Court of Appeal Judgments of Public Interest
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Case name
Case number
[2024] NZCA 609
Date of Judgment
21 November 2024
Summary
Private international law. Anti-suit and anti-enforcement injunctions. Comity. Mr Wikeley and his associates obtained a default judgment (the Kentucky Default Judgment) against Kea for approximately USD 130 million in the Kentucky Circuit Court based on an asserted contract between Kea and the Wikeley Family Trust (the Coal Agreement). Kea says that the Kentucky Default Judgment was obtained by fraud as part of a global fraud instigated by Mr Eric Watson.
In proceedings brought in New Zealand, Kea alleged conspiracy against Mr Wikeley, Wikeley Family Trustee Ltd and Mr Watson. It sought anti-suit and anti-enforcement injunctions to restrain Mr Wikeley from enforcing the judgment. Mr Wikeley initially challenged the High Court’s jurisdiction but failed to file a statement of defence. The hearing proceeded by formal proof. Gault J found that the Coal Agreement was a forgery and the Kentucky Default Judgment had been obtained by fraud. The injunctions sought by Kea were granted.
Mr Wikeley’s appeal was initially advanced on the basis that the Judge relied on inadmissible evidence, lacked jurisdiction to grant the injunctions and that the injunctions were contrary to international comity. Later, Mr Wikeley applied to amend his notice of appeal and to adduce further evidence in order to challenge the Judge’s finding of forgery and fraud. Kea and the interim liquidators also sought to adduce further evidence.
We are satisfied on comity grounds that the permanent injunctions should be discharged. The orders setting aside the injunctions will lie in Court and not become operative for a period of 20 working days from delivery of this judgment. We uphold the other orders made by the High Court, including the appointment of interim liquidators to the Wikeley Family Trust, the declaration that the Kentucky Default Judgment was obtained by fraud and the awards of damages and costs.
Whether Mr Wikeley’s applications to amend the notice of appeal and adduce further evidence should be granted? Held: no. Given Mr Wikeley chose not to defend the proceeding on the merits, nor to advance the evidence on which reliance is now placed, it would be inappropriate to admit the proposed evidence and widen the scope of the appeal. The proposed evidence is not cogent because it only fortifies the Judge’s alternative conclusion that, even if the Coal Agreement was not a forgery, it was nevertheless liable to be set aside for fraud or breach of fiduciary duty. The proposed evidence is that the Coal Agreement was a non-binding heads of agreement. A non-binding heads of agreement is not legally enforceable and it would be fraudulent to obtain judgment based on such an agreement.
Whether Kea’s and the interim liquidators’ applications to adduce further evidence should be granted? Held: yes, in part. Kea’s evidence of WhatsApp messages between Mr Wikeley and his associates is admitted because the messages explain Mr Wikeley’s strategy to effectively render the High Court decision otiose by transferring the benefit of the Kentucky Default Judgment to a new entity. Apart from an affidavit of Mr Hagerman which we admit on updating principles, Kea’s other proposed evidence is not cogent. We admit the proposed evidence of the interim liquidators on standard updating principles.
Whether Mr Wikeley’s challenges to the admissibility of evidence before the Judge should be allowed? Held: yes, in part. We consider 16 of Mr Wikeley’s 44 challenges to the admissibility of evidence before the Judge have merit, variously on the basis that the evidence is inadmissible opinion or hearsay evidence or that it offends s 50 of the Evidence Act 2006.
Whether the successful admissibility challenges affect the Judge’s findings? Held: no. None of the successful evidential challenges materially alter the conclusion to which the Judge could properly come on the finding of fraud. We share the Judge’s concerns about the authenticity of the version of the Coal Agreement which was before him. Even if it was authentic, it was still open to the Judge to conclude that Mr Wikeley and his associates knew the claims made under it in the Kentucky proceeding were not legitimate.
Whether the High Court had jurisdiction? Held: yes. New Zealand was the appropriate forum. The Kentucky Default Judgment is only part of the alleged conspiracy and does not define the jurisdictional limits. Kea’s claim concerned at least two parties who are not parties to the Kentucky proceedings. Nor is the jurisdiction clause in the Coal Agreement determinative. Either the most significant elements of the conspiracy took part in New Zealand or the general rule in s 8 of the Private International Law (Choice of Law in Tort) Act was appropriately displaced. The location of parties and witnesses did not favour Kentucky or the BVI. In any event, the forum conveniens implications of a trial in New Zealand were limited because of the substantive similarities between the applicable New Zealand, Kentucky and Federal United States law.
Whether it was appropriate in international comity terms to grant the anti-suit and anti-enforcement injunctions? Held: no. International comity requires that a New Zealand court should be extremely cautious before deciding that there is a sufficiently real risk that justice will not be done by a foreign court to warrant imposition of anti-suit and/or anti-enforcement injunctions. They are measures of last resort. In this case, Kea applied to the New Zealand High Court because of the apparent unwillingness of the Kentucky Circuit Court to intervene and its concern that the Kentucky Court of Appeals would apply a deferential standard of appellate review. However, comity required that a New Zealand court at least await the outcome of the appeal process before considering whether to issue an anti-suit or anti-enforcement judgment. United States courts are unlikely to look for or need the protection of New Zealand courts and are well capable of identifying fraud and ensuring no reward flows from it.
In proceedings brought in New Zealand, Kea alleged conspiracy against Mr Wikeley, Wikeley Family Trustee Ltd and Mr Watson. It sought anti-suit and anti-enforcement injunctions to restrain Mr Wikeley from enforcing the judgment. Mr Wikeley initially challenged the High Court’s jurisdiction but failed to file a statement of defence. The hearing proceeded by formal proof. Gault J found that the Coal Agreement was a forgery and the Kentucky Default Judgment had been obtained by fraud. The injunctions sought by Kea were granted.
Mr Wikeley’s appeal was initially advanced on the basis that the Judge relied on inadmissible evidence, lacked jurisdiction to grant the injunctions and that the injunctions were contrary to international comity. Later, Mr Wikeley applied to amend his notice of appeal and to adduce further evidence in order to challenge the Judge’s finding of forgery and fraud. Kea and the interim liquidators also sought to adduce further evidence.
We are satisfied on comity grounds that the permanent injunctions should be discharged. The orders setting aside the injunctions will lie in Court and not become operative for a period of 20 working days from delivery of this judgment. We uphold the other orders made by the High Court, including the appointment of interim liquidators to the Wikeley Family Trust, the declaration that the Kentucky Default Judgment was obtained by fraud and the awards of damages and costs.
Whether Mr Wikeley’s applications to amend the notice of appeal and adduce further evidence should be granted? Held: no. Given Mr Wikeley chose not to defend the proceeding on the merits, nor to advance the evidence on which reliance is now placed, it would be inappropriate to admit the proposed evidence and widen the scope of the appeal. The proposed evidence is not cogent because it only fortifies the Judge’s alternative conclusion that, even if the Coal Agreement was not a forgery, it was nevertheless liable to be set aside for fraud or breach of fiduciary duty. The proposed evidence is that the Coal Agreement was a non-binding heads of agreement. A non-binding heads of agreement is not legally enforceable and it would be fraudulent to obtain judgment based on such an agreement.
Whether Kea’s and the interim liquidators’ applications to adduce further evidence should be granted? Held: yes, in part. Kea’s evidence of WhatsApp messages between Mr Wikeley and his associates is admitted because the messages explain Mr Wikeley’s strategy to effectively render the High Court decision otiose by transferring the benefit of the Kentucky Default Judgment to a new entity. Apart from an affidavit of Mr Hagerman which we admit on updating principles, Kea’s other proposed evidence is not cogent. We admit the proposed evidence of the interim liquidators on standard updating principles.
Whether Mr Wikeley’s challenges to the admissibility of evidence before the Judge should be allowed? Held: yes, in part. We consider 16 of Mr Wikeley’s 44 challenges to the admissibility of evidence before the Judge have merit, variously on the basis that the evidence is inadmissible opinion or hearsay evidence or that it offends s 50 of the Evidence Act 2006.
Whether the successful admissibility challenges affect the Judge’s findings? Held: no. None of the successful evidential challenges materially alter the conclusion to which the Judge could properly come on the finding of fraud. We share the Judge’s concerns about the authenticity of the version of the Coal Agreement which was before him. Even if it was authentic, it was still open to the Judge to conclude that Mr Wikeley and his associates knew the claims made under it in the Kentucky proceeding were not legitimate.
Whether the High Court had jurisdiction? Held: yes. New Zealand was the appropriate forum. The Kentucky Default Judgment is only part of the alleged conspiracy and does not define the jurisdictional limits. Kea’s claim concerned at least two parties who are not parties to the Kentucky proceedings. Nor is the jurisdiction clause in the Coal Agreement determinative. Either the most significant elements of the conspiracy took part in New Zealand or the general rule in s 8 of the Private International Law (Choice of Law in Tort) Act was appropriately displaced. The location of parties and witnesses did not favour Kentucky or the BVI. In any event, the forum conveniens implications of a trial in New Zealand were limited because of the substantive similarities between the applicable New Zealand, Kentucky and Federal United States law.
Whether it was appropriate in international comity terms to grant the anti-suit and anti-enforcement injunctions? Held: no. International comity requires that a New Zealand court should be extremely cautious before deciding that there is a sufficiently real risk that justice will not be done by a foreign court to warrant imposition of anti-suit and/or anti-enforcement injunctions. They are measures of last resort. In this case, Kea applied to the New Zealand High Court because of the apparent unwillingness of the Kentucky Circuit Court to intervene and its concern that the Kentucky Court of Appeals would apply a deferential standard of appellate review. However, comity required that a New Zealand court at least await the outcome of the appeal process before considering whether to issue an anti-suit or anti-enforcement judgment. United States courts are unlikely to look for or need the protection of New Zealand courts and are well capable of identifying fraud and ensuring no reward flows from it.
Case number
[2024] NZCA 592
Date of Judgment
14 November 2024
Summary
Public works - Compensation - Compulsory acquisition of land - Shadow period
The appeal is dismissed.
The appellant must pay the respondent costs for a complex appeal on a band A basis together with usual disbursements. We do not award costs in respect of second counsel.
The appellant, Casata Ltd (Casata), contends that the shadow cast by the announcement of a roading project between the Hutt Valley and Tawa/Porirua, the Petone-Link Road (the Project), cost it the opportunity to sell or redevelop two properties located at Pita-One Road in Petone (referred to as No 7 and No 27, or together as the properties). Some three years later, the properties were acquired under the Act for the purposes of the Project. The parties were able to agree on the land value of both properties, but unable to agree on Casata's claim for additional compensation referenced to the effects of the shadow.
Casata's claim for additional compensation in the sum of $4,232,627 (plus GST if any) was rejected by the Land Valuation Tribunal (the LVT). Casata's appeal to the High Court was dismissed by Edwards J. The Judge subsequently granted an application by Casata for leave to appeal to this Court under s 18A of the Land Valuation Proceedings Act 1948. Casata appealed to this Court. The principal issue raised is whether the landowner can claim compensation for loss attributable to the inhibiting effect of the proposed acquisition during the "shadow period" - the time between the announcement of the proposed public work for which the land is to be acquired and completion of the acquisition.
Issue 1: Is the loss alleged to have arisen during the shadow period compensable under s 60(1)(c) of the Public Works Act 1981? Held: No.
There are two defects with the appellant's argument. First, the statutory entitlement to compensation in s 60(1)(c) requires the identification of a relevant statutory power, the exercise of which has given rise to damage. It is only where the exercise of such a power has caused land to suffer damage that compensation is payable for that damage. The appellant did not identify a statutory power. Second, the natural and ordinary meaning of the phrase "any land ... [s]uffers any damage" as it appears in s 60(1)(c) requires physical interference with the land: that is, something that affects the land itself. There was no such damage in this case. It is difficult to see how loss caused by damage to Casata's property rights during the shadow period could be compensable other than in relation to the value of the land.
Issue 2: Is the loss alleged to have arisen during the shadow period compensable under s 66 of the Public Works Act 1981? Held: No
The loss alleged to be caused by the shadow essentially goes to value. As such, it cannot fall within s 66, as the claim advanced is one for disturbance to land.
The appeal is dismissed.
The appellant must pay the respondent costs for a complex appeal on a band A basis together with usual disbursements. We do not award costs in respect of second counsel.
The appellant, Casata Ltd (Casata), contends that the shadow cast by the announcement of a roading project between the Hutt Valley and Tawa/Porirua, the Petone-Link Road (the Project), cost it the opportunity to sell or redevelop two properties located at Pita-One Road in Petone (referred to as No 7 and No 27, or together as the properties). Some three years later, the properties were acquired under the Act for the purposes of the Project. The parties were able to agree on the land value of both properties, but unable to agree on Casata's claim for additional compensation referenced to the effects of the shadow.
Casata's claim for additional compensation in the sum of $4,232,627 (plus GST if any) was rejected by the Land Valuation Tribunal (the LVT). Casata's appeal to the High Court was dismissed by Edwards J. The Judge subsequently granted an application by Casata for leave to appeal to this Court under s 18A of the Land Valuation Proceedings Act 1948. Casata appealed to this Court. The principal issue raised is whether the landowner can claim compensation for loss attributable to the inhibiting effect of the proposed acquisition during the "shadow period" - the time between the announcement of the proposed public work for which the land is to be acquired and completion of the acquisition.
Issue 1: Is the loss alleged to have arisen during the shadow period compensable under s 60(1)(c) of the Public Works Act 1981? Held: No.
There are two defects with the appellant's argument. First, the statutory entitlement to compensation in s 60(1)(c) requires the identification of a relevant statutory power, the exercise of which has given rise to damage. It is only where the exercise of such a power has caused land to suffer damage that compensation is payable for that damage. The appellant did not identify a statutory power. Second, the natural and ordinary meaning of the phrase "any land ... [s]uffers any damage" as it appears in s 60(1)(c) requires physical interference with the land: that is, something that affects the land itself. There was no such damage in this case. It is difficult to see how loss caused by damage to Casata's property rights during the shadow period could be compensable other than in relation to the value of the land.
Issue 2: Is the loss alleged to have arisen during the shadow period compensable under s 66 of the Public Works Act 1981? Held: No
The loss alleged to be caused by the shadow essentially goes to value. As such, it cannot fall within s 66, as the claim advanced is one for disturbance to land.
Case name
Case number
[2024] NZCA 590
Date of Judgment
13 November 2024
Summary
Court of Appeal allows sentence appeal in Kahi v R, substituting a sentence of home detention for manslaughter.
Case name
Case number
[2024] NZCA 579
Date of Judgment
13 November 2024
Summary
CRIMINAL PRACTICE AND PROCEDURE - NAME SUPPRESSION, LAWYERS
Mr Tarrant was convicted of 51 charges of murder, 40 charges of attempted murder and one charge of engaging in a terrorist act. He was sentenced to life imprisonment without parole. Mr Tarrant has applied to appeal his convictions and sentence.
Mr Tarrant's appellate counsel, Lawyers A and B, have applied for an order permanently suppressing their names as connected persons under s 202 of the Criminal Procedure Act 2011. Their application was made on the grounds that they would suffer undue hardship and/or that they and their families would be endangered if their names were published in connection with Mr Tarrant. The application was opposed by the Crown and four media organisations.
Affidavits were received from Lawyer A, Lawyer B, and two other senior defence barristers. The thrust of the evidence was that senior criminal defence lawyers have been subject to extensive abuse and threats of harm because of their association with high-profile notorious defendants.
The Court was required to answer three questions in determining whether to allow the application:
- are counsel for Mr Tarrant "connected with the proceedings" or otherwise "connected with" Mr Tarrant? If so;
- have counsel established that publishing their names would be likely to cause them undue hardship or endanger the safety of any person? If so;
- should the Court exercise its discretion to make the order sought?
Are counsel for Mr Tarrant "connected with the proceedings" or otherwise "connected with" Mr Tarrant? Held: Yes
The Court held that Mr Tarrant's counsel are "connected with the proceedings". The Court observed the ordinary and natural meaning of "connected" equates to a person being "related or associated" with another person or event. A lawyer who appears in court on instructions from an offender performs a vital element in the proceedings and are therefore intrinsically connected with the proceeding. In the absence of information concerning purpose or context that could assist in determining the meaning of "connected with the proceedings", the natural and ordinary meaning of "connected with" was treated as determinative as it did not produce a totally untenable result.
This meant it was not necessary for the Court to determine whether Mr Tarrant's counsel are "connected with" Mr Tarrant, though it considered they likely are.
Did counsel established that publishing their names would be likely to cause them undue hardship or endanger the safety of any person? Held: Yes.
Although the evidence before the Court did not identify specific risks of abuse or threats to Lawyer A and Lawyer B, the Court was satisfied that Lawyers A and B would likely receive abuse and threats if their identities were made public. The Court considered that the abuse and threats would arise from people hiding behind the relative anonymity that social media platforms provide and could come from both those who abhor and those who support Mr Tarrant. The nature and seriousness of the abuse received by the senior defence lawyers who gave evidence, in combination with the unprecedented and highly publicised nature of Mr Tarrant's offending, satisfied the Court that Lawyer A and Lawyer B would be likely to receive extreme abuse and threats, thereby causing them undue hardship. The hardship they would be likely to face was considered of a level and character beyond that of which defence counsel should be expected to weather.
Although not strictly necessary for the Court to determine, it considered that there was a genuine risk that the safety of Lawyer A, Lawyer B, and the members of their families would be compromised if they were publicly identified as the lawyers representing Mr Tarrant.
Should the Court exercise its discretion to make the order sought? Held: Yes
After considering various factors, including open justice, potential danger to the criminal bar, the cab-rank rule, the efficacy of any orders, and the potential precedential effect of the decision, the Court concluded that it should exercise its discretion in favour of the application.
The Court fully endorsed the principle of open justice and the role of the media in reporting on court proceedings, and noted that in almost all cases open justice will require counsel to be named. However, the Court considered in this case, media reporting would not be materially affected by suppressing counsels' names. The identity of the persons speaking on behalf of counsel is not nearly as important as the submissions made, which are able to be reported.
The Court did not place any weight on the media's argument that there may be a risk of danger to several criminal barristers suspected of representing Mr Tarrant. It considered it unlikely that an ill motivated individual would attack a random lawyer, or many random lawyers, on the off chance they were acting for Mr Tarrant.
The Court also did not agree with the media's submission that allowing the application would undermine the cab-rank rule. Under the cab-rank rule lawyers are professionally obliged to act for clients who instruct them. Lawyer A and Lawyer B are playing a critical role in the administration of justice in what is undoubtedly a very difficult case. They have been instructed to represent Mr Tarrant and intend to do so in accordance with the cab-rank rule. The application was designed to prevent Lawyer A and Lawyer B from facing undue harm and did not impact upon or undermine the cab-rank rule.
As to the efficacy of any orders, although the Court noted that those who attend Mr Tarrant's potential hearing would be able to learn the identity of counsel, it considered that the application should not be declined simply because a subversive individual may elect to breach the orders. Practical concerns raised by the Crown, and the availability of other methods to protect counsel, were held to not influence the outcome of the application. The purpose of the application is to prevent harm from occurring and, given the risk of harm Lawyer A and Lawyer B are likely to face is significant, the Court considered suppression of their identities was necessary in the circumstances.
Although cognisant of the potential precedential effects of the decision, internationally and nationally, the Court considered the uniqueness of Mr Tarrant's case meant the decision would not be an invitation to open the floodgates to other applications of a similar character.
The Court granted Lawyer A and Lawyer B's application. It permanently suppressed their names, addresses and identifying particulars, and made other related orders.
Mr Tarrant was convicted of 51 charges of murder, 40 charges of attempted murder and one charge of engaging in a terrorist act. He was sentenced to life imprisonment without parole. Mr Tarrant has applied to appeal his convictions and sentence.
Mr Tarrant's appellate counsel, Lawyers A and B, have applied for an order permanently suppressing their names as connected persons under s 202 of the Criminal Procedure Act 2011. Their application was made on the grounds that they would suffer undue hardship and/or that they and their families would be endangered if their names were published in connection with Mr Tarrant. The application was opposed by the Crown and four media organisations.
Affidavits were received from Lawyer A, Lawyer B, and two other senior defence barristers. The thrust of the evidence was that senior criminal defence lawyers have been subject to extensive abuse and threats of harm because of their association with high-profile notorious defendants.
The Court was required to answer three questions in determining whether to allow the application:
- are counsel for Mr Tarrant "connected with the proceedings" or otherwise "connected with" Mr Tarrant? If so;
- have counsel established that publishing their names would be likely to cause them undue hardship or endanger the safety of any person? If so;
- should the Court exercise its discretion to make the order sought?
Are counsel for Mr Tarrant "connected with the proceedings" or otherwise "connected with" Mr Tarrant? Held: Yes
The Court held that Mr Tarrant's counsel are "connected with the proceedings". The Court observed the ordinary and natural meaning of "connected" equates to a person being "related or associated" with another person or event. A lawyer who appears in court on instructions from an offender performs a vital element in the proceedings and are therefore intrinsically connected with the proceeding. In the absence of information concerning purpose or context that could assist in determining the meaning of "connected with the proceedings", the natural and ordinary meaning of "connected with" was treated as determinative as it did not produce a totally untenable result.
This meant it was not necessary for the Court to determine whether Mr Tarrant's counsel are "connected with" Mr Tarrant, though it considered they likely are.
Did counsel established that publishing their names would be likely to cause them undue hardship or endanger the safety of any person? Held: Yes.
Although the evidence before the Court did not identify specific risks of abuse or threats to Lawyer A and Lawyer B, the Court was satisfied that Lawyers A and B would likely receive abuse and threats if their identities were made public. The Court considered that the abuse and threats would arise from people hiding behind the relative anonymity that social media platforms provide and could come from both those who abhor and those who support Mr Tarrant. The nature and seriousness of the abuse received by the senior defence lawyers who gave evidence, in combination with the unprecedented and highly publicised nature of Mr Tarrant's offending, satisfied the Court that Lawyer A and Lawyer B would be likely to receive extreme abuse and threats, thereby causing them undue hardship. The hardship they would be likely to face was considered of a level and character beyond that of which defence counsel should be expected to weather.
Although not strictly necessary for the Court to determine, it considered that there was a genuine risk that the safety of Lawyer A, Lawyer B, and the members of their families would be compromised if they were publicly identified as the lawyers representing Mr Tarrant.
Should the Court exercise its discretion to make the order sought? Held: Yes
After considering various factors, including open justice, potential danger to the criminal bar, the cab-rank rule, the efficacy of any orders, and the potential precedential effect of the decision, the Court concluded that it should exercise its discretion in favour of the application.
The Court fully endorsed the principle of open justice and the role of the media in reporting on court proceedings, and noted that in almost all cases open justice will require counsel to be named. However, the Court considered in this case, media reporting would not be materially affected by suppressing counsels' names. The identity of the persons speaking on behalf of counsel is not nearly as important as the submissions made, which are able to be reported.
The Court did not place any weight on the media's argument that there may be a risk of danger to several criminal barristers suspected of representing Mr Tarrant. It considered it unlikely that an ill motivated individual would attack a random lawyer, or many random lawyers, on the off chance they were acting for Mr Tarrant.
The Court also did not agree with the media's submission that allowing the application would undermine the cab-rank rule. Under the cab-rank rule lawyers are professionally obliged to act for clients who instruct them. Lawyer A and Lawyer B are playing a critical role in the administration of justice in what is undoubtedly a very difficult case. They have been instructed to represent Mr Tarrant and intend to do so in accordance with the cab-rank rule. The application was designed to prevent Lawyer A and Lawyer B from facing undue harm and did not impact upon or undermine the cab-rank rule.
As to the efficacy of any orders, although the Court noted that those who attend Mr Tarrant's potential hearing would be able to learn the identity of counsel, it considered that the application should not be declined simply because a subversive individual may elect to breach the orders. Practical concerns raised by the Crown, and the availability of other methods to protect counsel, were held to not influence the outcome of the application. The purpose of the application is to prevent harm from occurring and, given the risk of harm Lawyer A and Lawyer B are likely to face is significant, the Court considered suppression of their identities was necessary in the circumstances.
Although cognisant of the potential precedential effects of the decision, internationally and nationally, the Court considered the uniqueness of Mr Tarrant's case meant the decision would not be an invitation to open the floodgates to other applications of a similar character.
The Court granted Lawyer A and Lawyer B's application. It permanently suppressed their names, addresses and identifying particulars, and made other related orders.
Media Release
- MR [2024] NZCA 579 (PDF, 154 KB)
Case number
[2024] NZCA 528
Date of Judgment
17 October 2024
Summary
Equitable Liens - Whether a purchaser's equitable lien attaches to a partly-built modular home - Personal Property Securities Act 1999 - Relative priority between an equitable lien and PPSA security interests - Companies Act 1993 - Relative priority between an equitable lien and preferential creditor interests under the Companies Act - Appeal allowed
Podular Housing Systems Ltd (Podular) carried on business constructing and installing modular residential buildings known as "pods". The pods were constructed at Podular's facilities in Hamilton and Christchurch. Podular was placed in liquidation, and the appellants were appointed as liquidators, on 12 December 2022. At the time of liquidation, Podular had 18 partly-completed pods at its facilities. The purchasers of each of these pods had paid a deposit and instalments of the purchase price. Another 20 purchasers had paid deposits, but construction of their pods had not begun.
The purchasers whose pods had not been partly constructed claimed in the liquidation as unsecured creditors. Secured creditors with security interests perfected by registration under the Personal Property Securities Act I 999 (PPSA) and preferential creditors under s 312 and sch 7 of the Companies Act I 993 also claimed in the liquidation.
The liquidators applied to the High Court for urgent directions in relation to various matters, including the nature and priority of the purchasers' claims to the partly-completed pods, and the liquidators' entitlement to recover the cost of identifying, preserving and selling the pods out of the proceeds of sale of those pods. Justice Jagose found that legal title to the pods remained with Podular, however each purchaser of a partlycompleted pod had an equitable lien over their respective pod to the extent of the purchase moneys paid by them: Francis v Gross [2023] NZHC I 107, [2023] 2 NZLR 762. In a subsequent minute Jagose J directed that the liquidators' costs and disbursements could not be deducted from the sale proceeds of the pods before remitting any balance to the purchasers.
The liquidators appeal to this Court. They say that an equitable lien does not attach to a partly-completed pod; but even if there is an equitable lien, that does not entitle the purchasers to be repaid in priority to preferential creditors or creditors with security interests under the PPSA. The liquidators also say that their costs and disbursements should be met out of the proceeds of sale of the pods ahead of any claim by the purchasers under an equitable lien.
Held: the appeal is allowed and the directions given in the High Court are set aside.
The purchasers do not have an equitable lien over their respective partly-completed pods. There is nothing about the arrangements between Podular and the claimant purchasers that distinguishes their position from that of other purchasers who paid deposits but whose pods have not been started. All of these purchasers entered into materially similar contracts, they have all made payments, and they have not yet received Podular's promised performance in exchange of those payments. There is no principled rationale which justifies equity providing purchasers of partly-completed pods with a priority over other purchasers and other unsecured creditors, particularly when (unlike some other purchasers) they did not contract for a purchase money security interest. There is no appellate authority in New Zealand that supports recognition of a purchaser's equitable lien over personal property in this context, and no persuasive authority from overseas jurisdictions.
The implications of recognising a lien in this context are potentially wide. If an equitable lien is recognised in this case, such a lien could come into existence in the context of consumer modular components of buildings, specialised vehicles, plant and machinery, joinery, and other types of asset that are built or customised to meet the requirements of particular purchasers. It is not clear why the law should recognise a form of security interest in those contexts, absent any agreement providing for such an interest. If this argument were accepted, there would also be a strong argument that such a lien should be recognised in the context of contracts for the sale of goods where the price had been paid in part, the goods to be delivered had been identified, but property had not yet passed: a much-debated issue which underscores the possible implications of recognising an equitable lien in this case.
Parliament has legislated in the Lay by Sales Act 1971 and now in subpt 1 of pt 4A of the Fair Trading Act 1986 to provide priority for buyers of goods on the insolvency of the seller in the specific context of lay by sale agreements for the supply of goods that have purchase price of up to $30,000. Courts should be cautious before extending a similar regime to contracts for the supply of goods (whether under a contract for work and materials or otherwise) without any financial limit where Parliament has chosen not to do so. Furthermore Parliament, in providing for a layby sales priority regime, has made detailed provision for the interplay between the priority conferred on consumers by this regime and the claims of security interest holders under the PPSA and other unsecured creditors. A court recognising an equitable lien in the present case cannot adjust other statutory priority regimes to ensure coherency and consistency.
Recognition of an equitable lien in this context would also lead to difficulties in applying relevant statutory priority regimes in the insolvency context. Security interests that attach to the pods under the PPSA are legal interests which, if acquired in good faith for value without notice of the circumstances giving rise to the equitable lien, would have priority over a purchaser's equitable lien. However the relative priority between an equitable lien and claim by preferential creditors under sch 7 of the Companies Act would present difficulties. The claims of preferential creditors over the pods would appear to rank ahead of claims to the pods by secured creditors under the PPSA, but would also appear to rank behind an equitable lien. That is logically impossible where an equitable lien ranks behind security interests under the PPSA. These difficulties support the conclusion that equitable liens should not be recognised in New Zealand in the context of the present case.
The holder of an equitable lien is not entitled to take possession of the property, and they do not have an ownership interest in it. Rather, a purchaser's equitable lien over property entitles the purchaser to have the property sold, and to have the net proceeds of sale applied to meet their claim for repayment of the purchase price. It follows that if a purchaser's equitable lien were recognised in this case, the liquidators would be entitled to deduct the costs they have incurred in identifying, preserving and selling the pods. The net proceeds after meeting those costs would then be available to meet the purchasers' claims, subject to claims with priority over the equitable liens.
Podular Housing Systems Ltd (Podular) carried on business constructing and installing modular residential buildings known as "pods". The pods were constructed at Podular's facilities in Hamilton and Christchurch. Podular was placed in liquidation, and the appellants were appointed as liquidators, on 12 December 2022. At the time of liquidation, Podular had 18 partly-completed pods at its facilities. The purchasers of each of these pods had paid a deposit and instalments of the purchase price. Another 20 purchasers had paid deposits, but construction of their pods had not begun.
The purchasers whose pods had not been partly constructed claimed in the liquidation as unsecured creditors. Secured creditors with security interests perfected by registration under the Personal Property Securities Act I 999 (PPSA) and preferential creditors under s 312 and sch 7 of the Companies Act I 993 also claimed in the liquidation.
The liquidators applied to the High Court for urgent directions in relation to various matters, including the nature and priority of the purchasers' claims to the partly-completed pods, and the liquidators' entitlement to recover the cost of identifying, preserving and selling the pods out of the proceeds of sale of those pods. Justice Jagose found that legal title to the pods remained with Podular, however each purchaser of a partlycompleted pod had an equitable lien over their respective pod to the extent of the purchase moneys paid by them: Francis v Gross [2023] NZHC I 107, [2023] 2 NZLR 762. In a subsequent minute Jagose J directed that the liquidators' costs and disbursements could not be deducted from the sale proceeds of the pods before remitting any balance to the purchasers.
The liquidators appeal to this Court. They say that an equitable lien does not attach to a partly-completed pod; but even if there is an equitable lien, that does not entitle the purchasers to be repaid in priority to preferential creditors or creditors with security interests under the PPSA. The liquidators also say that their costs and disbursements should be met out of the proceeds of sale of the pods ahead of any claim by the purchasers under an equitable lien.
Held: the appeal is allowed and the directions given in the High Court are set aside.
The purchasers do not have an equitable lien over their respective partly-completed pods. There is nothing about the arrangements between Podular and the claimant purchasers that distinguishes their position from that of other purchasers who paid deposits but whose pods have not been started. All of these purchasers entered into materially similar contracts, they have all made payments, and they have not yet received Podular's promised performance in exchange of those payments. There is no principled rationale which justifies equity providing purchasers of partly-completed pods with a priority over other purchasers and other unsecured creditors, particularly when (unlike some other purchasers) they did not contract for a purchase money security interest. There is no appellate authority in New Zealand that supports recognition of a purchaser's equitable lien over personal property in this context, and no persuasive authority from overseas jurisdictions.
The implications of recognising a lien in this context are potentially wide. If an equitable lien is recognised in this case, such a lien could come into existence in the context of consumer modular components of buildings, specialised vehicles, plant and machinery, joinery, and other types of asset that are built or customised to meet the requirements of particular purchasers. It is not clear why the law should recognise a form of security interest in those contexts, absent any agreement providing for such an interest. If this argument were accepted, there would also be a strong argument that such a lien should be recognised in the context of contracts for the sale of goods where the price had been paid in part, the goods to be delivered had been identified, but property had not yet passed: a much-debated issue which underscores the possible implications of recognising an equitable lien in this case.
Parliament has legislated in the Lay by Sales Act 1971 and now in subpt 1 of pt 4A of the Fair Trading Act 1986 to provide priority for buyers of goods on the insolvency of the seller in the specific context of lay by sale agreements for the supply of goods that have purchase price of up to $30,000. Courts should be cautious before extending a similar regime to contracts for the supply of goods (whether under a contract for work and materials or otherwise) without any financial limit where Parliament has chosen not to do so. Furthermore Parliament, in providing for a layby sales priority regime, has made detailed provision for the interplay between the priority conferred on consumers by this regime and the claims of security interest holders under the PPSA and other unsecured creditors. A court recognising an equitable lien in the present case cannot adjust other statutory priority regimes to ensure coherency and consistency.
Recognition of an equitable lien in this context would also lead to difficulties in applying relevant statutory priority regimes in the insolvency context. Security interests that attach to the pods under the PPSA are legal interests which, if acquired in good faith for value without notice of the circumstances giving rise to the equitable lien, would have priority over a purchaser's equitable lien. However the relative priority between an equitable lien and claim by preferential creditors under sch 7 of the Companies Act would present difficulties. The claims of preferential creditors over the pods would appear to rank ahead of claims to the pods by secured creditors under the PPSA, but would also appear to rank behind an equitable lien. That is logically impossible where an equitable lien ranks behind security interests under the PPSA. These difficulties support the conclusion that equitable liens should not be recognised in New Zealand in the context of the present case.
The holder of an equitable lien is not entitled to take possession of the property, and they do not have an ownership interest in it. Rather, a purchaser's equitable lien over property entitles the purchaser to have the property sold, and to have the net proceeds of sale applied to meet their claim for repayment of the purchase price. It follows that if a purchaser's equitable lien were recognised in this case, the liquidators would be entitled to deduct the costs they have incurred in identifying, preserving and selling the pods. The net proceeds after meeting those costs would then be available to meet the purchasers' claims, subject to claims with priority over the equitable liens.
Case name
Case number
[2024] NZCA 522
Date of Judgment
16 October 2024
Summary
On the morning of 15 January 2020, Mrs Fisi'ihoi heard sounds outside her lounge window. She pulled back the curtain and was shot in the head by a person firing a shotgun through a window. She died instantly. Falala'angi (known as Falala) longi, his younger brother, Viliami longi, and their cousin Manu Iongi. were charged with Mrs Fisi'ihoi's murder.
Following a jury trial, Falala and Viliami Iongi were found guilty of murder. Manu longi was found guilty of manslaughter. Falala and Viliami Iongi were also found guilty of reckless discharge of a firearm with intent to cause grievous bodily harm and wounding with intent to cause grievous bodily harm in relation to events that occurred on 4 December 2019. Falala and Viliami Iongi had attended Mrs Fisi'ihoi's address, where she lived with her family, including her son, Stephen Fisi'ihoi. Falala and Viliami longi arrived with shotguns to confront Stephen Fisi'ihoi. Viliami Iongi fired two shots, one of which missed Stephen Fisi'ihoi, the other hitting Stephen's associate in the lower abdomen.
On 23 February 2024, Powell J sentenced Falala Iongi to life imprisonment with a minimum period or 17 years for the murder of Mrs Fisi'ihoi, and to concurrent sentences of eight years' imprisonment for discharge of a firearm and 10 years' imprisonment for the wounding charge. Manu Iongi was sentenced to eight years and six months' imprisonment with a minimum period of four years and three months for the manslaughter charge.
Manu longi has appealed both his conviction and sentence. Falala longi has appealed his sentence.
Criminal law - murder - parties to offences - conviction appeal-improperly obtained evidence - unreasonable verdict - inadequate summing up - sentence appeal
Manu Iongi appeals his sentence on the basis it is manifestly excessive. He appeals his conviction on three grounds: that the High Court erred when it ruled Havea longi's evidence admissible under s 30 of the Evidence Act 2006; that the jury's verdict was unreasonable; and that the Judge failed to adequately summarise Manu Iongi's case in his summing up to the jury.
Issue: should the appeal against conviction be allowed? Held: no.
While the police's failure to advise Havea longi that he was no longer under arrest and free to leave the police station before he commenced making his statement was improper and contravened s 22 of the New Zealand Bill of Rights Act 1990, the statement was correctly ruled admissible pursuant to s 30 or the Evidence Act.
As to unreasonable verdict the evidence presented was sufficient to enable the jury to infer that Manu Iongi was one of the men present at the address when Mrs Fisi'ihoi was killed. The jury were entitled to convict Manu Iongi of manslaughter pursuant to ss 66(1) or 66(2) of the Crimes Act 1961 as a party to the offence.
As to the Judge's summing up, while the Judge deliberately did not engage in a detailed analysis of the competing positions of the Crown and defence counsel, the question trail and the Judge's additional comments to the jury adequately explained the essence of Manu Iongi's defence. The defence case had been thoroughly presented by competent counsel and, given the combined effect of the Judge's explanation of the question trail and additional comments to the jury ensured no miscarriage of justice occurred through the way the Judge summed up Manu Iongi's defence.
Issue: Whether the appeal against sentence should be allowed? Held: no.
While the starting point adopted by Powell J was arguably high, it is within range. Further, when assessing the aggravating factors involved in the offending, we are satisfied that while the sentence imposed is on the higher side of the range available, it is not manifestly excessive.
Manu Iongi's appeals against conviction and sentence are dismissed.
Criminal law - sentence appeal - minimum period of imprisonment - manifestly excessive
Falala Iongi appeals his sentence on the basis that the minimum period of imprisonment of 17 years is manifestly excessive.
Issue: should the appeal against sentence be allowed? Held: yes.
The Judge was correct to set a minimum period of imprisonment under s 103 of the Sentencing Act 2002 that was far higher than 10 years. However, the minimum period imposed of 17 years was manifestly excessive. Falala longi's cultural report indicates he is motivated towards a pro-social life without his gang connections. Further, Falala longi was not the person who shot Mrs Fisi'ihoi and although he was found guilty of her murder, a more proportionate approach to his offending would have been to sentence him to life imprisonment with a minimum period of 15 years; the same minimum period that was imposed on the person who actually shot Mrs Fisi'ihoi.
Falala Iongi's appeal against sentence is allowed. The minimum period of imprisonment of 17 years is quashed and substituted with a minimum period of imprisonment of 15 years.
Following a jury trial, Falala and Viliami Iongi were found guilty of murder. Manu longi was found guilty of manslaughter. Falala and Viliami Iongi were also found guilty of reckless discharge of a firearm with intent to cause grievous bodily harm and wounding with intent to cause grievous bodily harm in relation to events that occurred on 4 December 2019. Falala and Viliami Iongi had attended Mrs Fisi'ihoi's address, where she lived with her family, including her son, Stephen Fisi'ihoi. Falala and Viliami longi arrived with shotguns to confront Stephen Fisi'ihoi. Viliami Iongi fired two shots, one of which missed Stephen Fisi'ihoi, the other hitting Stephen's associate in the lower abdomen.
On 23 February 2024, Powell J sentenced Falala Iongi to life imprisonment with a minimum period or 17 years for the murder of Mrs Fisi'ihoi, and to concurrent sentences of eight years' imprisonment for discharge of a firearm and 10 years' imprisonment for the wounding charge. Manu Iongi was sentenced to eight years and six months' imprisonment with a minimum period of four years and three months for the manslaughter charge.
Manu longi has appealed both his conviction and sentence. Falala longi has appealed his sentence.
Criminal law - murder - parties to offences - conviction appeal-improperly obtained evidence - unreasonable verdict - inadequate summing up - sentence appeal
Manu Iongi appeals his sentence on the basis it is manifestly excessive. He appeals his conviction on three grounds: that the High Court erred when it ruled Havea longi's evidence admissible under s 30 of the Evidence Act 2006; that the jury's verdict was unreasonable; and that the Judge failed to adequately summarise Manu Iongi's case in his summing up to the jury.
Issue: should the appeal against conviction be allowed? Held: no.
While the police's failure to advise Havea longi that he was no longer under arrest and free to leave the police station before he commenced making his statement was improper and contravened s 22 of the New Zealand Bill of Rights Act 1990, the statement was correctly ruled admissible pursuant to s 30 or the Evidence Act.
As to unreasonable verdict the evidence presented was sufficient to enable the jury to infer that Manu Iongi was one of the men present at the address when Mrs Fisi'ihoi was killed. The jury were entitled to convict Manu Iongi of manslaughter pursuant to ss 66(1) or 66(2) of the Crimes Act 1961 as a party to the offence.
As to the Judge's summing up, while the Judge deliberately did not engage in a detailed analysis of the competing positions of the Crown and defence counsel, the question trail and the Judge's additional comments to the jury adequately explained the essence of Manu Iongi's defence. The defence case had been thoroughly presented by competent counsel and, given the combined effect of the Judge's explanation of the question trail and additional comments to the jury ensured no miscarriage of justice occurred through the way the Judge summed up Manu Iongi's defence.
Issue: Whether the appeal against sentence should be allowed? Held: no.
While the starting point adopted by Powell J was arguably high, it is within range. Further, when assessing the aggravating factors involved in the offending, we are satisfied that while the sentence imposed is on the higher side of the range available, it is not manifestly excessive.
Manu Iongi's appeals against conviction and sentence are dismissed.
Criminal law - sentence appeal - minimum period of imprisonment - manifestly excessive
Falala Iongi appeals his sentence on the basis that the minimum period of imprisonment of 17 years is manifestly excessive.
Issue: should the appeal against sentence be allowed? Held: yes.
The Judge was correct to set a minimum period of imprisonment under s 103 of the Sentencing Act 2002 that was far higher than 10 years. However, the minimum period imposed of 17 years was manifestly excessive. Falala longi's cultural report indicates he is motivated towards a pro-social life without his gang connections. Further, Falala longi was not the person who shot Mrs Fisi'ihoi and although he was found guilty of her murder, a more proportionate approach to his offending would have been to sentence him to life imprisonment with a minimum period of 15 years; the same minimum period that was imposed on the person who actually shot Mrs Fisi'ihoi.
Falala Iongi's appeal against sentence is allowed. The minimum period of imprisonment of 17 years is quashed and substituted with a minimum period of imprisonment of 15 years.
Case number
[2024] NZCA 514
Date of Judgment
11 October 2024
Summary
Criminal practice and procedure - Solicitor-General's reference
Building - Construction and control
We answer the question of law (arising from Cancian v Tauranga City Council [2022] NZHC 556) as follows:
Was the Court correct to find that the issue of producer statements (following or as a result of construction monitoring) in relation to non-compliant building work does not give rise to liability under s 40 of the Building Act 2004?
No.
This judgment concerns a question of law referred to this Court by the Solicitor-General with the leave of this Court, which relates to the application of s 40 of the Building Act 2004 (the Act) to producer statements issued following or resulting from construction monitoring. The question of law arises from Cancian v Tauranga City Council [2022] NZHC 556, in which the High Court allowed the conviction appeals of a Mr Cameron and his company, The Engineer Ltd, relating to the issue of producer statements in connection with a residential subdivision and development near Tauranga known as The Lakes.
Does the issue of producer statements (following or as a result of construction monitoring) in relation to non-compliant building work give rise to liability under s 40 of the Act?
Held: Yes.
Although the Act does not provide for producer statements, the issue of producer statements clearly falls within both "building work" and "sitework" as defined in the Act. A producer statement is a standard document with well understood content and purpose, intended to contain reasonable statements of professional opinion that the building works to which they relate have been completed in accordance with the building consent and the building code. In the case of Mr Cameron, this necessarily involved on-site construction monitoring, physically carrying out investigations and testing, and providing instructions or directions to building contractors in respect of the next stages in construction. A statement by a qualified professional that there has been compliance when that is not the case will itself be building work that is not in accordance with the building consent. There was therefore a breach of s 40(1). This conclusion accords with the purpose of the Act.
The absence of statutory reference to the role of producer statements is not significant when the provision of the statements in fact assists all the parties who have relevant responsibilities under the Act to fulfil their responsibilities. Building consents and the building code have prescriptive and verifiable standards as to what they each require. The author of the producer statement will not be criminally liable unless it is established beyond reasonable doubt that the matters certified in the statement are incorrect.
Building - Construction and control
We answer the question of law (arising from Cancian v Tauranga City Council [2022] NZHC 556) as follows:
Was the Court correct to find that the issue of producer statements (following or as a result of construction monitoring) in relation to non-compliant building work does not give rise to liability under s 40 of the Building Act 2004?
No.
This judgment concerns a question of law referred to this Court by the Solicitor-General with the leave of this Court, which relates to the application of s 40 of the Building Act 2004 (the Act) to producer statements issued following or resulting from construction monitoring. The question of law arises from Cancian v Tauranga City Council [2022] NZHC 556, in which the High Court allowed the conviction appeals of a Mr Cameron and his company, The Engineer Ltd, relating to the issue of producer statements in connection with a residential subdivision and development near Tauranga known as The Lakes.
Does the issue of producer statements (following or as a result of construction monitoring) in relation to non-compliant building work give rise to liability under s 40 of the Act?
Held: Yes.
Although the Act does not provide for producer statements, the issue of producer statements clearly falls within both "building work" and "sitework" as defined in the Act. A producer statement is a standard document with well understood content and purpose, intended to contain reasonable statements of professional opinion that the building works to which they relate have been completed in accordance with the building consent and the building code. In the case of Mr Cameron, this necessarily involved on-site construction monitoring, physically carrying out investigations and testing, and providing instructions or directions to building contractors in respect of the next stages in construction. A statement by a qualified professional that there has been compliance when that is not the case will itself be building work that is not in accordance with the building consent. There was therefore a breach of s 40(1). This conclusion accords with the purpose of the Act.
The absence of statutory reference to the role of producer statements is not significant when the provision of the statements in fact assists all the parties who have relevant responsibilities under the Act to fulfil their responsibilities. Building consents and the building code have prescriptive and verifiable standards as to what they each require. The author of the producer statement will not be criminally liable unless it is established beyond reasonable doubt that the matters certified in the statement are incorrect.
Case name
Case number
[2024] NZCA 483
Date of Judgment
26 September 2024
Summary
CLASS ACTION COMMERCIAL LAW – Fair Trading Act 1986 NEGLIGENCE – duty of care, new duty
From 1987 until 2005 James Hardie manufactured and sold a sheet cladding system called Harditex for use in residential houses. A group of homeowners whose houses were built using Harditex claimed that Harditex was an inherently defective product that was not fit for purpose. They further claimed it had either caused or contributed to cause their homes to suffer water ingress and moisture-related damage.
The inherent defects relied on included the absorbent nature of the Harditex sheets and allegations that the cladding system allowed significant water ingress at various locations, principally the base of elevations, horizontal control joints, exterior corners and penetrations such as joinery/cladding junctions. It was alleged that not only was the system vulnerable to water ingress, it did not have adequate drainage and drying capabilities to manage the water that entered the wall assembly. The homeowners further alleged that Harditex required a level of building expertise beyond the skill level of a reasonably competent builder, and that James Hardie provided inadequate and misleading information to consumers and builders.
The claim pleaded causes of action under ss 9 and 10 of the Fair Trading Act and the tort of negligence, and sought to hold James Hardie liable in damages.
The named appellants filed proceedings in the High Court and were granted leave to bring their proceedings in a representative capacity on behalf of all current and previous owners of properties clad with Harditex who consented to being represented. 144 additional homeowners were part of the class. The first stage of the proceeding was to determine the claims of the named appellants and also determine, for the whole class, whether a duty of care was owed by James Hardie, if so whether the duty was breached, and whether the statements made in James Hardie’s technical literature (the JHTIs) were misleading and deceptive.
For the purposes of the proceeding eight homes were subjected to invasive testing and inspection, to analyse the extent and cause of the moisture damage (the test properties). The were numerous experts instructed by both parties. The trial record ran to over 70,000 pages.
In the High Court Simon France J held that James Hardie owed a duty of care to the homeowners, however in all other respects he rejected their claim. He found they had failed to prove Harditex was an inherently flawed product unable to deliver a watertight and durable house. He said he was satisfied that Harditex worked and that, while capable of improvements, it was fit for purpose. The Judge accepted that the test properties were water damaged and should not be. However, he concluded that the cause of the damage to the test properties was more likely to be incompetent building and poor texture coating than inherent defects associated with Harditex.
The homeowners appealed that judgment. They challenged almost all of the Judge’s factual findings. James Hardie sought to support the judgment on other grounds. Of the other grounds the Court only addressed the duty of care and limitation issues as the remainder were not of general importance.
The appeal was dismissed, and although the Court found that there was a duty of care and most claims would have been time-barred these findings were not determinative of the appeal because the Court’s factual findings on the evidence were sufficient to determine the outcome of the appeal. The appeal thus turned on whether any legal obligations - assuming they existed - were in fact breached.
Did James Hardie owe a duty of care to the homeowners? Held: yes.
After conducting the two-stage policy and proximity inquiry required when considering if it would be just, fair and reasonable to recognise a novel duty, the Court concluded the Judge was correct to find that James Hardie owed a duty of care to the homeowners.
It considered the duty of care should be formulated as follows: the manufacturer of a cladding product intended for use as a key component in the construction of a weathertight building owes a duty of care to an owner of the building to exercise reasonable care and skill in the design, manufacture and supply of the product so as to prevent loss from damage to the building caused by water ingress.
Did James Hardie breach the duty of care owed to the homeowners or ss 9 and/or 10 of the Fair Trading Act? Held: No.
The Court upheld the Judge’s findings that James Hardie did not breach their duty of care nor ss 9 and/or 10 of the Fair Trading Act. The key reasons for this were:
a) Criticisms of the Judge’s assessment of the expert evidence relating to the alleged inherent defects of Harditex and the causes of the water damage in the test properties were unjustified.
b) Its own assessment of the evidence confirmed that, generally speaking, on several key issues the James Hardie experts had greater expertise and gave their evidence in a more measured and less partisan way than some of the experts called by the homeowners.
c) Neither the evidence derived from the test properties nor the testing conducted for the litigation undermined the evidence of the James Hardie experts. On the contrary, the test properties tended to support the James Hardie claim that, when properly constructed and maintained (which the Court considered could be done by a competent builder), Harditex was fit for purpose.
d) None of the test properties had been built in full compliance with the James Hardie installation instructions and all contained significant building They did not provide a meaningful test of the Harditex system.
e) It was reasonable to assume that had any of the class members owned a property which had suffered water related damage despite being constructed in accordance with the James Hardie instructions and relevant building regulations, that property would have been selected as one of the test properties.
f) The technical instructions (including the construction details) provided by James Hardie were adequate and with one possible exception did not amount to operative misstatements.
Further, in relation to the Fair Trading Act the Court considered the Judge was correct in holding that, at least by 1991, the target audience of the JHTIs was designers and builders who had a good knowledge of the building industry and were capable of reading the relevant JHTI as a whole. The Court held the one possible misleading statement could not give rise to a breach of ss 9 and/or 10 because there was not a sufficient causal nexus and claims based on the JHTI the statement was contained in were time-barred.
Were the homeowners’ claims time-barred? Held: Likely, yes.
The Court held that all claims under the Fair Trading Act—aside from possibly those where the relevant JHTI was one of the 1998 versions—were time-barred.
For limitation purposes the homeowners’ negligence claims were governed by the Limitation Act 1950. The Court held that for the purposes of s 4 of that Act the cause of action accrued when the damage was reasonably discoverable. It noted that although the long-stop provisions in the Building Act did not apply to the homeowners’ claims, s 23B of the Limitation Act 1950 (a 15-year longstop provision) did apply. This appeared to mean that—given the proceedings were filed in August and October 2015—at best for the homeowners, only claims about properties built after August or October 2000 would likely be in time.
The Court did not make a determination on costs, but reserved leave for costs memoranda to be filed if necessary.
From 1987 until 2005 James Hardie manufactured and sold a sheet cladding system called Harditex for use in residential houses. A group of homeowners whose houses were built using Harditex claimed that Harditex was an inherently defective product that was not fit for purpose. They further claimed it had either caused or contributed to cause their homes to suffer water ingress and moisture-related damage.
The inherent defects relied on included the absorbent nature of the Harditex sheets and allegations that the cladding system allowed significant water ingress at various locations, principally the base of elevations, horizontal control joints, exterior corners and penetrations such as joinery/cladding junctions. It was alleged that not only was the system vulnerable to water ingress, it did not have adequate drainage and drying capabilities to manage the water that entered the wall assembly. The homeowners further alleged that Harditex required a level of building expertise beyond the skill level of a reasonably competent builder, and that James Hardie provided inadequate and misleading information to consumers and builders.
The claim pleaded causes of action under ss 9 and 10 of the Fair Trading Act and the tort of negligence, and sought to hold James Hardie liable in damages.
The named appellants filed proceedings in the High Court and were granted leave to bring their proceedings in a representative capacity on behalf of all current and previous owners of properties clad with Harditex who consented to being represented. 144 additional homeowners were part of the class. The first stage of the proceeding was to determine the claims of the named appellants and also determine, for the whole class, whether a duty of care was owed by James Hardie, if so whether the duty was breached, and whether the statements made in James Hardie’s technical literature (the JHTIs) were misleading and deceptive.
For the purposes of the proceeding eight homes were subjected to invasive testing and inspection, to analyse the extent and cause of the moisture damage (the test properties). The were numerous experts instructed by both parties. The trial record ran to over 70,000 pages.
In the High Court Simon France J held that James Hardie owed a duty of care to the homeowners, however in all other respects he rejected their claim. He found they had failed to prove Harditex was an inherently flawed product unable to deliver a watertight and durable house. He said he was satisfied that Harditex worked and that, while capable of improvements, it was fit for purpose. The Judge accepted that the test properties were water damaged and should not be. However, he concluded that the cause of the damage to the test properties was more likely to be incompetent building and poor texture coating than inherent defects associated with Harditex.
The homeowners appealed that judgment. They challenged almost all of the Judge’s factual findings. James Hardie sought to support the judgment on other grounds. Of the other grounds the Court only addressed the duty of care and limitation issues as the remainder were not of general importance.
The appeal was dismissed, and although the Court found that there was a duty of care and most claims would have been time-barred these findings were not determinative of the appeal because the Court’s factual findings on the evidence were sufficient to determine the outcome of the appeal. The appeal thus turned on whether any legal obligations - assuming they existed - were in fact breached.
Did James Hardie owe a duty of care to the homeowners? Held: yes.
After conducting the two-stage policy and proximity inquiry required when considering if it would be just, fair and reasonable to recognise a novel duty, the Court concluded the Judge was correct to find that James Hardie owed a duty of care to the homeowners.
It considered the duty of care should be formulated as follows: the manufacturer of a cladding product intended for use as a key component in the construction of a weathertight building owes a duty of care to an owner of the building to exercise reasonable care and skill in the design, manufacture and supply of the product so as to prevent loss from damage to the building caused by water ingress.
Did James Hardie breach the duty of care owed to the homeowners or ss 9 and/or 10 of the Fair Trading Act? Held: No.
The Court upheld the Judge’s findings that James Hardie did not breach their duty of care nor ss 9 and/or 10 of the Fair Trading Act. The key reasons for this were:
a) Criticisms of the Judge’s assessment of the expert evidence relating to the alleged inherent defects of Harditex and the causes of the water damage in the test properties were unjustified.
b) Its own assessment of the evidence confirmed that, generally speaking, on several key issues the James Hardie experts had greater expertise and gave their evidence in a more measured and less partisan way than some of the experts called by the homeowners.
c) Neither the evidence derived from the test properties nor the testing conducted for the litigation undermined the evidence of the James Hardie experts. On the contrary, the test properties tended to support the James Hardie claim that, when properly constructed and maintained (which the Court considered could be done by a competent builder), Harditex was fit for purpose.
d) None of the test properties had been built in full compliance with the James Hardie installation instructions and all contained significant building They did not provide a meaningful test of the Harditex system.
e) It was reasonable to assume that had any of the class members owned a property which had suffered water related damage despite being constructed in accordance with the James Hardie instructions and relevant building regulations, that property would have been selected as one of the test properties.
f) The technical instructions (including the construction details) provided by James Hardie were adequate and with one possible exception did not amount to operative misstatements.
Further, in relation to the Fair Trading Act the Court considered the Judge was correct in holding that, at least by 1991, the target audience of the JHTIs was designers and builders who had a good knowledge of the building industry and were capable of reading the relevant JHTI as a whole. The Court held the one possible misleading statement could not give rise to a breach of ss 9 and/or 10 because there was not a sufficient causal nexus and claims based on the JHTI the statement was contained in were time-barred.
Were the homeowners’ claims time-barred? Held: Likely, yes.
The Court held that all claims under the Fair Trading Act—aside from possibly those where the relevant JHTI was one of the 1998 versions—were time-barred.
For limitation purposes the homeowners’ negligence claims were governed by the Limitation Act 1950. The Court held that for the purposes of s 4 of that Act the cause of action accrued when the damage was reasonably discoverable. It noted that although the long-stop provisions in the Building Act did not apply to the homeowners’ claims, s 23B of the Limitation Act 1950 (a 15-year longstop provision) did apply. This appeared to mean that—given the proceedings were filed in August and October 2015—at best for the homeowners, only claims about properties built after August or October 2000 would likely be in time.
The Court did not make a determination on costs, but reserved leave for costs memoranda to be filed if necessary.
Case number
[2024] NZCA 481
Date of Judgment
26 September 2024
Summary
Judicial review – Resource Management Act – Te Ture Whenua Maori Act – Issue estoppel
The application to adduce further evidence is granted. The appeal is allowed in part. We make a declaration that the Council erred in determining (in 2013 and 2014) that the order made by the Māori Land Court under s 30 of Te Ture Whenua Maori Act 1993 (TTWMA) did not require it to recognise the Trust Board as the representative of Ngāti Paoa for the purposes of the Resource Management Act 1991. The appeal is otherwise dismissed.
The costs orders in the High Court are set aside. We refer the issue of costs back to that Court so that costs can be reassessed in light of this decision. We make no order as to costs in relation to the appeal.
Ngāti Paoa has been engaged in a leadership struggle for many years. The competing entities are the Ngāti Paoa Trust Board (the Trust Board) and the Ngāti Paoa Iwi Trust (the Iwi Trust). In 2009, the Māori Land Court made an order under s 30 of Te Ture Whenua Maori Act 1993 which recognised the Trust Board as the representative authority for Resource Management Act 1991 (RMA) purposes. In 2013, however, Auckland Council decided that, due to changed circumstances, it would recognise the Iwi Trust as the authorised representative of Ngāti Paoa for RMA purposes. The Council confirmed that decision in 2014.
In 2016, Kennedy Point Boatharbour Ltd (KPBL) applied to the Council for resource consent to construct and operate a marina at Kennedy Point, Pūtiki Bay on Waiheke Island (the Application). The Application was publicly notified and a copy of it was provided by the Council to the Iwi Trust, but not the Trust Board. The Iwi Trust ultimately supported the Application, subject to certain conditions. Following a hearing before independent commissioners, the Application was granted. In 2017, the Environment Court dismissed two appeals against that decision, including one by a community group, Save Kennedy Point (SKP).
SKP subsequently sought a rehearing of the appeals in the Environment Court based on new evidence, namely that the Trust Board (not the Iwi Trust) was the lawful authorised representative of Ngāti Paoa at the relevant time, and the Trust Board opposed the marina development. The rehearing application, which was supported by evidence from the Trust Board, was unsuccessful. An appeal to the High Court was unsuccessful. This Court and the Supreme Court declined leave for a further appeal.
The Trust Board then unsuccessfully brought judicial review proceedings in the High Court against the Auckland Council, the Environment Court and KPBL, challenging various aspects of the resource consent process. The Trust Board now appeals.
Issue 1: Whether the application to adduce further evidence should be granted? Held: Yes.
The further evidence was uncontentious and simply updated this Court on the progress of the marina development.
Issue 2: Whether the Council erred in 2013 and 2014 by not recognising the Trust Board as the authorised representative of Ngāti Paoa for RMA purposes? Held: Yes.
The s 30 order required the Council to recognise the Trust Board as the representative entity for Ngāti Paoa in relation to RMA matters. The s 30 order remained in force until it was amended or revoked by the Māori Land Court. It was not open to the Council to decide the order was no longer effective or legally operative and to decide instead to recognise the Iwi Trust as the authorised representative of Ngāti Paoa.
Issue 3: Whether the Trust Board is estopped from challenging the Environment Court’s assessment of the cultural effects of the Application? Held: No
The High Court found that the Trust Board was estopped from challenging the Environment Court’s assessment of the cultural effects of the Application as the issue had been finally determined in the context of SKP’s rehearing application and the Trust Board was SKP’s privy.
Although SKP and the Trust Board shared a strong common interest in opposing the marina, they had different constituents, roles and responsibilities. Further, the possibility that the Trust Board would have submitted more comprehensive evidence on cultural effects to the Environment Court, if it had formally been a party to the rehearing application, could not be excluded. There is accordingly not such a union or nexus, community or mutuality of interest, that the Trust Board can fairly be considered to be SKP’s privy. No estoppel therefore arises.
Issue 4: Whether the Environment Court made material errors in its assessment of the cultural effects of the proposed marina? Held: No.
The Council’s failure to recognise the Trust Board as the authorised representative of Ngāti Paoa and to provide it with a copy of the Application was not materially causative of the Trust Board’s subsequent lack of involvement in the resource consent process.
The Application was publicly notified and widely publicised, as was the subsequent appeal to the Environment Court. The Trust Board had the opportunity to make a submission on the Application (or seek leave to be heard on the appeals) if it had been willing and able to do so. However, the Trust Board was dysfunctional and legally inoperative when the Application was publicly notified. It lacked a quorum and arguably had no valid trustees at all. Further, there is no evidential basis for assuming that the Trust Board would have participated in the resource consent process prior to March 2017, or to infer what it’s position would have been, even if it had been legally operative at that time. Following the election of 10 new trustees in March 2017, the Trust Board could have sought to (belatedly) become involved in the resource consent process and subsequent appeal hearings but did not do so. Again, this failure cannot be attributed to the Council.
In any event, as the High Court Judge observed, although the Trust Board did not participate in the resource consent process, any suggestion that Ngāti Paoa was shut out of the decision-making surrounding the marina is incorrect. Mr Morehu Wilson, a leading Ngāti Paoa kaumātua, gave evidence before the Environment Court on behalf of the Iwi Trust. At the time, Mr Wilson had been a Treaty settlement negotiator for Ngāti Paoa since 2011, with the mandate of the iwi. Mr Wilson’s evidence was that KPBL representatives held various consultative meetings with Ngāti Paoa rangatira, kaitiaki and members of the Board of Trustees of the Iwi Trust. It is common ground that Mr Wilson was widely respected for his great knowledge of Ngāti Paoa mātauranga. The Environment Court gave his evidence considerable weight.
As the Trust Board has failed to establish that the Environment Court made material errors in its assessment of the cultural effects of the proposed marina due to the Council’s failure to recognise the Trust Board as the authorised representative of Ngāti Paoa, there is no basis to grant the relief sought (such as the setting aside of the resource consents for the construction and operation of the marina).
The application to adduce further evidence is granted. The appeal is allowed in part. We make a declaration that the Council erred in determining (in 2013 and 2014) that the order made by the Māori Land Court under s 30 of Te Ture Whenua Maori Act 1993 (TTWMA) did not require it to recognise the Trust Board as the representative of Ngāti Paoa for the purposes of the Resource Management Act 1991. The appeal is otherwise dismissed.
The costs orders in the High Court are set aside. We refer the issue of costs back to that Court so that costs can be reassessed in light of this decision. We make no order as to costs in relation to the appeal.
Ngāti Paoa has been engaged in a leadership struggle for many years. The competing entities are the Ngāti Paoa Trust Board (the Trust Board) and the Ngāti Paoa Iwi Trust (the Iwi Trust). In 2009, the Māori Land Court made an order under s 30 of Te Ture Whenua Maori Act 1993 which recognised the Trust Board as the representative authority for Resource Management Act 1991 (RMA) purposes. In 2013, however, Auckland Council decided that, due to changed circumstances, it would recognise the Iwi Trust as the authorised representative of Ngāti Paoa for RMA purposes. The Council confirmed that decision in 2014.
In 2016, Kennedy Point Boatharbour Ltd (KPBL) applied to the Council for resource consent to construct and operate a marina at Kennedy Point, Pūtiki Bay on Waiheke Island (the Application). The Application was publicly notified and a copy of it was provided by the Council to the Iwi Trust, but not the Trust Board. The Iwi Trust ultimately supported the Application, subject to certain conditions. Following a hearing before independent commissioners, the Application was granted. In 2017, the Environment Court dismissed two appeals against that decision, including one by a community group, Save Kennedy Point (SKP).
SKP subsequently sought a rehearing of the appeals in the Environment Court based on new evidence, namely that the Trust Board (not the Iwi Trust) was the lawful authorised representative of Ngāti Paoa at the relevant time, and the Trust Board opposed the marina development. The rehearing application, which was supported by evidence from the Trust Board, was unsuccessful. An appeal to the High Court was unsuccessful. This Court and the Supreme Court declined leave for a further appeal.
The Trust Board then unsuccessfully brought judicial review proceedings in the High Court against the Auckland Council, the Environment Court and KPBL, challenging various aspects of the resource consent process. The Trust Board now appeals.
Issue 1: Whether the application to adduce further evidence should be granted? Held: Yes.
The further evidence was uncontentious and simply updated this Court on the progress of the marina development.
Issue 2: Whether the Council erred in 2013 and 2014 by not recognising the Trust Board as the authorised representative of Ngāti Paoa for RMA purposes? Held: Yes.
The s 30 order required the Council to recognise the Trust Board as the representative entity for Ngāti Paoa in relation to RMA matters. The s 30 order remained in force until it was amended or revoked by the Māori Land Court. It was not open to the Council to decide the order was no longer effective or legally operative and to decide instead to recognise the Iwi Trust as the authorised representative of Ngāti Paoa.
Issue 3: Whether the Trust Board is estopped from challenging the Environment Court’s assessment of the cultural effects of the Application? Held: No
The High Court found that the Trust Board was estopped from challenging the Environment Court’s assessment of the cultural effects of the Application as the issue had been finally determined in the context of SKP’s rehearing application and the Trust Board was SKP’s privy.
Although SKP and the Trust Board shared a strong common interest in opposing the marina, they had different constituents, roles and responsibilities. Further, the possibility that the Trust Board would have submitted more comprehensive evidence on cultural effects to the Environment Court, if it had formally been a party to the rehearing application, could not be excluded. There is accordingly not such a union or nexus, community or mutuality of interest, that the Trust Board can fairly be considered to be SKP’s privy. No estoppel therefore arises.
Issue 4: Whether the Environment Court made material errors in its assessment of the cultural effects of the proposed marina? Held: No.
The Council’s failure to recognise the Trust Board as the authorised representative of Ngāti Paoa and to provide it with a copy of the Application was not materially causative of the Trust Board’s subsequent lack of involvement in the resource consent process.
The Application was publicly notified and widely publicised, as was the subsequent appeal to the Environment Court. The Trust Board had the opportunity to make a submission on the Application (or seek leave to be heard on the appeals) if it had been willing and able to do so. However, the Trust Board was dysfunctional and legally inoperative when the Application was publicly notified. It lacked a quorum and arguably had no valid trustees at all. Further, there is no evidential basis for assuming that the Trust Board would have participated in the resource consent process prior to March 2017, or to infer what it’s position would have been, even if it had been legally operative at that time. Following the election of 10 new trustees in March 2017, the Trust Board could have sought to (belatedly) become involved in the resource consent process and subsequent appeal hearings but did not do so. Again, this failure cannot be attributed to the Council.
In any event, as the High Court Judge observed, although the Trust Board did not participate in the resource consent process, any suggestion that Ngāti Paoa was shut out of the decision-making surrounding the marina is incorrect. Mr Morehu Wilson, a leading Ngāti Paoa kaumātua, gave evidence before the Environment Court on behalf of the Iwi Trust. At the time, Mr Wilson had been a Treaty settlement negotiator for Ngāti Paoa since 2011, with the mandate of the iwi. Mr Wilson’s evidence was that KPBL representatives held various consultative meetings with Ngāti Paoa rangatira, kaitiaki and members of the Board of Trustees of the Iwi Trust. It is common ground that Mr Wilson was widely respected for his great knowledge of Ngāti Paoa mātauranga. The Environment Court gave his evidence considerable weight.
As the Trust Board has failed to establish that the Environment Court made material errors in its assessment of the cultural effects of the proposed marina due to the Council’s failure to recognise the Trust Board as the authorised representative of Ngāti Paoa, there is no basis to grant the relief sought (such as the setting aside of the resource consents for the construction and operation of the marina).
Case name
Case number
[2024] NZCA 435
Date of Judgment
11 September 2024
Summary
The Attorney-General and the Registrar of the Supreme Court, the appellants, applied for Vincent Siemer, the respondent, to be made subject to an order under s 166 of the Senior Courts Act 2016 preventing him from bringing civil proceedings without leave. Duffy J ruled that a number of court minutes and judgments issued in proceedings commenced by Mr Siemer were inadmissible in support of the applications. This was primarily because of s 50 of the Evidence Act 2006 which provides that evidence of “a judgment or a finding of fact in a civil proceeding” is inadmissible in another civil proceeding to “prove the existence of a fact that was in issue in the proceeding in which the judgment was given”. The Judge also consolidated the applications.
Held: the appeal is allowed in part. The judgments and minutes are admissible. The appeal against consolidation is dismissed.
The Judge erred in finding the judgments and minutes were inadmissible for the following reasons. First, judgments issued in proceedings that a judge must review under s 166 of the Senior Courts Act to determine if they are or were totally without merit must be part of the review. They are the culmination and an authentic and reliable record of the proceedings. Secondly, the correctness of the judgments is not in issue because a judge will “carefully review the reasoning in the judgments” as a record of the causes of action argued and their outcome, but will make his or her own assessment of whether the proceedings were totally without merit. This also meant they were not “hearsay opinion evidence” as the Judge had also found. Thirdly, judgments and minutes were admissible under s 50 under the previous jurisdiction in the Judicature Act 1908. Fourthly, the primary concerns that underlie s 50 are not engaged because Mr Siemer is not a stranger to the judgments that relate to proceedings he has commenced and his commencement and conduct of them are directly relevant. Fifthly, a court should not only rely on pleadings, applications and affidavits or agreed facts in determining the application because judgments or minutes provide the court with the nature and context of the proceedings, and the outcome and reasons for that outcome. Finally, the judgments are relevant and their probative value outweighs any prejudicial effect. If the judgments made findings of fact at issue in the s 166 application the judge will not be able to rely on that finding for its truth and a judge can ignore any irrelevant material.
It was open to the Judge to consolidate the proceedings. Rule 10.12 of the High Court Rules 2016 does not preclude consolidation because one of the applications is an originating application and the other is an interlocutory application. There are efficiencies from consolidation because there are common questions of law or fact and the s 166 applications may determine the substantive proceeding for the interlocutory application. It was open to the Judge to give greater weight to these efficiencies than the fact that one of the proceedings was ready for hearing. Consolidation also ensure that the common issues would be dealt with consistently.
Held: the appeal is allowed in part. The judgments and minutes are admissible. The appeal against consolidation is dismissed.
The Judge erred in finding the judgments and minutes were inadmissible for the following reasons. First, judgments issued in proceedings that a judge must review under s 166 of the Senior Courts Act to determine if they are or were totally without merit must be part of the review. They are the culmination and an authentic and reliable record of the proceedings. Secondly, the correctness of the judgments is not in issue because a judge will “carefully review the reasoning in the judgments” as a record of the causes of action argued and their outcome, but will make his or her own assessment of whether the proceedings were totally without merit. This also meant they were not “hearsay opinion evidence” as the Judge had also found. Thirdly, judgments and minutes were admissible under s 50 under the previous jurisdiction in the Judicature Act 1908. Fourthly, the primary concerns that underlie s 50 are not engaged because Mr Siemer is not a stranger to the judgments that relate to proceedings he has commenced and his commencement and conduct of them are directly relevant. Fifthly, a court should not only rely on pleadings, applications and affidavits or agreed facts in determining the application because judgments or minutes provide the court with the nature and context of the proceedings, and the outcome and reasons for that outcome. Finally, the judgments are relevant and their probative value outweighs any prejudicial effect. If the judgments made findings of fact at issue in the s 166 application the judge will not be able to rely on that finding for its truth and a judge can ignore any irrelevant material.
It was open to the Judge to consolidate the proceedings. Rule 10.12 of the High Court Rules 2016 does not preclude consolidation because one of the applications is an originating application and the other is an interlocutory application. There are efficiencies from consolidation because there are common questions of law or fact and the s 166 applications may determine the substantive proceeding for the interlocutory application. It was open to the Judge to give greater weight to these efficiencies than the fact that one of the proceedings was ready for hearing. Consolidation also ensure that the common issues would be dealt with consistently.
Case name
Case number
[2024] NZCA 334
Summary
The Court of Appeal has dismissed Ms Shute's appeals against her sentence and the refusal to grant permanent name suppression. Ms Shute's sentence of two years and two months' imprisonment for manslaughter is upheld, and her name may be published in connection with the death of Connor Boyd.
Case number
[2024] NZCA 419
Date of Judgment
05 September 2024
Summary
Three strikes -third strike -mandatory maximum sentence -arbitrary detention -criminal sentencing -New Zealand Bill of Rights Act -compensation -prosecutorial discretion
Result: appeal allowed. Judgment of the High Court set aside. There is no order for costs.
Background: Mr Fitzgerald was prosecuted for indecent assault. At the time, indecent assault was, for Mr Fitzgerald, his third strike under the three strikes regime. Accordingly, the sentencing Judge imposed the maximum penalty, being seven years' imprisonment. Mr Fitzgerald appealed unsuccessfully to this Court, but successfully to the Supreme Court. The Supreme Court held that the seven-year term breached Mr Fitzgerald's right under s 9 of the New Zealand Bill of Rights Act 1990 not to subject to disproportionately severe punishment. A rights-consistent interpretation of three strikes meant it should be read as subject to the proviso that the maximum sentence should not be imposed if it would breach s 9. Mr Fitzgerald's sentence had therefore been imposed in error of law. Mr Fitzgerald was resentenced to a term of six months' imprisonment, which by that stage he had already served.
Mr Fitzgerald then bought a claim in damages against the Crown based on the breach of his s 9 right. In the High Court, Ellis J held that, at the point where Mr Fitzgerald's detention became grossly disproportionate to his offending, his continued detention became arbitrary, and in breach of the right not to be arbitrarily detained in s 22 of the Bill of Rights Act. She assessed this arbitrary detention as being for approximately 44 months. The Judge held the breach was the consequence of the action of the Crown prosecutor laying the charge of indecent assault. The prosecutor had a duty to prefer a different charge where proceeding with the charge of indecent assault would result in the foreseeable and likely (because of the operation of the three strikes regime as then understood) grossly disproportionate sentence. She awarded Mr Fitzgerald $450,000 in damages together with interest.
The Attorney-General appealed.
Issue: did the Judge err in finding the Crown prosecutor was liable for the breach of Mr Fitzgerald's s 9 right not to be subject to grossly disproportionate treatment, and that Mr Fitzgerald should be compensated by way of a damages award?
Held: Yes. The sentence ultimately imposed, and the corresponding breach of Mr Fitzgerald's rights, was the act of the sentencing Judge, not the prosecutor. Once the charge had been laid, it was open to the sentencing Judge to not sentence Mr Fitzgerald to the maximum term, in accordance with the approach taken by the Supreme Court in Mr Fitzgerald's sentence appeal, and accordingly avoid the breach of Mr Fitzgerald's rights. The prosecutor cannot be liable for the breach of Mr Fitzgerald's rights as a result of the sentence imposed by the sentencing Judge.
There are instances where courts can inquire into exercises of prosecutorial discretion. When selecting a charge, a prosecutor should be mindful of the Solicitor-General's Prosecution Guidelines and Bill of Rights Act considerations. However, the result of that review cannot be to require a prosecutor not to proceed with an (otherwise appropriate) charge because of the mandatory minimum sentence legislated by Parliament. In the present case, as the likely penalty was the only factor pointing away from prosecution, which in any event is a matter for the sentencing Judge, the decision to proceed with the charge of indecent assault cannot be criticised.
Miller J provided further reasons on causation. Miller J concluded that the length of Mr Fitzgerald's detention could be attributed to judicial decision: first to impose the sentence, and then to uphold it on appeal, necessitating a second appeal to the Supreme Court. Likewise, the length of time taken between the second and first sentences was too remote to be attributed to the prosecutor's original decision to pursue the indecent assault charge.
Result: appeal allowed. Judgment of the High Court set aside. There is no order for costs.
Background: Mr Fitzgerald was prosecuted for indecent assault. At the time, indecent assault was, for Mr Fitzgerald, his third strike under the three strikes regime. Accordingly, the sentencing Judge imposed the maximum penalty, being seven years' imprisonment. Mr Fitzgerald appealed unsuccessfully to this Court, but successfully to the Supreme Court. The Supreme Court held that the seven-year term breached Mr Fitzgerald's right under s 9 of the New Zealand Bill of Rights Act 1990 not to subject to disproportionately severe punishment. A rights-consistent interpretation of three strikes meant it should be read as subject to the proviso that the maximum sentence should not be imposed if it would breach s 9. Mr Fitzgerald's sentence had therefore been imposed in error of law. Mr Fitzgerald was resentenced to a term of six months' imprisonment, which by that stage he had already served.
Mr Fitzgerald then bought a claim in damages against the Crown based on the breach of his s 9 right. In the High Court, Ellis J held that, at the point where Mr Fitzgerald's detention became grossly disproportionate to his offending, his continued detention became arbitrary, and in breach of the right not to be arbitrarily detained in s 22 of the Bill of Rights Act. She assessed this arbitrary detention as being for approximately 44 months. The Judge held the breach was the consequence of the action of the Crown prosecutor laying the charge of indecent assault. The prosecutor had a duty to prefer a different charge where proceeding with the charge of indecent assault would result in the foreseeable and likely (because of the operation of the three strikes regime as then understood) grossly disproportionate sentence. She awarded Mr Fitzgerald $450,000 in damages together with interest.
The Attorney-General appealed.
Issue: did the Judge err in finding the Crown prosecutor was liable for the breach of Mr Fitzgerald's s 9 right not to be subject to grossly disproportionate treatment, and that Mr Fitzgerald should be compensated by way of a damages award?
Held: Yes. The sentence ultimately imposed, and the corresponding breach of Mr Fitzgerald's rights, was the act of the sentencing Judge, not the prosecutor. Once the charge had been laid, it was open to the sentencing Judge to not sentence Mr Fitzgerald to the maximum term, in accordance with the approach taken by the Supreme Court in Mr Fitzgerald's sentence appeal, and accordingly avoid the breach of Mr Fitzgerald's rights. The prosecutor cannot be liable for the breach of Mr Fitzgerald's rights as a result of the sentence imposed by the sentencing Judge.
There are instances where courts can inquire into exercises of prosecutorial discretion. When selecting a charge, a prosecutor should be mindful of the Solicitor-General's Prosecution Guidelines and Bill of Rights Act considerations. However, the result of that review cannot be to require a prosecutor not to proceed with an (otherwise appropriate) charge because of the mandatory minimum sentence legislated by Parliament. In the present case, as the likely penalty was the only factor pointing away from prosecution, which in any event is a matter for the sentencing Judge, the decision to proceed with the charge of indecent assault cannot be criticised.
Miller J provided further reasons on causation. Miller J concluded that the length of Mr Fitzgerald's detention could be attributed to judicial decision: first to impose the sentence, and then to uphold it on appeal, necessitating a second appeal to the Supreme Court. Likewise, the length of time taken between the second and first sentences was too remote to be attributed to the prosecutor's original decision to pursue the indecent assault charge.
Media Release
- MR [2024] NZCA 419 (PDF, 213 KB)
Case name
Case number
[2024] NZCA 403
Date of Judgment
26 August 2024
Summary
Employment Relations Act 2000, s 214 – Employment Relations Act, s 6 – Employment status of Uber drivers – Approach to s 6 of the Employment Relations Act – Appeal dismissed
Four Uber drivers sought declarations of their employment status in the Employment Court. Chief Judge Inglis granted a declaration that the four Uber drivers were employees of one or more of the appellant companies for the purposes of the Employment Relations Act 2000 (ERA): E Tū Inc v Rasier Operations BV [2022] NZEmpC 192, (2022) 19 NZELR 475 (EC judgment).
Leave was granted for the appellant companies (Uber) to appeal from the EC judgment to this Court under s 214 of the ERA on the following questions of law:
a) Did the Employment Court err by misdirecting itself on the application of s 6 of the ERA, which sets out the definition of the term “employee” for the purposes of the ERA?
b) Did the Employment Court err by misapplying the test in s 6, or was the Court’s conclusion so insupportable as to amount to an error of law?
c) Did the Employment Court err in finding that joint employment may arise in New Zealand simply as a result of a number of entities being sufficiently connected and exercising common control over an employee? This issue was not pursued by Uber at the hearing of the appeal.
Uber submitted that the Chief Judge’s observations and her application of s 6 involved misdirections and errors of law. Uber argued that her approach was inconsistent with the text of s 6 and with the guidance provided by the Supreme Court in Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721. The respondent unions submitted that Uber had misconstrued the aspects of the EC judgment it was criticising, and the EC judgment reflected an orthodox approach to the interpretation and application of s 6 of the ERA by reference to the Supreme Court's guidance in Bryson. Business New Zealand and the New Zealand Council of Trade Unions were granted leave to intervene and provided submissions on the operation of s 6 in the context of new ways of working involving online platforms.
Held: the appeal is dismissed.
Did the Employment Court err by misdirecting itself on the application of s 6 of the ERA?
As the Supreme Court noted in Bryson, s 6 of the ERA incorporates the legal concept of a contract of service, and defines an employee in terms which largely reflect the common law. As a matter of common law prior to the ERA being enacted, it was well established that in determining whether a contract was a contract of service, the focus must be on the substance of the parties’ mutual rights and obligations, considered objectively and in light of all the surrounding circumstances, and whether the key substantive features of a contract of service are present. The courts developed three tests to assist in resolving this question: the control test, the integration test, and the fundamental test (was the worker providing services in the course of carrying on business on their own account?)
In applying s 6, it is helpful to distinguish between two stages in the inquiry. The first stage involves identifying the substance of the parties’ mutual rights and obligations as a matter of reality. The second stage involves determining whether those rights and obligations amount to a contract of service by applying the common law test for what qualifies as a contract of service to the real (substantive) relationship between the parties. That test turns on the control test, the integration test, and the fundamental test.
Section 6 reinforces the common law requirement to focus on the substance of the parties’ agreement when determining their mutual rights and obligations and emphasises the importance of the real nature of the relationship, ascertained by reference to how that relationship operates in practice. Labels used by the parties are not determinative. Provisions in the agreement which are designed to convey the impression that the relationship of the parties differs from what it is as a matter of substance and reality must be set to one side. An employer cannot use their superior bargaining power to include in a contract of service, frequently proffered on a “take it or leave it” basis, labels or other terms designed to make that contract appear to be something other than that which it in reality is.
This Court has concluded that the Chief Judge misdirected herself in the way she framed the s 6 test; in failing to take as a starting point of the inquiry the express terms of the agreement and other relevant contractual documents; and in the approach she adopted to the common law tests.
In framing the s 6 test, the Chief Judge placed emphasis on the perceived vulnerability of the drivers, and encapsulated the test as being whether, construed purposively, s 6 was intended to apply to the relationship between Uber and drivers when viewed realistically. This approach risks distracting attention from the well-established tests. The Chief Judge placed a gloss on the s 6 test as explained in Bryson which adds unnecessary complexity and uncertainty. This is an error of law.
As regards the contractual documents, the Chief Judge touched on some of the terms in the agreement between Uber and the drivers, and some of the other contractual documents in her analysis. But the Chief Judge did not begin her analysis by reviewing the relevant features of those documents with a view to ascertaining the substance and nature of the agreement as recorded; and she did not systematically review the substance of the parties’ rights and obligations by reference to the three common law tests. Given the nature of Uber’s argument that drivers operate their own transportation service business, and do not provide transportation services to Uber, but rather to riders and eaters, it was necessary for the Chief Judge to closely consider the contractual matrix to understand and characterise the relationship between the parties.
The Chief Judge “infused” the three limbs of the common law test into her (differently structured) inquiries. It would have been more helpful to deploy the test explicitly, but such a reordering would not have been a misdirection in and of itself were it not for the way the fundamental test was framed, which was in terms of “who benefitted from the work undertaken by the ... drivers” and “who was working for whose interests”. This formulation is materially different from the proper formulation of the fundamental test, and would lead to an overly broad approach to who is an employee.
Whether one focuses on the specific aspects of the Chief Judge’s approach or the overall thrust of the judgment, there were material misdirections in relation to the s 6 test. The answer to question 1 is “yes”.
Did the Employment Court err by misapplying the test in s 6, or was the Court’s conclusion so insupportable as to amount to an error of law?
It is unnecessary to answer this question in light of the answer to question 1.
Applying the s 6 test to the four drivers
This Court was urged by Uber and the respondent unions to go on and apply the correct test under s 6 of the ERA if we considered the Chief Judge had misdirected herself in relation to that test, or erred in law in its application. We are satisfied that it is appropriate to do so. This Court has all the relevant evidence, there is no material factual contest between the parties, and it is in the interests of justice that the question be determined now.
The starting point is the matrix of documents with contractual effect, because the s 6 inquiry is concerned with the real nature of the parties’ substantive mutual rights and obligations. The agreement between Uber and drivers, and the associated documents, are all drafted by Uber, and are put to drivers on a take it or leave it basis. They are complex and sophisticated, and reflect Uber’s preferred view of the relationship between it, drivers and riders.
Leaving to one side the express provisions about the nature of the relationship between Uber and drivers, the substantive rights and obligations described in the agreement between Uber and drivers do not on their face appear to give rise to an employment relationship because the agreement is not a contract under which drivers do work for hire or reward. But when the agreement is reviewed against the reality of the relationship between Uber and drivers, many of the provisions designed to point away from employee status are window dressing. Uber has a high level of unilateral control over the documents with contractual force and over the day-to-day operation of the relationship, in a manner and to an extent which renders ineffective many of the rights which drivers appear to have on the face of the agreement.
Section 6(3)(a) requires the court to have regard to any matters that indicate the intention of the parties. Labels placed on the relationship are not determinative, as s 6(3)(b) confirms. This reference to the intention of the parties must be a reference to the parties’ common intention about the substance of the parties’ mutual rights and obligations, objectively ascertained. It is not a reference to the parties’ separate subjective intentions about employment status. In this case we do not consider that there are any indications of the parties’ common intention that provide material assistance, other than the indications of intention implicit in the objectively ascertained mutual rights and obligations of the parties having regard to the contractual matrix and the realities of the parties’ relationship.
Applying the common law tests – control, integration, and the fundamental test – Uber exercises some control over when and where drivers log in, and when they log out, through various incentive structures. But drivers have control over whether they drive for Uber, and when and where they work. The limited extent of control exercised by Uber when a driver is not logged in is inconsistent with employment at those times. But when a driver is logged into the Uber driver app, Uber exercises a high level of control over nearly every facet of the manner in which a driver provides services to riders, and over the payment for those services. This level of control while a driver is logged in is consistent with an employment relationship during those periods.
The integration test assesses the extent to which the individual is “part and parcel” of, or integrated into, the relevant business. While traditional forms of integration – uniforms, vehicles having Uber signage, and drivers congregating in the same place to work together – are not present, drivers are integral to Uber’s business and are the public face of the Uber brand. Overall, we do not consider integration is a strong indicator in relation to employment status in the present case.
Turning to the fundamental test, there are a number of factors that are consistent with drivers operating their own business. However when one focusses on the realities of the relationship, it is clear that drivers are not in business on their own account. Critically, while a driver is logged into the Uber driver app, they have no opportunity to establish any business goodwill of their own, or to influence the quantity and quality of the work they receive, and the revenue from that work, except to the extent that Uber facilitates that. They cannot bargain with Uber for preference in relation to access to ride requests, information about rides, or supplementary payments. Drivers cannot in reality be said to be carrying on transport service businesses on their own account when they are logged into the Uber driver app.
In respect of the four drivers, the s 6 test was therefore met. The real nature of the relationship between the drivers and Uber was that they were employees of Uber at the times they were logged into the Uber driver app. The conclusion reached by the Chief Judge was correct. The appeal is dismissed.
Four Uber drivers sought declarations of their employment status in the Employment Court. Chief Judge Inglis granted a declaration that the four Uber drivers were employees of one or more of the appellant companies for the purposes of the Employment Relations Act 2000 (ERA): E Tū Inc v Rasier Operations BV [2022] NZEmpC 192, (2022) 19 NZELR 475 (EC judgment).
Leave was granted for the appellant companies (Uber) to appeal from the EC judgment to this Court under s 214 of the ERA on the following questions of law:
a) Did the Employment Court err by misdirecting itself on the application of s 6 of the ERA, which sets out the definition of the term “employee” for the purposes of the ERA?
b) Did the Employment Court err by misapplying the test in s 6, or was the Court’s conclusion so insupportable as to amount to an error of law?
c) Did the Employment Court err in finding that joint employment may arise in New Zealand simply as a result of a number of entities being sufficiently connected and exercising common control over an employee? This issue was not pursued by Uber at the hearing of the appeal.
Uber submitted that the Chief Judge’s observations and her application of s 6 involved misdirections and errors of law. Uber argued that her approach was inconsistent with the text of s 6 and with the guidance provided by the Supreme Court in Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721. The respondent unions submitted that Uber had misconstrued the aspects of the EC judgment it was criticising, and the EC judgment reflected an orthodox approach to the interpretation and application of s 6 of the ERA by reference to the Supreme Court's guidance in Bryson. Business New Zealand and the New Zealand Council of Trade Unions were granted leave to intervene and provided submissions on the operation of s 6 in the context of new ways of working involving online platforms.
Held: the appeal is dismissed.
Did the Employment Court err by misdirecting itself on the application of s 6 of the ERA?
As the Supreme Court noted in Bryson, s 6 of the ERA incorporates the legal concept of a contract of service, and defines an employee in terms which largely reflect the common law. As a matter of common law prior to the ERA being enacted, it was well established that in determining whether a contract was a contract of service, the focus must be on the substance of the parties’ mutual rights and obligations, considered objectively and in light of all the surrounding circumstances, and whether the key substantive features of a contract of service are present. The courts developed three tests to assist in resolving this question: the control test, the integration test, and the fundamental test (was the worker providing services in the course of carrying on business on their own account?)
In applying s 6, it is helpful to distinguish between two stages in the inquiry. The first stage involves identifying the substance of the parties’ mutual rights and obligations as a matter of reality. The second stage involves determining whether those rights and obligations amount to a contract of service by applying the common law test for what qualifies as a contract of service to the real (substantive) relationship between the parties. That test turns on the control test, the integration test, and the fundamental test.
Section 6 reinforces the common law requirement to focus on the substance of the parties’ agreement when determining their mutual rights and obligations and emphasises the importance of the real nature of the relationship, ascertained by reference to how that relationship operates in practice. Labels used by the parties are not determinative. Provisions in the agreement which are designed to convey the impression that the relationship of the parties differs from what it is as a matter of substance and reality must be set to one side. An employer cannot use their superior bargaining power to include in a contract of service, frequently proffered on a “take it or leave it” basis, labels or other terms designed to make that contract appear to be something other than that which it in reality is.
This Court has concluded that the Chief Judge misdirected herself in the way she framed the s 6 test; in failing to take as a starting point of the inquiry the express terms of the agreement and other relevant contractual documents; and in the approach she adopted to the common law tests.
In framing the s 6 test, the Chief Judge placed emphasis on the perceived vulnerability of the drivers, and encapsulated the test as being whether, construed purposively, s 6 was intended to apply to the relationship between Uber and drivers when viewed realistically. This approach risks distracting attention from the well-established tests. The Chief Judge placed a gloss on the s 6 test as explained in Bryson which adds unnecessary complexity and uncertainty. This is an error of law.
As regards the contractual documents, the Chief Judge touched on some of the terms in the agreement between Uber and the drivers, and some of the other contractual documents in her analysis. But the Chief Judge did not begin her analysis by reviewing the relevant features of those documents with a view to ascertaining the substance and nature of the agreement as recorded; and she did not systematically review the substance of the parties’ rights and obligations by reference to the three common law tests. Given the nature of Uber’s argument that drivers operate their own transportation service business, and do not provide transportation services to Uber, but rather to riders and eaters, it was necessary for the Chief Judge to closely consider the contractual matrix to understand and characterise the relationship between the parties.
The Chief Judge “infused” the three limbs of the common law test into her (differently structured) inquiries. It would have been more helpful to deploy the test explicitly, but such a reordering would not have been a misdirection in and of itself were it not for the way the fundamental test was framed, which was in terms of “who benefitted from the work undertaken by the ... drivers” and “who was working for whose interests”. This formulation is materially different from the proper formulation of the fundamental test, and would lead to an overly broad approach to who is an employee.
Whether one focuses on the specific aspects of the Chief Judge’s approach or the overall thrust of the judgment, there were material misdirections in relation to the s 6 test. The answer to question 1 is “yes”.
Did the Employment Court err by misapplying the test in s 6, or was the Court’s conclusion so insupportable as to amount to an error of law?
It is unnecessary to answer this question in light of the answer to question 1.
Applying the s 6 test to the four drivers
This Court was urged by Uber and the respondent unions to go on and apply the correct test under s 6 of the ERA if we considered the Chief Judge had misdirected herself in relation to that test, or erred in law in its application. We are satisfied that it is appropriate to do so. This Court has all the relevant evidence, there is no material factual contest between the parties, and it is in the interests of justice that the question be determined now.
The starting point is the matrix of documents with contractual effect, because the s 6 inquiry is concerned with the real nature of the parties’ substantive mutual rights and obligations. The agreement between Uber and drivers, and the associated documents, are all drafted by Uber, and are put to drivers on a take it or leave it basis. They are complex and sophisticated, and reflect Uber’s preferred view of the relationship between it, drivers and riders.
Leaving to one side the express provisions about the nature of the relationship between Uber and drivers, the substantive rights and obligations described in the agreement between Uber and drivers do not on their face appear to give rise to an employment relationship because the agreement is not a contract under which drivers do work for hire or reward. But when the agreement is reviewed against the reality of the relationship between Uber and drivers, many of the provisions designed to point away from employee status are window dressing. Uber has a high level of unilateral control over the documents with contractual force and over the day-to-day operation of the relationship, in a manner and to an extent which renders ineffective many of the rights which drivers appear to have on the face of the agreement.
Section 6(3)(a) requires the court to have regard to any matters that indicate the intention of the parties. Labels placed on the relationship are not determinative, as s 6(3)(b) confirms. This reference to the intention of the parties must be a reference to the parties’ common intention about the substance of the parties’ mutual rights and obligations, objectively ascertained. It is not a reference to the parties’ separate subjective intentions about employment status. In this case we do not consider that there are any indications of the parties’ common intention that provide material assistance, other than the indications of intention implicit in the objectively ascertained mutual rights and obligations of the parties having regard to the contractual matrix and the realities of the parties’ relationship.
Applying the common law tests – control, integration, and the fundamental test – Uber exercises some control over when and where drivers log in, and when they log out, through various incentive structures. But drivers have control over whether they drive for Uber, and when and where they work. The limited extent of control exercised by Uber when a driver is not logged in is inconsistent with employment at those times. But when a driver is logged into the Uber driver app, Uber exercises a high level of control over nearly every facet of the manner in which a driver provides services to riders, and over the payment for those services. This level of control while a driver is logged in is consistent with an employment relationship during those periods.
The integration test assesses the extent to which the individual is “part and parcel” of, or integrated into, the relevant business. While traditional forms of integration – uniforms, vehicles having Uber signage, and drivers congregating in the same place to work together – are not present, drivers are integral to Uber’s business and are the public face of the Uber brand. Overall, we do not consider integration is a strong indicator in relation to employment status in the present case.
Turning to the fundamental test, there are a number of factors that are consistent with drivers operating their own business. However when one focusses on the realities of the relationship, it is clear that drivers are not in business on their own account. Critically, while a driver is logged into the Uber driver app, they have no opportunity to establish any business goodwill of their own, or to influence the quantity and quality of the work they receive, and the revenue from that work, except to the extent that Uber facilitates that. They cannot bargain with Uber for preference in relation to access to ride requests, information about rides, or supplementary payments. Drivers cannot in reality be said to be carrying on transport service businesses on their own account when they are logged into the Uber driver app.
In respect of the four drivers, the s 6 test was therefore met. The real nature of the relationship between the drivers and Uber was that they were employees of Uber at the times they were logged into the Uber driver app. The conclusion reached by the Chief Judge was correct. The appeal is dismissed.