; 3. the reasoning and conclusion of the Tribunal are correct. Consideration 1. The issue of overcharges and recovering the cost of electricity from residents has come about since the commencement of the RLLC Act on 1 November 2015. This Act made new provision for the basis on which an operator could recover the cost of electricity from residents. The issue is also complicated by the fact that the electricity used in the Community as a whole is measured by interval meters (also known as "smart meters"), which measure and distinguish the quantity of electricity used during peak, shoulder and off-peak periods, and the maximum demand amount for electricity in each billing period; while the use of electricity by the homeowners is measured at each site by an accumulation meter of the traditional kind which only records the number of kilowatt hours (kWh) of electricity consumed at the site and does not show time of use of electricity at the site or the contribution of the site to peak demand. 2. From November 2015 to about December 2018 the Operator charged the Residents for electricity at the standing offer rate per kWh of the electricity supply retailer plus a service availability charge. In Silva Portfolios Pty Ltd t/as Ballina Waterfront Village & Tourist Park v Reckless [2018] NSWSC 1343, Davies J determined that operators were not permitted under s.77(3) of the RLLC Act to charge residents the amount for usage of electricity that a designated retailer would charge if it were the direct supplier to the resident plus a service availability charge. Following the decision in Reckless, it was clear that the Operator had been overcharging residents. The Operator accepted this, but the issue revolves around the extent of the overcharging. 3. The difficulty with determining the methodology to calculate what homeowners should have been charged arises by the difference between the way charges for electricity supplied to the Operator were categorised in each invoice (with reference to time and use and peak demand) and the information at the Resident's meter (which simply recorded the number of kWh of energy drawn). The Tribunal favoured the approach contended for by the Operator's expert witness: dividing all charges in the invoice from the electricity retailer by the total number of kWh used to arrive at a cost per kWh and then applying the rate to the kWh measured at the Resident's meter. 4. The Tribunal rejected the Residents' argument that s.77(3) of the Act required separate treatment of (a) supplier availability charges and (b) usage charges. 5. Whilst the term "utility charge" is defined to mean "a usage charge or service availability charge for the provision of a utility", the terms "usage charge" and "service availability charge" are not defined in the RLLC Act. 6. Section 77 of the RLLC Act has been considered in a number of recent decisions of the Tribunal since the Supreme Court decision in Reckless. On 9 January 2019 the Tribunal determined the amount of overcharge in contravention of s.77(3) in the decision of Reckless v Silva Portfolios Pty Ltd t/as Ballina Waterfront Village & Tourist Park [2018] NSWCATCD 59 ( Reckless (No 2)). The operator's supplier was Origin whose invoices included the same components as the invoices from Origin received by the Operator. The Tribunal at [20]-[34] accepted the evidence of Ms Petkovic that all the various charges of Origin, or components in the invoices of Origin are "the cost of electricity", and in the terms of s.77(3) are included in "the amount charged by the utility service provider … for the quantity of the service supplied to, or used at, the residential site". The Tribunal at [39] held that the most accurate method to use to compensate Mrs Reckless is to determine the overall cost of the electricity to the operator, divide that amount by the total kilowatts used, and apply that figure to the total kilowatts used by Mrs Reckless. The Tribunal in so finding at [35]-[38] acknowledged that this method may not be completely accurate: "[35] The respondent's position is that all the charges on the accounts it has received from Origin are amounts charged for the quantity of electricity supplied to it. The respondent proposes two possible methods of charging the applicant for the electricity it supplies to her. The first is to group all the components of Origin's charges into 3 categories – "Energy charges that vary with energy usage", "Supply charges that vary with demand" and "Fixed supply charges"; then divide each of the three amounts by the total amount of kilowatt hours the respondent has consumed. This exercise results in a separate cents per kilowatt hour rate for each of the three categories. Each rate can then be applied to the total kilowatt hours Mrs Reckless' has used, as recorded on the meter at her home for the same period. [36] The second method simply divides the respondent's total kilowatt hour usage, into the total Origin has charged the respondent, to produce an overall cents per kilowatt hour rate. This rate can be then be applied to Mrs Reckless' recorded usage. In both cases, the result is the same. The only difference in the two methods is that the first one would reveal more detail, or itemisation, to the respondent. However, the lack of detail can be overcome, if the respondent provided the applicant with a copy of the account it received from Origin. [37] Ms Petkovic acknowledges that this method is not perfect, as it outlined in the assumptions she has made in her report. The difficulties arise because the meter at Mrs Reckless' home is not a "smart meter", and cannot precisely identify when Mrs Reckless consumed electricity. Consequently it is not possible to say how much electricity Mrs Reckless used for which the respondent was charged at the off peak rate, rather than the peak rate or shoulder rate. Therefore, if Mrs Reckless has consumed more electricity at the off peak rates than the respondent has, she will be charged a greater amount for the use of electricity than the respondent has been charged by Origin. However in this case, there is no evidence that has occurred, and it seems the only way such evidence could be obtained in future, would be by the installation of a smart meter at Mrs Reckless' home. It appears on the evidence just as likely Mrs Reckless might on occasions, be charged less than the respondent was, because her usage of electricity at "peak rates", was greater than the respondent's. As Ms Petkovic says in her report, such discrepancies, if they occurred are likely to be minor, and to even out over time. [38] The fact the methods proposed by the respondent may not be 100% accurate, does not mean they cannot be used to determine the amount of compensation that is to be paid to the applicant. As Brooking J said in JLW (Vic) Pty Ltd v Tsilogou [1994] 1 VR 237 at 241 "[T]he plaintiff must prove what he has suffered and will suffer and what is fair and reasonable compensation in respect of that. It is often said the amount of the damage must be proved with certainty, but this only means as much "certainty" as is reasonable in the circumstances. Where precise evidence is obtainable, the court naturally expects to have it; where it is not, the court must do the best it can"." 1. With respect, the Appeal Panel agrees with and adopts this reasoning. The Residents bears an onus of proof to show what loss they have suffered and what is fair and reasonable compensation in respect of the alleged overcharging. In the absence of evidence of the actual pattern of usage throughout the day of electricity by the Residents, they are unable to demonstrate any overcharging beyond that set out in the expert report of Ms Petkovic. 2. Similarly, we note in Stewart v Raythel Holdings Pty Ltd t/as Colonial Tweed Holiday Home Park [2019] NSWCATCD 48 at [41] the Tribunal held that," [t]he correct method for calculating the refunds is stated in Reckless (No.2) being to determine the overall cost of the electricity to the respondent charged by its provider, divide that amount by the total kilowatts used, and apply that figure to the total kilowatts used by each of the applicants''. 3. Lastly, we note that the Appeal Panel in Bavin v Parklea Operations Pty Ltd [2019] NSWCATAP 120 at [105]-[107] endorsed the approach of the Tribunal in Reckless (No 2) stating at [107] that: "Each case must of course be decided on its own facts. Whether the formula proposed and applied in the case of Reckless will depend on the material that has been filed by the parties." 1. In our view, the material filed before the Tribunal and the expert evidence led supports the conclusion of the Tribunal in adopting the averaging approach of Ms Petkovic. 2. Nextly, with respect to the Residents' submission that the expression "supplied to, or used at" in s.77(3) of the RLLC Act does not encompass "service availability charges" or "supply charges", we agree with and adopt the reasoning of the Tribunal below at [57] of the Decision. In our view, the expression "utility charges to the operator for the use by the homeowner of the utility at the residential site" in s.77(1) of the RLLC Act may refer to one or both of the usage charge and a service availability charge for the provision of electricity. We agree that the word "use" in this subsection may apply equally to the usage, or the availability, of electricity. Similarly, we agree that the words "for the use" in s.77(2) ought be regarded as referring back to the expression "utility charges to the operator for the use by the homeowner of a utility at the residential site" in s.77(1). 3. Also, we agree that the words "for the use of the utility" in s.77(3) refers back to the same expression. Hence, the better construction is that the expression "the amount charged by the utility service provider or regulated offer retailer who is providing the service for the quantity of the service supplied to, or used at, the residential site" in s.77(3) should be construed as referring to the total amount charged by the applicable provider or retailer for both the usage and availability of electricity at the residential site. 4. In summary, in our view, consistent with the reasoning of the Decision at [57], the correct construction of s.77 is that: 1. the word "use" in s.77(1) may refer to either a "usage charge" or a "service availability charge" as is contemplated by s.77(5) and also s.77(4); 2. the Operator's entitlement to charge for both "use" and "service availability" arises from the ordinary meaning of the word "use" in s.77(1); 3. the words "for the use" in s.77(2) refer back to "utility charges to the operator for the use by the homeowner of a utility at the residential site" in s.77(1); 4. the words "for the use of a utility" in s.77(3) also refer back to the "utility charges to the operator for the use by the homeowner of a utility at the residential site" in s.77(1); 5. by reason of the foregoing, the expression "the amounts charged by the utility service provider or regulated offer retailer who is providing the service for the quantity of the service supplied to, or used at, the residential site" in s.77(3) must refer to the total amount charged by the applicable provider or retailer for both the usage and availability of electricity at the residential site; 6. the word "quantity" should be given its ordinary meaning and therefore is capable of encompassing quantities such as rates charged on a per day or per month basis. 1. Accordingly, the Appeal Panel rejects this ground of appeal. Notice of Appeal – Ground 2 1. Ground 2 is in the following terms: "The Tribunal erred in law by denying the applicant procedural fairness by failing to consider a substantial argument propounded by the applicant to the effect that the requirements of s 77(3) of the RLLC Act could only be met by a charging methodology based on the off peak rate and flat rates per kWh imposed by the electricity supplier and not including fixed charges and demand charges." 1. In the proceedings before the Tribunal, the Residents submitted that a method of calculating electricity costs, which averaged variable charges, was invalid. This was clearly propounded in written submissions, in questions directed to expert witnesses in cross-examination and in oral submissions. It was submitted that it was central to the Residents' case but the Tribunal's failure to address the argument deprived the Residents of a fair hearing. It was contended that this resulted in practical injustice to the Residents because, for the reasons advanced, the averaging methodology is contrary to s.77(3) of the RLLC Act. 2. The Operator submitted that the Tribunal had dealt with the applicability of the "averaging methodology" by referring to the contentions of the parties and the expert, in evidence particular the methodology propounded. Therefore, in adopting the expert evidence of the Operator, the Tribunal in turn adopted the averaging methodology. Hence, the Tribunal was necessarily dealing with and rejecting the Residents' submission on the grounds set forth in the expert's report. Consideration 1. We agree with the Operator's submission and reject this ground of appeal. At [53] of the Decision, the Tribunal summarised the contention of the Residents that: "(c) s 77(3) of the RLLC Act restricts operators to charging home owners no more than the electricity supplier charges for the quantity of electricity used at each individually metered site. This means that electricity charges imposed by a retailer with reference to quantity may be passed on to home owners provided the quantity used by each home owner is measured so as to allow the amount charged by the electricity retailer to be accurately passed on. The prohibition in s 77(3) on charging more than the retailer charges for the amount used means that, where the electricity retailer's charge varies with time of use, but time of use is not measured at the site, no more than the retailer's minimum time of use charge may be passed on to the home owner; (d) the only method of charging for electricity in the Community that is consistent with s 77(3) of the RLLC Act is: (i) home owners are charged for electricity used at their sites by their individual meters at the off peak kWh rate plus the kWh rates for items that do not vary with time of use; (ii) home owners are not charged as part of the usage component of their electricity bill any amount of fixed charges or demand charges; and (iii) home owners may be charged a service availability charge based on the amount that would have been payable under a standing retail contract offered to a small customer consistent with cl 13 of the RLLC Reg." 1. Based on the above, it is clear to us that the Tribunal considered and rejected the submission of the Residents as to the inapplicability of the so-called "averaging methodology". The Tribunal can also be taken to have considered the argument by its reference to the evidence in the expert report of Mr Harris referred to at [49] of the Decision. There the Tribunal clearly referred to and must have considered Mr Harris' evidence and his propounded methodology that electricity use should be calculated by reference to off-peak rates. 2. Similarly, it is clear the Tribunal considered the reasoning of Ms Petkovic, the Operator's expert, at [50] of the Decision. At [58] of the Decision the Tribunal stated that it accepted "the methodology used by Ms Petkovic rather than the methodology used by Mr Harris to calculate the amount of the overpayment by each of the applicants". In our view, viewing the Decision as a whole, it is clear that the Tribunal considered the Residents' contention as to the inapplicability of the averaging methodology, but for the reasons given by Ms Petkovic, the Tribunal rejected the Residents' contention and after properly considering it, adopted the averaging methodology contended for by Ms Petkovic. 3. This is also made clear by the Tribunal's references at [46] and [47] to Reckless (No 2) and Stewart v Raythel Holdings Pty Ltd and the adoption of the "averaging methodology" in those two decisions. 4. Accordingly, we reject the contention that the Residents were denied procedural fairness by the Tribunal, and we reject the contention that the Tribunal did not consider the submission with respect to only using off-peak rates rather than the averaging methodology. 5. Accordingly, we reject this ground of appeal. Orders 1. The Appeal Panel makes the following orders: 1. The appeal is dismissed. 2. If any party seeks a costs order, the applicant for costs ("costs applicant") must file and serve any costs application, including submissions and any evidence in support, within 14 days of the date of these Orders 3. Any respondent to the costs application is to file and serve any submissions and evidence in reply within 14 days thereafter. 4. The costs applicant is to file any submissions in reply within 7 days after receipt of the respondent's submissions and evidence. 5. Any submissions are to include submissions on the issue of whether an order should be made pursuant to s.50(2) of the Civil and Administrative Tribunal Act 2013 (NSW), dispensing with a hearing of the costs application. ********** SCHEDULE File No at first instance RC Appellant Name From Schedule 1 18/46382 Janet Jones 18/46176 Susan McIvor 18/46216 Ron Anthony Nicholls 18/46480 Mary Preston 18/46438 Heather Schilliro 18/46275 Bevan Sheperdson 18/46229 Pauline Sheppard 18/46450 Lex Stanford 18/46544 Patricia Starks 18/46516 Barry Stevens 18/46379 Nerida Tootill From Schedule 2 19/14831 Christopher Jones From Schedule 3 19/17836 Mary Eggmann From Schedule 4 19/22691 Samar Rafidi I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 December 2019