Supreme Court of New Zealand · [2010] NZSC 5
Two energy companies agreed on an interim gas price of $6.50 per gigajoule but did not say clearly whether transmission costs were included.
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Vector and Bay of Plenty Energy were fighting over whether an existing gas distribution agreement had been validly terminated. Stopping supply while that case ran would have created immediate operational consequences.
They therefore agreed on temporary supply at $6.50 per gigajoule. The interim agreement solved the continuity problem, but its short pricing language created a second dispute.
Bay of Plenty Energy said $6.50 was a bundled price for the gas and the transmission and network costs needed to deliver it. Vector said the figure covered the commodity only, with delivery costs payable on top.
Both readings affected the economics of the interim deal. The Court examined the agreement in the context of the parties' negotiations, their existing commercial relationship and the alternatives they faced when the temporary supply was arranged.
| Pricing label | What it should answer |
|---|---|
| Gas-only price | Which transport, network and metering costs are extra |
| Delivered price | The delivery point and included charges |
| Pass-through costs | Evidence, mark-up and change process |
| Tax-exclusive price | Which taxes are added and at what rate |
The Supreme Court unanimously concluded that the $6.50 figure was a gas-only price. It restored the High Court decision and required transmission costs to be treated separately.
The case is frequently cited because the judges discussed how commercial contracts should be read. The practical point is simpler: meaning comes from the document read in its objective setting, and the court will resolve ambiguity after the event if the parties do not do so themselves.
Keep the document short if speed matters, but do not omit the commercial mechanics. Record the start date, end trigger, price basis, payment cycle, service level and what happens to rights in the main dispute.
A worked invoice can expose ambiguity faster than another page of legal language. Use the expected volume and show the commodity amount, delivery, tax and total payable. Both sides should confirm that example before signing.
Key points
The agreement governed ongoing gas supply while another dispute continued. A small difference in unit pricing can create a large total exposure when multiplied across commercial volumes.
No. The judges expressed the role of text, context, prior negotiations and commercial purpose differently. They were unanimous that the agreed price excluded transmission costs.
They may be relevant to objective interpretation in New Zealand, depending on what they show and the issue in dispute. Businesses should still make the final document complete rather than rely on reconstructing an email chain.