In this edition:

When Time is of the Essence: statutory time limits and appeals
The need to adhere strictly to statutory time limits when bringing an appeal was recently affirmed by the Court of Appeal in Attorney-General v Howard [2010] NZCA 58. more ...

The Supreme Court's departure from Privy Council decision: implications for precedent
The Supreme Court's decision in Couch v The Attorney General represents an important milestone in the judicial history of New Zealand. more ...

Looking to shareholder pockets to determine "true assessment" of Company's ability to pay (appeal against fines imposed in Icepak decision)
In April 2008, there was a large explosion at the Icepak coolstore facility in Hamilton, destroying the site, killing one firefighter, and seriously injuring several others. more ...

High Court discusses decision-makers' rights on appeal
The High Court has rejected an application by the Commerce Commission to appear as party to an appeal of its prior determination, citing the need to maintain the appearance of impartiality in decision-makers. more ...

Court of Appeal confirms effectiveness of "entire agreement" clause
A dispute arose following the sale by the shareholders of all shares in Central Property Services Limited to PAE (New Zealand) Limited. more ...

Trans-Tasman Proceedings Bill
The Trans-Tasman Proceedings Bill 2009 recently passed its first reading in Parliament. If enacted, the Bill will simplify dispute resolution processes in trans-Tasman proceedings, strengthen and encourage trans-Tasman trade, and help to integrate New Zealand and Australian markets. more ...

Nuplex litigation (directors' duties under the disclosure regime): watch this space
On 14 April 2010 the Securities Commission issued proceedings against resin maker, Nuplex Industries Limited and some of its former and current directors alleging that it has breached its continuous disclosure obligations under the Securities Market Act 1988. more ...

The need to strictly adhere to statutory time limits when bringing an appeal was recently affirmed by the Court of Appeal in Attorney-General v Howard [2010] NZCA 58 ("Howard").

On 15 May 2008, the Human Rights Review Tribunal ("Tribunal") in Howard issued a declaration of inconsistency; such declaration being that clause 52 of the First Schedule to the Injury Prevention Rehabilitation and Compensation Act 2001 was inconsistent with section 19 of the Bill of Rights Act 1990.

On 16 June 2008, the Attorney-General purported to appeal this decision pursuant to section 123(4) of the Human Rights Act 1993 ("HRA"), which requires that any appeal must be "made" within 30 days of the Tribunal's decision. 

While the Attorney-General filed his notice of appeal in the High Court on 16 June (the last day of the 30-day time limit), he failed to serve a copy of the notice of appeal on Mr Howard and in the administrative office of the Tribunal respectively until several days later.  The matter was considered in Attorney-General v Howard HC Wellington CIV-2008-485-1291 (7 April 2009), where His Honour Justice Joseph Williams held:

1. for an appeal to be "made" under section 123(4) of the HRA it is necessary to file the notice of appeal in the High Court and in the administrative office of the Tribunal and to serve the same on all other parties all within the 30-day appeal period;
2. a time limit which has been prescribed by statute cannot be extended by the courts, unless provided for by the statute; and
3. waiver of compliance by a party might be possible (but His Honour did not need to determine this conclusively, having found Mr Howard had not done so).

On appeal from Justice Joseph Williams' decision, the Court of Appeal upheld the finding that a time limit that is prescribed by statute cannot be extended by the courts unless provided for by the statute.  The Court also agreed with the finding on what was needed for an appeal to be made under section 123(4).

Although these findings mean that statutory time limits are strict, their requirements are softened somewhat by the Court of Appeal's recognition of two situations in which non-compliance with them may not be fatal to an appeal.

The first situation is where a party is permitted to waive compliance with a statutory time limit (a possibility alluded to by Justice Joseph Williams).  In explaining where such waiver is possible, Her Honour Justice Glazebrook drew a distinction between statutory provisions inserted for a party's sole benefit and those serving some broader public purpose.  The requirements of the former, she suggested, may be waived, whereas those of the latter may not.  This distinction meant that Mr Howard could have waived a failure to serve him on time, such service being purely for his benefit.  In contrast, he could not have waived late filing in the High Court, nor late service on the Tribunal - both requirements not being for his private benefit, but instead serving broader public purposes.

The second situation where non-compliance with a statutory time limit may not be fatal arises where a court refuses to hear a challenge to its jurisdiction which is based on filing/serving non-compliance.  Delivering a separate judgment focusing on this point, Sir William Young suggested this refusal may be justified in two different scenarios.  First, where an order extending time has been made and the point was fully argued before and decided by a Judge, and in reliance on that decision the parties have incurred substantial costs in preparing for the appeal.  Secondly, even when such an order had not been made, a party might still be prevented from raising the jurisdictional point because of, for instance, waiver or estoppel.  Sir William Young suggested that in both cases a court would be entitled to refuse to entertain the jurisdiction point and could safely hear the appeal. 

Andrew Butler of Russell McVeagh appeared for the Human Rights Review Tribunal in Howard.

The Supreme Court's decision in Couch v The Attorney General¹ ("Couch") represents an important milestone in the judicial history of New Zealand.  For the first time the Supreme Court has departed from a Privy Council precedent, providing guidelines as to the circumstances in which the Supreme Court will overrule a Privy Council decision. 

The facts of Couch concern the 2001 Panmure RSA tragedy in which William Bell killed three of his fellow co-workers, and seriously wounded Ms Couch.  At the time of these murders, Mr Bell was on parole for previous convictions for aggravated robbery.  Ms Couch sought exemplary damages, claiming that the Department of Corrections was negligent in the way it administered Mr Bell’s parole conditions and that this negligence caused the injuries she suffered.

One issue that the Supreme Court in Couch had to resolve was what is the appropriate test for determining whether exemplary damages should be awarded in respect of the negligent infliction of personal injury.  In Bottrill v A,² the Privy Council had held that "outrageous negligence" was sufficient to form a basis for such a claim.  In declining to follow this test the majority in Couch held that exemplary damages will only be available if the defendant consciously appreciated the risk that the conduct in question posed to the safety of the plaintiff and proceeded deliberately and outrageously to run that risk, causing harm to the plaintiff.³

Despite Chief Justice Elias’s dissent on the substance of the appeal, all five members of the bench held that the Supreme Court has the jurisdiction to depart from a decision of its own, or of the Privy Council.⁴  Before this, there was little authority or guidance on whether the Supreme Court could overrule Privy Council decisions,⁵ whether the Supreme Court would overrule Privy Council decisions, and how the Supreme Court would frame its departure.

However, and notwithstanding the Supreme Court's recognition in this case of its jurisdiction to depart from decisions of the Privy Council, the decision in Couch is tempered with caution as to when such departures should occur.  A common theme throughout the judgment is the striking of a balance between paying deference to or respecting precedent in a common law jurisdiction in order to promote certainty and stability, against the need for justice in the immediate case and to develop New Zealand law.

Other factors noted by the Court that may support departure from a decision of the Privy Council in future include a finding by the Supreme Court that the Privy Council decision was wrong, or has become wrong; if the Privy Council decision itself was a departure from precedent; and whether there were differences of opinion within the Privy Council decision.

In April 2008, there was a large explosion at the Icepak coolstore facility in Hamilton, destroying the site, killing one firefighter, and seriously injuring several others. The fire-fighters had responded to a smoke alarm at the coolstore.  After forcing their way into one of the buildings, they discovered a leak of what is now known to have been flammable refrigerant; moments after their entry the refrigerant was ignited by an unknown source resulting in the explosion and subsequent fire.

The owner of the coolstore, Icepak Coolstores Ltd ("Icepak") and the provider of the refrigeration unit, Mobile Refrigeration Specialists Ltd ("MRS"), were charged by the Department of Labour with various offences under the Health and Safety in Employment Act 1992. 

Icepak was charged with failing to take all practicable steps to ensure safety of its employees and failing to ensure that no hazard on the premises harmed any person. Mr Grattan, the director of Icepak, was charged with acquiescing in the failure of the company to ensure the safety of its employees.

MRS was charged with failing to take all practicable steps to ensure that no act or inaction of its employees, while at work, harmed any other person and failing to take all practicable steps in relation to the design of the pressure equipment.  

Ultimately, both companies pleaded guilty to all charges. Sentencing took place in the District Court at Hamilton on 15 December 2009; Icepak was ordered to pay reparation of $95,000 and fined $30,000 and MRS was ordered to pay reparation of $175,000 and fined $56,200.

In financial declarations made to the Court prior to sentencing, Icepak had indicated that as it had lost its facility and faced numerous claims on its limited financial resources, it was no longer trading and did not expect to generate any income in the foreseeable future.  MRS, which is essentially a one-person company, had informed the judge that while it continued to trade, the imposition of anything more than a nominal fine would be likely to push the company into liquidation.

Neither company appealed the reparation orders. However, both defendants appealed the quantum of the fines imposed on the grounds that the sentencing judge had failed to take into account the company's financial capacity to pay, or had failed to give it due and proper weight, when setting the amount of the fine.

In the High Court (Mobile Refrigeration Specialists Ltd v Department of Labour (HC Hamilton CRI 2009-419-94, 29 March 2010)), His Honour Justice Heath considered that he could safely infer that the sentencing Judge had given the matter proper consideration, and was not satisfied that the disclosed financial situation of each company justified a reduction in the level of the fines.  His Honour held that, although financial information had been provided indicating that the imposition of substantial fines would potentially lead to the liquidation of the companies, nothing had been put before the sentencing Judge in concrete terms to suggest that this consequence would necessarily follow in respect of either company. As there was no reason to believe that the shareholders' historical support of the companies would not be continued in order to enable them to pay the fines, the Judge was entitled to proceed on the basis that the fine imposed should reflect the amount required to denounce the conduct of each offender and to provide general deterrence. 

In coming to his decision, His Honour suggested that a true assessment of a company's ability to pay fines necessarily requires inquiry into its means of obtaining funds and the will and capability of its shareholders or parent company to meet its obligations. His Honour noted that Icepak's working capital had historically been provided through a related company, Icepak Group Ltd.  His Honour stated that where a company has been funded during its trading life through the provision of shareholder advances, it should not be able to escape paying financial penalties because of alleged impecuniosity.  Rather, the Court should be able to impose a fine which was beyond the ability of the company itself to pay; shareholders are then given the choice to either provide funds to pay the fine and allow the company to keep trading, or leaving the company to go into liquidation. 

An application has been made by MRS for leave to appeal His Honour Justice Heath's decision to the Court of Appeal.

Russell McVeagh acted for MRS in the District Court and in the High Court.

In Fonterra Co-operative Group Limited v Grate Kiwi Cheese Company Limited & Anor (High Court, Wellington, CIV-2009-485-223, 8 December 2009, Miller J), the High Court rejected an application by the Commerce Commission to appear as party to an appeal of its prior determination, citing the need for decision-makers to maintain the appearance of impartiality.

In June 2009, the Commerce Commission ("Commission") issued a joint determination of disputes between Fonterra Co-operative Group Limited ("Fonterra") and both The Grate Kiwi Cheese Company Limited ("Grate Kiwi") and Kaimai Cheese Company Limited ("Kaimai").  The determination was made pursuant to the Commission's powers under the Dairy Industry Restructuring Act 2001 ("DIRA").

Fonterra appealed this determination, and the Commission applied for joinder as respondent to the High Court appeal, which Fonterra opposed.  The Court had to decide whether the Commission could properly be considered a party to the dispute.

Decision-makers on appeal

Ordinarily, a decision-maker is entitled to be represented and heard at the hearing of an appeal though not a party (r 20.17) and this entitlement was not in issue. 

Instead, the Commission wished to maintain a right to appeal any adverse decision of the High Court and so requested the Court to exercise its discretion under r 4.56 (1)(b)(ii) to add the Commission as a party to the proceedings on the grounds that its presence before the Court might be necessary to adjudicate on, and settle all questions involved in the proceeding.

As a starting point, the Court observed that a decision-maker may not be named as a respondent in a notice of appeal (r 20.9 High Court Rules).   The Court then noted that the rule does not apply to appeals under the Commerce Act 1986 (r 20.9(3)), permitting the Commission to be named in appeals from its determinations under that Act.  His Honour Justice Miller identified this exception as based in the Act's object of promoting competition for the long term benefit of consumers who, as a class, are "diffuse and often poorly informed" and so cannot be relied upon to mount an effective opposition (paragraph [22]).  However, because the application before the Court related instead to a DIRA determination appeal, the Commission could not rely upon the carve-out in this instance.

The appearance of impartiality

The traditional rationale for the principle that a decision-maker should not appear on an appeal from its own decision is that a judicial body “should strive not to enter into the fray in a way which might appear to favour the interests of one of the parties”: Engineers Union v Arbitration Court [1976] 2 NZLR 283, 284. Here, His Honour Justice Miller was live to this concern:

[38] ... to grant the Commission a right of further appeal so it can rectify an unsatisfactory precedent would be to place it in a unique position among tribunals, whose decisions also commonly raise questions of public interest or statutory administration. The Rules provide that decision-makers - including the Commission under the DIRA - generally may not be named in appeals from their decisions, principally because of the loss of apparent impartiality.

The Court noted further that, while the Commission's traditional functions under the Commerce Act might justify inclusion as a party to the appeal, its role in making the relevant determinations under the DIRA was outside that sphere:

[39] ... The applications are inter partes and, its inquisitorial powers notwithstanding, the Commission’s jurisdiction is distinctly judicial in nature. The appearance of impartiality is accordingly all the more important. Yet by appearing as a party to defend its decision with an eye to a further appeal, the Commission would necessarily become a protagonist.

Importantly, the Commission had still to make a determination in respect of Grate and Kaimai's claim for compensation, and retained the jurisdiction to award costs in those proceedings, raising further the need for the appearance of impartiality on the Commission's part. 

Moreover, His Honour Justice Miller was not satisfied that Grate and Kaimai would not seek leave to appeal any adverse decision in the instant case. 

His Honour Justice Miller closed by observing that, rather than appear on an appeal, decision-makers may seek to have the Attorney-General joined as a party to appeal in the public interest, as discussed in In re Baise-Moi [2005] NZAR 214 (also discussed in Canterbury Regional Council v Attorney-General [2009] NZAR 611).

The Court therefore rejected the Commission's application for joinder, awarding scale costs to Fonterra.

Significance

This case sends a clear signal that decision-makers need to demonstrate a strong public interest should they wish to be made a party to High Court appeals from their decisions.  The need to maintain the appearance of impartiality will be particularly acute where the decision-maker exercises a judicial, rather than an inquisitorial, role. 

James Every-Palmer of Russell McVeagh appeared for Fonterra in the High Court.

A dispute arose following the sale by the shareholders of all shares in Central Property Services Limited ("CPS") to PAE (New Zealand) Limited ("PAE"). 

Execution of the agreement (in April 2004) followed a 6-month process of negotiation, during which time the shareholders made representations about CPS's turnover and profitability and provided copies of financial statements.  As it happened the accounts substantially overstated CPS's accounts receivable, accounts payable, and overall profitability. 

PAE alleged misrepresentation and claimed loss of $964,000, representing the difference between the purchase price of $1,250,000 and the true value of CPS's shares of $286,000.  In the High Court, Her Honour Justice Mallon concluded that although PAE had relied on CPS's financial statements generally in deciding to proceed with the purchase and on the price it was prepared to pay, the misrepresentation cause of action could not succeed because the contract contained an "entire agreement" clause.  PAE challenged that conclusion in the Court of Appeal. 

The entire agreement clause provided, relevantly, that:

This agreement (and any schedules to it) constitutes the entire agreement between the parties and supersedes all prior agreements, understandings, negotiations, representations and discussions, whether oral or written, of the parties.  The vendors make the representations and warranties set forth in clause 7 and no others.  … Any and all implied warranties are expressly excluded.

The warranties related mainly to disclosed liabilities and the vendors' ability to sign and to perform the agreement.  There was no warranty relating to either accounts receivable (the largest component of the error in CPS's financial statements), or to profitability.

His Honour Justice Harrison, for the Court of Appeal, stated that section 4(1) of the Contractual Remedies Act 1979 recognises a wide judicial discretion to determine whether it is "fair and reasonable" that an entire agreement clause should be conclusive.  In situations where there is an imbalance between the relative bargaining strengths of the parties section 4(1) prevents the stronger party from imposing exemptions from liability which are contrary to the actual reality or existing legal obligations, and are therefore unreasonable and unfair; section 4(1) strikes a balance between freedom of contract and unfair or unreasonable commercial conduct.

In finding for the shareholders, His Honour Justice Harrison stressed that the agreement for sale and purchase, including the entire agreement clause, was prepared by PAE's solicitors.  PAE had had every opportunity to require the accuracy of the accounts receivable or profitability to be warranted.  If it regarded either as sufficiently important to justify a right of recourse in the event of material error it should have done so.  To deny the entire agreement clause its natural meaning in such a circumstance would have converted the alleged representations about profitability into an implied warranty when they were expressly excluded.  Furthermore, there was no imbalance in the respective bargaining strengths of the parties; if anything, PAE's position was stronger.  It was part of a substantial multinational, and it had had access to, and obtained, independent financial and legal advice.  Accordingly, although the errors in CPS's accounts may have been significant and the result of negligence or even recklessness, those factors were irrelevant when considered against the plain words of the clause.   

PAE's claim that the shareholders' conduct was misleading or deceptive in terms of section 9 of the FTA also failed.  Justice Harrison stated that although impossible to contract out of, the FTA does not act as a general warranty.  Furthermore, PAE's own reliance on the accounts without making proper enquiry into their accuracy was unreasonable, and so the FTA claim failed.

Andrew Butler of Russell McVeagh appeared for the shareholders of CPS in the Court of Appeal.

The Trans-Tasman Proceedings Bill 2009 ("Bill") recently passed its first reading in Parliament.  If enacted, the Bill will simplify dispute resolution processes in trans-Tasman proceedings, strengthen and encourage trans-Tasman trade, and help to integrate New Zealand and Australian markets.

In 2003 a Trans-Tasman Working Group on Court Proceedings and Regulatory Enforcement ("Working Group") was established to examine the effectiveness of trans-Tasman arrangements relating to civil actions, civil penalty proceedings, and criminal/regulatory penalty proceedings.  

The Working Group recommended that a simpler, more efficient trans-Tasman regime would significantly benefit both countries.  The Working Group's recommendations were incorporated into the Trans-Tasman Court Proceedings and Regulatory Enforcement Agreement, which was signed between New Zealand and Australia in July 2008. 

The purpose of the Bill is to implement the provisions in that agreement into New Zealand law. The Bill allows closer integration between the legislative regimes of New Zealand and Australia, and supports initiatives under the Single Economic Market and the 1983 Closer Economic Relations Trade Agreement.  To ensure compatibility with Australian legislation, the Bill mirrors provisions recently passed in Australia.

The main features of the Bill are outlined below.¹

Initiating Proceedings

Service of civil proceedings between trans-Tasman parties is more efficient under the Bill.  The Bill allows initiating documents to be served in Australia in the same form as is required in New Zealand.   There is no requirement that plaintiffs seek the leave of the Court or establish a connection between the proceedings and New Zealand as the appropriate forum. 

However, a party served in Australia will be able to make an application to stay the New Zealand proceedings if the party considers it is more appropriate for an Australian court to hear the dispute.  The Bill proposes that New Zealand and Australian courts apply a common test when considering whether they have jurisdiction to hear a dispute. 

Remote appearances

The Bill encourages greater use of video and audio conferencing, allowing parties and counsel to appear remotely in proceedings with the leave of the Court.  However (as long as there are adequate facilities available for a remote appearance), leave of the Court is not required for an Australian party who has been served with a New Zealand proceeding to appear remotely, if the Australian party wishes to make an application to stay the New Zealand proceedings on the basis that it is more appropriate for an Australian court to hear the dispute.

Interim relief

The Bill enables parties to seek interim relief from a New Zealand Court in support of an Australian proceeding, with the leave of the Court.

Trans-Tasman evidence

The Bill also amends the trans-Tasman evidence regime.  Trans-Tasman subpoenas will be able to be issued by judges of lower courts, and similar subpoenas may be issued for some tribunals by the District Court.  Subpoenas in criminal proceedings will also be able to be served with the leave of the Court.

Enforcement of Australian judgments, civil and criminal penalties in NZ

Under the Bill, a broader range of Australian judgments are able to be enforced in New Zealand if registered in a New Zealand court, in particular:

The first category of judgments includes non-monetary judgments such as injunctions or orders for specific performance.

Further, some civil and criminal/regulatory penalties granted in Australia will be enforceable in New Zealand as judgment debts.

What do these changes mean?

The Bill aims to clarify the procedure relating to trans-Tasman litigation, as well as make it easier and more cost-effective for New Zealand parties to initiate proceedings and seek interim relief against Australian parties. 

However, the regime will also make it easier for Australian parties to commence proceedings against New Zealand parties in Australia, and allow Australian parties to enforce a larger range of Australian judgments against New Zealand parties.

The Bill is currently progressing towards its second reading.  Submissions are due on 7 May 2010, with the Select Committee report being scheduled for 29 July 2010

On 14 April 2010 the Securities Commission ("Commission") issued proceedings against resin maker, Nuplex Industries Limited ("Nuplex") and some of its former and current directors.  The Commission alleges that between 22 December 2008 and 19 February 2009 Nuplex breached its continuous disclosure obligations under the Securities Markets Act 1988 ("Act") and NZX Listing Rules by failing to disclose a pending breach of a banking covenant to the market. This failure allegedly shielded Nuplex shares from a predicted 30% drop in value.

Nuplex denies any wrongdoing, explaining that it did not disclose the potential breach as it was engaged in confidential negotiations (which were in fact successful) with the banks regarding the loosening of the covenant. Nuplex argues that disclosure at this point was not required by the Rules and would have unduly prejudiced the company, its shareholders and the banks.

The Commission is seeking declarations of contravention, pecuniary penalties, with a maximum penalty of up to $1 million per director, and compensatory orders.  As the first case under the disclosure rules, the proceedings are set to provide some much needed judicial guidance as to what exactly is expected of directors under the disclosure regime.

© Russell McVeagh 2009. All rights reserved. www.russellmcveagh.com