Sixteen months ago I irritated some banks with a post predicting they would lose in the New Zealand class action promoted by Australian lawyers in June last year.  If iPredict had a contract on that issue, the price should have rewarded me this week.

The AFR last Friday reported on a paper delivered to the Australasian Mining and Petroleum Law Association. It warned of the wide-ranging implications of the High Court of Australia’s decision that late fees were penalties. As such they are likely to be unlawful. The AFR reports mining and other businesses worrying about a need to redraft thousands of contracts.

It is highly unlikely that our courts will reach different conclusions. Business New Zealand, the Bankers’ Association, and other peak bodies should be getting suitable amendments  on the work programme of MBIE. It would be cheaper and probably result in better law to use statute pre-emptively to modify contract law, than to excite contract lawyers with thousands of amendments, and enrich litigators with opportunistic reopening of past conduct.

As I said last year the cost of good research and informative lobbying would be a fraction of the cost of just one of the cases business could have to fight.  If they choose to wait there could be many  cases exploiting the current legal uncertainty (a euphemism for centuries old hostility) toward rational penalty provisions.

Reportedly my comments on this last year annoyed some business leaders.  Singing the team song when in the cross-hairs is obviously preferred over realistic bad news and advice.  I can’t believe their own lawyers would have had markedly different conclusions unless they too were victims of pressure for group-think, so either the irritated business leaders were head in the sand, or the lawyers were muffling their advice.

Perhaps the leaders  thought I was enjoying their predicament.  I was not, as should have been clear from the stated view that a victory would not be in consumers’ best interests long term. Invalidating penalty provisions will make it harder for large businesses to control costs with effective incentives on the parties in the  least cost position to to minimise default.

And business peak bodies should have been doing some stitch-in-time spending too, to mitigate the impact of the pending Supreme Court decision in the case I posted on in August last year.  The case involves liquidators’ rights to claw back payments made to innocent creditors while a company is insolvent, unbeknown to the creditor (and perhaps the debtor company). I offered some free advice on minimising exposure in September 2013

The Supreme Court is in the unenviable position that whichever way it goes will produce an absurd result, from some-one’s perspective. The Court is confronted by law that is simply badly drafted.  Officials responded in 2007 to advocacy with what they apparently thought was something close to Australia’s law. It left confusion not only in the provisions, but also in the explanatory memorandum which courts can use to aid in working out what Parliament thought it was doing.

Perhaps business peak bodies have been doing some homework, but quietly? They should be stepping it up in both areas.

Why has NZ media not reported this NZ research before the UK Daily Mail revealed it under the following headline?

“Are eco-friendly bulbs BAD for the environment? LEDs attract 50% more insects and could damage ecosystems”

The catchline goes ” Scientists at New Zealand-based research institute Scion claim that if more insects are attracted to street lights they will be thrown off their usual path and into the jaws of predators”.

The Smithsonian is also running it.

Do we have no reporters with the curiousity or the knowledge to see the general interest in the story? Or has Scion not drawn it to their attention? Or is there a greenish bias against running stories that shade an energy saving campaign?
Perhaps the risk will accelerate the adoption of the new switching technology, that turns street lights off until motion detectors or other sensors decide they need to go on.

Canterbury people may one day thank the Christchurch planners whose incompetence has probably eliminated its CBD, at least as CBDs are known and loved by planners.  John McCrone in the Press describes without the common sneers, the dispersion of commercial and residential development, built around excellent roads.  It may mean Christchurch gains New Zealand’s nearest equivalent to the growth and energy of Houston, Texas.

Houston is hated by the elites, but it is where people choose to live. That city alone is now building more residences than the whole of highly regulated California. 

The hopeless dithering of planners, and their inability to empathise with people who have to make a return on capital could mean that Christchurch and Canterbury people are not saddled with a real CBD which the planners then warp everything else to serve, such as white elephant commuter trains and other ‘spines’.

So the region will be freer to react to the enormous changes coming from driverless transport. Their built pattern will not involve the forced concentrations so beloved of those who need to see heads nodding all in unison, on trains and buses. 

There’s another reason to think that the disaster inflicted on Canterbury by paralysing planning is short term. Unlike monolithic Auckland, Christchurch has had the safety valve of competing small local authorities whose decision-makers respect their customers. So business has been able to escape the costs and paralysis.

I’m looking forward to the time, not too far away, when our urban rail corridors compete with the Otago Rail Trail. We’ll love to cycle on them, for commuting, but also for fun, because the safety, speed, efficience and cheapness of self driving personal transport will have made them redundant. 

And country pubs will revive, as drunk driving becomes a quaint historical concern. When our cars can drive us home better than we can sober, the country pub and garden bar will recover their proper places in the sun.

Disclosure – I bus and cycle and walk to work, and have never had a work car-park in 40 years. But that does not mean I won’t share the joy of seeing the silencing of the little despots who keep trying to coerce us all into public transport.

 Thanks Whale Oil for the link to the Atlantic comments

An independent Electricity Authority report may tell us whether some of the $17m Vector  admitted to spending on lawyers and experts fighting the Commerce Commission’s methodology for price control, could have been better spent on a few sprinklers and engineers.

Wayne Brown would agree. His forthright views in the Herald, also covered in the NBR updates, fit with what appears to be a developing strategy by Vector to exploit the blackout to justify higher charges.

There is a reason for a frenzy of lobbying right now, to persuade politicians to threaten the Commerce Commission. The Commerce Commission will decide by the end of this month whether to lower the chances of lines monopolies extracting excess profits. The Commission has received evidence that the current formula for calculating the permitted cost of capital is too generous. And plenty of claims that it is not.

But curiously, in none of the expensive expert material the lines companies have put before the Commission is any evidence that they have not invested because of inadequate returns. Indeed there is a startling lack of internal evidence that returns have been relevant to their decisions at all, despite media claims (mentioned below).

With the nutty Labour/Green policy to renationalise the competitive generators (by stipulated prices) gone for at least three years, legitimate consumer concern about electricity price increases will focus where it should, on charges by monopoly lines companies.

So it would be understandable if Vector aren’t putting their faith in wininng on the facts before the Commerce Commission, and are instead trying to take their fight over its head and straight to the politicians.

 They may have some reason to think it is working, at present. As NBR reported yesterday:

 Power bills could rise
It was Auckland’s fifth major power outage since 1998. 

Yesterday, Prime Minister John Key said if the city wanted a “gold-plated” network with redundancy, upgrades could mean higher electricity bills for consumers.

And a bit of blackmail  statement to Radio New Zealand a month ago, telling the government that it would not extend its network for new housing areas unless it could earn more than the regulated return.

Strange then that in evidence to the Commission, which of course could have been challenged by experts, neither Vector nor Transpower provided internal evidence that they would not have proceeded with their substantial investments at a lower regulatory cost of capital, or rebutted MEUG’s challenges to them to do so.

Vector argued against the Commission relying on evidence of the actual circumstances of the regulated suppliers. It claimed that the Commission should not assume that recent substantial investments and future investment plans by EDBs and Transpower are indicative of future investment. Vector did not provide any alternative asset management or other plan in support of its submission.

Disclosure of interest – my firm has advised MEUG on the regulatory WACC issues in the Commerce Commission’s Input Methodology Determination process.

It seems significant that Hon Paula Bennett remains Minister of Local Government.  Paula Bennett handled controversial welfare changes deftly. This suggests that the government places high importance on improvements  in local government.

Curiously, Kiwiblog seems not to have noticed Paula Bennett’s Local Government role:

“I thought Paula Bannett’s talents are a bit under-utilised. She has given up welfare, which was a huge portfolio, to take on state services, social housing and a couple of associates. But she could do very well in state services if she pushes the investment approach pioneered at MSD to the wider public service”.

When Paula Bennett first got Local Government she was widely seen as  interim,  a safe pair of hands until the election. She will now be working closely with Hon Bill English.  That, together with her Cabinet rank, leaving that portfolio with her, and appointing a respected Associate Minister  (Louise Upston), suggests that government is set on real  change in the sector.

There are opportunities for serious improvements. Many of them would be secured by legislative incentive corrections at the micro level. For example, much of the really dumb expenditure by Councils is not dumb for them, only for New Zealand.  Councils have been put under badly designed and badly drafted liability incentives.  They could be relieved from exposures for risks for which they are not the least cost mitigators, and from routine judicial second-guessing on matters that should remain political. They should be relieved of silly lawyer conflict of interest processes  that reflect lawyer hostility to democracy more than any intelligent concern for integrity.

And on the other side, council officers need more protection of the kind offered by SSC codes. Councils (and councillors personally) should come under  efficiency and cost disciplines with at least as much incentive for integrity and competence as govern company directors. Small but signficant changes could make it much more attractive for competent people to serve on councils.

It should be an interesting time for local government. Tony Ryall showed in Health how to transform a nightmare portfolio. Instead of more splashy ‘structural” reforms and managerialism, he restored a culture of respect for the people doing the work. He created a brains trust with executive talent, and made sure that his management enhanced buy-in to what works.

Let’s hope National’s best team for this term make sure that the changes respect the local in local democracy, and do not just add superstructure, with high salaried managers, which is what bedevilled Health ‘reforms’ for many years.

Interesting to see Hon Nick Smith get Environment back again. Perhaps there is a kind of last chance logic to have him hold both the Environment and Building and Housing portfolios, given the desperate need for RMA reform to address the land/housing price insanity.

Perhaps with his genuine greenery, Nick Smith will explore the long overdue changes that would take the lead problem solving role off greenfields development (out instead of up).  Relatively simple law changes could suck the juice out of NIMBYism  in the leafy inner suburbs. It could be all about creating win/win mechanisms so that objectors/voters for Councillors  have a productive alternative to simply blocking all unwanted change.

Nick may have been among the road-blocks for Amy Adams’s stalled reforms. Looking over his shoulder will be Paula Bennett with the odd retention of a welfare portfolio as Minister of Social Housing. Housing costs twice as high as they should be is a major stress on budgets of families with ‘child poverty’

I’m amazed that it has taken an Aussie news report to bring into MSM (Stuff) the simple reality that ISIS has killed the slim chance that NZ would choose a black flag. Someone pointed that out around our family table months ago, shortly after first seeing an ISIS flag procession.

I want a new flag.  I expect that it will have a silver fern somewhere. I want it because I find it hard to remember which is ours, and which is Australia’s.

But getting a new flag does not mean we need to dump the old one. The new one can be flown by the organisations and people who want it, and over time the flag that most of us prefer will be adopted.

But I’ve never expected we’d be stupid enough to choose a black flag.  Flags, like all titles and brands, have power because of their associations acquired in use. Usually it requires a long time. There is a very long history of the use of black flags by ghastly people. The rest of the world will not decide to like and respect a black flag just because we think it is cool, and speaks of us.

We are pushing enough up hill at the moment with the over-frequent use of the haka on foreigners.

David Farrar acknowledged on Morning Report this morning that he may be putting Kiwiblog at risk by signing up with the Online Media Standards Authority. PC and stupid people could steal his time with partisan complaints. They do not accept the tolerance and skin thickness required for free speech.

It would be a shame if David’s experiment does not work, and he has to withdraw from the OMSA. WhaleOil will be waiting for the experiment to fail. David’s blog is the best political digest by a long shot, but Cam’s courage and extreme risk tolerance is probably essential to lead in breaking stories. It would be unlikely to suit OMSA.

David’s hopes for rationality in political debate may run against human nature, according to an article by Brian Resnick in the National Journal. It surveys recent brain research on the effects of partisanship on reasoning and perceptions. it should be read by all who want to prescribe how politics should be conducted.

There is a practical suggestion David might adopt now. He might improve  civility in the comments on his posts by changing the invitation to ‘Like’ a comment or a post, to an opportunity to note ‘Respect’. For the reasons, read the whole Resnick article.

But first, lets look at DPF’s recently updated Comments Policy. In my opinion the policy is superbly expressed and balanced. With one change I’d adopt it as my own.

Take the Personal Abuse section, for example:

“Personal Abuse I want arguments attacked, not people. As an example it will be unacceptable to call someone a moron, but it will be acceptable to say their argument is moronic. That may seem a fine distinction, but an important one.

However don’t try and push the distinction to breaking point. If you say that someone’s argument has the integrity of a syphilitic pygmy  (for example), then that would find you with a warning or strike.

There is greater latitude when it comes to public figures such as MPs. They can and should be criticised, but not to a degree when it is just nasty abuse.

Gratitious references to attributes people have no control over People can not choose their gender, race, skin colour or sexual orientation. There will be times when those attributes about a public figure can be a legitimate discussion in relation to an political event. For example the media have quoted Grant Robertson on whether his sexual orientation may be a factor in the leadership election. But slagging off an MP, or non MP, on the basis of something they can’t control will get a strike or a warning.

Likewise grossly offensive generalisations are not acceptable either. Treat people as individuals.

This is not to say one can’t discuss group characteristics (such as why certain races are over-represented in crime statistics), but it should be done in a way which is not derogatory of the entire group.

In terms of humour, I have a wide tolerance for humour which makes fun of generalisations, so long as the intent is to be humourous, not to be nasty. If you are not sure of the difference, then don’t do it. And generally keep that stuff to the general debate.

I do not want Kiwiblog to be a politically correct blog, but I do want it to be a place where people wouldn’t say anything in the comments, they wouldn’t say to someone’s face”

The humour excepti0n I’d make a small exception. Extremely clever and funny personal abuse, like the worst kind of Australian sledging, would earn exemption on the grounds that exceptional humour draws a sting, even if in fact it makes it more piercing.

Reducing government safer But lets come back to the intriguing and depressing findings reported in Brian Resnick’s National Journal article.

Essentially it reinforces the power of what Daniel Kahneman describes in Thinking Fast and Slow as ‘confirmation bias’. People warp their perceptions, and their reasoning to avoid letting their biases and pre-conceptions be disturbed by inconvenient facts.

Interestingly the bias is much more associated with team loyalty (in turn perhaps steered by genetic brain differences?) than with real differences in personal interests.

So people who get monetary reward for rational non-partisan thinking can put it aside for small payments. It seems to me to be a strong argument for removing as much of our decision-making as possible from politics, and placing it with commerce, where people are encouraged to decide on the basis of wealth maximising considerations, not whose team or party will ‘win’ or ‘lose’ from the adoption of a policy.

Law will always be used for purposes not expected by its supporters, but no one who rushed Sarbanes Oxley through to show how staunch they were on corporate fraud would have dreamed that they were toughening up fishing enforcement.

The US Supreme Court will shortly hear an appeal against a conviction under Sarbanes Oxley’s offence for shredding papers that would be evidence in an investigation, of an offender who threw undersize fish overboard.

John Yates was apparently catching undersized red grouper in the Gulf of Mexico. He was instructed to return to port where the grouper were to be seized, but when he arrived, the fisheries officer counted fewer undersized fish and suspected Yates threw some overboard. A jury convicted Yates under Sarbanes-Oxley for destroying “tangible objects” with the intent to obstruct an investigation.

Seems sensible to me to have an offence that covers such conduct. But is this use of the law too remote from its intended white collar crime purpose?

The Commerce Commission recently applauded a Court of Appeal decision on bold headline claims undermined by the fine print.

The case was brought by a carpet manufacturer against a competitor. The Commission joined in to help ensure that “businesses and consumers  have a clear sense of what the ground rules are“.

As you look at the principles set out by the Court, consider how political pitches for your vote would fare if politicians held themselves to the same standards they sanctimoniously impose on business. The penalties for breach can be very severe, and personal.  Competitors can ‘prosecute’ so that honesty in commerce is enforced whether or not the regulatory establishment favours the wrongdoers.

Contrast that with the situation under electoral law, where the Police have simply declined to enforce the law on many occasions of clear breach, but there is no effective right to the people to step in.

As summarised by the Commission’s lawyer, Mary Ann Borrowdale, the Court of Appeal held that:
“All consumers are entitled to the protection of the Fair Trading Act, not just the knowledgeable, well-off or sophisticated.
Claims are made to all members of the target audience, except for outliers which includes those who are ill-equipped or whose reactions are extreme or fanciful.
When assessing whether a claim breaches the Fair Trading Act, it is the dominant message of the headline that is important.
Where there is a glaring disparity between the dominant message of the headline and the information qualifying it, the maker of the statement must draw the disparity to the consumer’a attention in the clearest possible way.
The Fair Trading Act will be breached where a claim has lured a consumer intothe marketing web by misleading means. It does not matter that the consumer may come to appreciate the true position before the transaction is completed.”

I do not think that our electoral speech should be inhibited by such liabilities. But there could be more consequences for casual or calculated lying – for example on the costs of promises, and the realism of income expectations from law changes.