Court of Appeal Judgments of Public Interest
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Case name
Case number
[2024] NZCA 692
Date of Judgment
19 December 2024
Summary
New Zealand Bill of Rights Act 1990 - Treaty of Waitangi - climate change
The appellant, Mr Smith, is an environmental advocate and elder of Ngāpuhi and Ngāti Kahu. He is the plaintiff in a claim against seven New Zealand companies for their contribution to the adverse effects of climate change that survived a strike out application following a decision of the Supreme Court earlier this year.
This appeal concerns Mr Smith’s separate claim against the Crown in relation to the adverse effects of climate change. Mr Smith alleges that hundreds of sites of special cultural, historical and spiritual significance to his iwi have already been impacted or will be impacted by climate change, specifically those in the vicinity of the Mahinepua C Block, whenua with which he has a close connection. He brings this claim on behalf of his whānau, members of his iwi and future descendants.
He says that New Zealand’s legislative framework responding to climate change, primarily the Climate Change Response Act 2002 (the CCRA), is inadequate to provide rational and effective deterrence of the real and immediate risk that Mr Smith and those he represents will be deprived of their right to life under s 8 of the New Zealand Bill of Rights Act 1990 (NZBORA) and their right to culture under s 20 of NZBORA. He further says their right to life and their right to culture is breached because the Crown does not measure or monitor its own emissions and does not have a regulatory framework to mitigate its own emissions. He also says the inadequate framework under the CCRA and the absence of a framework for Crown emissions breaches te Tiriti, a fiduciary duty and/or a novel common law duty. He seeks declarations to this effect as well as reporting orders requiring the Crown to update the court of the steps it is taking to bring itself into a position of compliance with NZBORA (including the possibility for further relief).
Grice J in the High Court granted the Crown's application to strike out the claims. Mr Smith appeals from that decision.
Held: The appeal is dismissed.
Right to life
The Court examined Mr Smith's right to life claim through six questions:
a) whether the right to life includes a right to a life with dignity;
b) whether widespread effects prevent the engagement of the right to life;
c) whether the risks from climate change are sufficiently proximate;
d) whether the right to life can impose positive duties;
e) whether it is tenable that New Zealand's regulatory framework breached the right to life; and
f) whether reporting orders are tenably available.
On the first question, it is not clearly untenable that the right to life includes a right to a minimum baseline as to the quality of one’s life and is engaged in the context of the potential impacts of climate change. This approach is not necessarily inconsistent with the words of s 8 or earlier authority, is consistent with international jurisprudence on equivalent rights and could be necessary to give the right to life its “full measure”.
On the second question, the claim is not clearly untenable on the basis that the alleged risk to life potentially affects a large group or all of the population.
On the third question, overseas jurisprudence on equivalent rights requires that a risk to life be reasonably foreseeable and sufficiently timely and physically proximate to be engaged. The scientific consensus articulated in the ICCPR reports is relevant to the imminence of the risk to life from climate change and the timeframe within which measures are available to address this risk. Whether the risk to life pleaded by Mr Smith is sufficiently timely and proximate to engage the right to life in NZBORA would require further particulars and would be a matter of evidence for trial. While proof would be challenging, as this would be a matter of evidence for trial this aspect is not so clearly untenable that the claim should be struck out on this basis.
On the fourth question, given the context of the climate emergency and the developing jurisprudence around the world responding to this challenge, it is not clearly untenable that the right to life in NZBORA encompasses a requirement on the Crown to take protective measures against foreseeable threats to life so as to give practical effect to the right.
On the fifth question, the pleaded claim challenged the efficacy of the legislative framework responding to climate change which reflected Parliament’s policy choices. The claim largely relied on jurisprudence on art 2 of the European Convention on Human Rights which had been interpreted to impose substantive obligations on states to have a legislative and administrative framework designed to provide effective deterrence against threats to the right to life. If a legislative and administrative framework is in place, the state was allowed a wide margin of appreciation, but the efficacy of the framework could still be considered and might be found to breach art 2. In the present case, the CCRA is New Zealand’s primary framework for responding to the threats that climate change presents. The pleaded deficiencies in the CCRA framework reflect policy choices that are for Parliament under New Zealand’s constitutional arrangements and it is not for this Court to second guess them. The CCRA is comprehensive in its reach and the accountability mechanisms for decisions made under it included consultation, judicial review and potentially NZBORA claims in respect of those decisions. It is the decisions that are made under the CCRA that will determine the adequacy or otherwise of New Zealand’s response to climate change. Judicial review claims of these decisions is available and would be brought against the Minister responsible for the particular decision rather than against the Attorney-General as here. The pleaded claim under s 8 of NZBORA is clearly untenable and the Attorney-General is therefore entitled to an order striking it out.
On the sixth question, although there is jurisdiction to grant declarations of inconsistency with NZBORA, the court’s institutional role did not encompass an ongoing monitoring role of the measures the Crown is implementing in response to climate change. The reporting orders sought would not have been available even if the s 8 claim had been tenable.
Right to culture
It is not clearly untenable that climate change may give rise to a positive obligation on the Crown to protect against a denial of the right to culture under s 20 of NZBORA. It is not any damage to the whenua or sites of cultural significance that could give rise to any such obligation. A substantial interference amounting to a denial of the right would be necessary.
The pleaded claim is that s 20 is breached because the regulatory framework does not provide a rational and effective deterrent of the pleaded real and imminent risk to the right of Mr Smith and those he represents to enjoy their culture. This pleaded claim is clearly untenable for the same reasons as the right to life claim. The pleaded deficiencies of the CCRA framework reflect policy choices that are for Parliament.
Te Tiriti breach
The claim of a breach of te Tiriti is clearly untenable because the CCRA and other relevant Acts give effect to the Crown’s obligations under the Treaty. The CCRA could not be said to breach the Treaty where decisions consistent with Treaty principles are available to decision-makers. If decisions have been made lawfully under legislation that gives effect to the Crown’s Treaty obligations, there is no room for a claim to operate that the Treaty had been breached. If the decisions have not been made lawfully, Mr Smith’s remedy is judicial review in respect of that decision against the decision-maker under the relevant legislation. There are also other remedial avenues available for decisions made under the CCRA including a claim under s 20 of NZBORA if the basis for such a claim arises and under the Waitangi Tribunal’s jurisdiction.
Te Tiriti fiduciary duty
Mr Smith claims that the Crown owes fiduciary or fiduciary-like duties to Mr Smith, his whānau, Ngāpuhi and Ngāti Kahu which includes duties to perform the commitments undertaken in te Tiriti, to take active steps to ensure those commitments are honoured and to act in good faith. He claims that the Crown has breached these duties.
The claimed fiduciary duty is unlike specific fiduciary duties that can arise between the Crown and certain Māori as a result of particular dealings between them. The pleaded claim is inconsistent with the nature of fiduciary duties because the response to climate change requires the Crown to represent and must balance many interests — it could not just act in the interests of the pleaded beneficiaries. The duty would also sit uneasily with the statutory scheme in the CCRA which reflected the range of considerations relevant to the Crown’s response to climate change (of which the effect on Māori communities was undoubtedly an important one).
Novel common law duty
The parts of the pleaded novel common law duty relying on NZBORA and the Treaty are untenable and therefore do not add to the case for the pleaded novel common law claim. The claim primarily relied upon a public trust doctrine which had been applied at common law to provide rights of access to the seashore and navigable waters, a context a long way from the extensive duty pleaded in relation to climate change. The boundaries of the public trust doctrine are imprecise and fluid, and raised a host of conceptual problems in imposing fiduciary or trust-like obligations on the Crown. The doctrine could also only operate to the extent that it was not displaced by legislation. The comprehensive framework that the CCRA provides does not leave room for the public trust doctrine to operate because it would cut across the balancing of interests entrusted to the Minister under the CCRA and, ultimately, Parliament.
The appellant, Mr Smith, is an environmental advocate and elder of Ngāpuhi and Ngāti Kahu. He is the plaintiff in a claim against seven New Zealand companies for their contribution to the adverse effects of climate change that survived a strike out application following a decision of the Supreme Court earlier this year.
This appeal concerns Mr Smith’s separate claim against the Crown in relation to the adverse effects of climate change. Mr Smith alleges that hundreds of sites of special cultural, historical and spiritual significance to his iwi have already been impacted or will be impacted by climate change, specifically those in the vicinity of the Mahinepua C Block, whenua with which he has a close connection. He brings this claim on behalf of his whānau, members of his iwi and future descendants.
He says that New Zealand’s legislative framework responding to climate change, primarily the Climate Change Response Act 2002 (the CCRA), is inadequate to provide rational and effective deterrence of the real and immediate risk that Mr Smith and those he represents will be deprived of their right to life under s 8 of the New Zealand Bill of Rights Act 1990 (NZBORA) and their right to culture under s 20 of NZBORA. He further says their right to life and their right to culture is breached because the Crown does not measure or monitor its own emissions and does not have a regulatory framework to mitigate its own emissions. He also says the inadequate framework under the CCRA and the absence of a framework for Crown emissions breaches te Tiriti, a fiduciary duty and/or a novel common law duty. He seeks declarations to this effect as well as reporting orders requiring the Crown to update the court of the steps it is taking to bring itself into a position of compliance with NZBORA (including the possibility for further relief).
Grice J in the High Court granted the Crown's application to strike out the claims. Mr Smith appeals from that decision.
Held: The appeal is dismissed.
Right to life
The Court examined Mr Smith's right to life claim through six questions:
a) whether the right to life includes a right to a life with dignity;
b) whether widespread effects prevent the engagement of the right to life;
c) whether the risks from climate change are sufficiently proximate;
d) whether the right to life can impose positive duties;
e) whether it is tenable that New Zealand's regulatory framework breached the right to life; and
f) whether reporting orders are tenably available.
On the first question, it is not clearly untenable that the right to life includes a right to a minimum baseline as to the quality of one’s life and is engaged in the context of the potential impacts of climate change. This approach is not necessarily inconsistent with the words of s 8 or earlier authority, is consistent with international jurisprudence on equivalent rights and could be necessary to give the right to life its “full measure”.
On the second question, the claim is not clearly untenable on the basis that the alleged risk to life potentially affects a large group or all of the population.
On the third question, overseas jurisprudence on equivalent rights requires that a risk to life be reasonably foreseeable and sufficiently timely and physically proximate to be engaged. The scientific consensus articulated in the ICCPR reports is relevant to the imminence of the risk to life from climate change and the timeframe within which measures are available to address this risk. Whether the risk to life pleaded by Mr Smith is sufficiently timely and proximate to engage the right to life in NZBORA would require further particulars and would be a matter of evidence for trial. While proof would be challenging, as this would be a matter of evidence for trial this aspect is not so clearly untenable that the claim should be struck out on this basis.
On the fourth question, given the context of the climate emergency and the developing jurisprudence around the world responding to this challenge, it is not clearly untenable that the right to life in NZBORA encompasses a requirement on the Crown to take protective measures against foreseeable threats to life so as to give practical effect to the right.
On the fifth question, the pleaded claim challenged the efficacy of the legislative framework responding to climate change which reflected Parliament’s policy choices. The claim largely relied on jurisprudence on art 2 of the European Convention on Human Rights which had been interpreted to impose substantive obligations on states to have a legislative and administrative framework designed to provide effective deterrence against threats to the right to life. If a legislative and administrative framework is in place, the state was allowed a wide margin of appreciation, but the efficacy of the framework could still be considered and might be found to breach art 2. In the present case, the CCRA is New Zealand’s primary framework for responding to the threats that climate change presents. The pleaded deficiencies in the CCRA framework reflect policy choices that are for Parliament under New Zealand’s constitutional arrangements and it is not for this Court to second guess them. The CCRA is comprehensive in its reach and the accountability mechanisms for decisions made under it included consultation, judicial review and potentially NZBORA claims in respect of those decisions. It is the decisions that are made under the CCRA that will determine the adequacy or otherwise of New Zealand’s response to climate change. Judicial review claims of these decisions is available and would be brought against the Minister responsible for the particular decision rather than against the Attorney-General as here. The pleaded claim under s 8 of NZBORA is clearly untenable and the Attorney-General is therefore entitled to an order striking it out.
On the sixth question, although there is jurisdiction to grant declarations of inconsistency with NZBORA, the court’s institutional role did not encompass an ongoing monitoring role of the measures the Crown is implementing in response to climate change. The reporting orders sought would not have been available even if the s 8 claim had been tenable.
Right to culture
It is not clearly untenable that climate change may give rise to a positive obligation on the Crown to protect against a denial of the right to culture under s 20 of NZBORA. It is not any damage to the whenua or sites of cultural significance that could give rise to any such obligation. A substantial interference amounting to a denial of the right would be necessary.
The pleaded claim is that s 20 is breached because the regulatory framework does not provide a rational and effective deterrent of the pleaded real and imminent risk to the right of Mr Smith and those he represents to enjoy their culture. This pleaded claim is clearly untenable for the same reasons as the right to life claim. The pleaded deficiencies of the CCRA framework reflect policy choices that are for Parliament.
Te Tiriti breach
The claim of a breach of te Tiriti is clearly untenable because the CCRA and other relevant Acts give effect to the Crown’s obligations under the Treaty. The CCRA could not be said to breach the Treaty where decisions consistent with Treaty principles are available to decision-makers. If decisions have been made lawfully under legislation that gives effect to the Crown’s Treaty obligations, there is no room for a claim to operate that the Treaty had been breached. If the decisions have not been made lawfully, Mr Smith’s remedy is judicial review in respect of that decision against the decision-maker under the relevant legislation. There are also other remedial avenues available for decisions made under the CCRA including a claim under s 20 of NZBORA if the basis for such a claim arises and under the Waitangi Tribunal’s jurisdiction.
Te Tiriti fiduciary duty
Mr Smith claims that the Crown owes fiduciary or fiduciary-like duties to Mr Smith, his whānau, Ngāpuhi and Ngāti Kahu which includes duties to perform the commitments undertaken in te Tiriti, to take active steps to ensure those commitments are honoured and to act in good faith. He claims that the Crown has breached these duties.
The claimed fiduciary duty is unlike specific fiduciary duties that can arise between the Crown and certain Māori as a result of particular dealings between them. The pleaded claim is inconsistent with the nature of fiduciary duties because the response to climate change requires the Crown to represent and must balance many interests — it could not just act in the interests of the pleaded beneficiaries. The duty would also sit uneasily with the statutory scheme in the CCRA which reflected the range of considerations relevant to the Crown’s response to climate change (of which the effect on Māori communities was undoubtedly an important one).
Novel common law duty
The parts of the pleaded novel common law duty relying on NZBORA and the Treaty are untenable and therefore do not add to the case for the pleaded novel common law claim. The claim primarily relied upon a public trust doctrine which had been applied at common law to provide rights of access to the seashore and navigable waters, a context a long way from the extensive duty pleaded in relation to climate change. The boundaries of the public trust doctrine are imprecise and fluid, and raised a host of conceptual problems in imposing fiduciary or trust-like obligations on the Crown. The doctrine could also only operate to the extent that it was not displaced by legislation. The comprehensive framework that the CCRA provides does not leave room for the public trust doctrine to operate because it would cut across the balancing of interests entrusted to the Minister under the CCRA and, ultimately, Parliament.
Media Release
- MR [2024] NZCA 692 (PDF, 153 KB)
Case name
Case number
[2024] NZCA 684
Date of Judgment
19 December 2024
Summary
The application for leave to adduce further evidence dated 11 September 2023 is granted; the application for leave to adduce further evidence dated 23 November 2023 is declined. The appeal is dismissed.
The respondents are awarded costs on an indemnity basis.
Summary judgment – Commercial law – Quantum
Associate Judge Gardiner entered summary judgment in the High Court against Mr George Kerr and a group of related corporate defendants (together, the appellants) (the Liability Judgment). The Judge subsequently quantified the amount owing, in the sum of approximately $65 million (the Quantum judgment). The Judge found that the appellants had no reasonably arguable defences to claims made against them (as either borrowers or guarantors) by Bank of New Zealand (BNZ) arising out of two substantial loan facilities provided to Lothian Partners Capital Ltd (Lothian), and Pyne Holdings Ltd (Pyne Holdings). Specifically, the Judge found it was not reasonably arguable that BNZ’s claims were time-barred under the Limitation Act 2010, as Mr Kerr had acknowledged liability to pay the outstanding debts on behalf of both himself (as guarantor) and the corporate appellants (as borrowers or guarantors) during the primary limitation period, giving rise to fresh claims. The Judge further found that Galt Nominees Ltd (Galt) and Glencoe Land (Joint Venture) Ltd (Glencoe JV) had no reasonably arguable defence to BNZ’s claim for recovery of an indemnity costs award of$243,419.84 (Costs Award) arising out of an unsuccessful injunction application brought by those companies against the BNZ. Mr Kerr, Lothian and Pyne Holdings were also liable to pay the Costs Award in their capacity as co-guarantors of Galt’s obligations under the Lothian Facility Agreement.
Did the Judge err in finding that Mr Kerr had acknowledged his personal liability as guarantor during the primary limitation period, giving rise to fresh claims against him? Held: No.
The corporate appellants are all closely associated with Mr Kerr. He is, or was previously, a director of each of them. Following the defaults on the loan facilities, Mr Kerr assumed overall responsibility for ensuring repayment of the outstanding debt on behalf of all of the appellants. His acknowledgements of liability were not made solely on behalf of the corporate appellants. Mr Kerr was the sole point of contact with BNZ following the defaults for almost eight years in respect of the Lothian Facility, and almost six years in respect of the Pyne Holdings Facility. He engaged in a sustained, consistent pattern of communication with BNZ during this time regarding the outstanding debt and his proposals for repaying it. In his correspondence, Mr Kerr used terms such as “my facilities” and “my companies”. He almost always signed his communications “George” and they were sent from his personal email address without any identifying corporate logos or email signatures. Mr Kerr consistently used possessive terms like “we” and “our” and language such as “we expect,” “we understand,” and “we wish to make a proposal” in his communications. Mr Kerr did not differentiate himself from the corporate appellants at any stage. Rather, the tone and content of Mr Kerr’s communications indicated that he was speaking both for himself and “his” companies. Viewed objectively, the inevitable inference is that Mr Kerr was acknowledging his personal liability as a guarantor of both facilities, in addition to acknowledging the liability of the corporate appellants under those facilities.
Did the Judge err in finding that Mr Kerr’s acknowledgements of liability extended to both principal andinterest? Held: No.
As Mr Kerr acknowledged liability to pay interest, it is immaterial that he sought to negotiate to pay a lesser sum than BNZ were seeking as he did not specifically record that limitation.
Did the Judge make errors in her assessment of quantum? Held: No.
The appellants did not raise an arguable defence to the quantum claimed by the BNZ. The various challenges to quantum were almost entirely based on the expert evidence of Mr Cornmell on behalf of the appellants. Mr Kerr, who was the person best placed to provide factual evidence regarding the challenged transactions, did not specifically address any of them in his evidence. In the absence of such evidence from Mr Kerr (or any other Pyne Holdings or Lothian witness) there was an insufficient evidential foundation for Mr Cornmell’s opinions. The factual evidence that was before the Court, including affidavit evidence filed by BNZ and the contemporaneous documents, indicated that there was no substance to the various issues identified by Mr Cornmell. Ultimately, as the appellants were unable to show that there was specific, credible evidence of arguable errors in BNZ’s assessment of quantum, the Judge did not err in entering summary judgment.
Is the Costs Award recoverable? Held: Yes.
The limitation of liability clauses in the Galt and Glencoe JV Guarantees do not preclude BNZ from recovering the Costs Award. The obligation in those guarantees to pay BNZ’s enforcement costs, on an indemnity basis, is a distinct and separate contractual obligation imposed on Glencoe JV and/or Galt to meet any costs BNZ may incur in enforcing their obligations as guarantors. This obligation is in addition to Galt and Glencoe JV’s obligations as guarantors to meet the guaranteed indebtedness under the relevant facility agreement.
Is BNZ entitled to recover indemnity costs in respect of the appeals? Held: Yes.
As the successful party, BNZ is entitled to an award of indemnity costs in respect of the appeal in accordance rule 53E(3)(e) of the Court of Appeal (Civil) Rules 2005 and its entitlement to recover indemnity costs under the terms of the relevant contracts.
The respondents are awarded costs on an indemnity basis.
Summary judgment – Commercial law – Quantum
Associate Judge Gardiner entered summary judgment in the High Court against Mr George Kerr and a group of related corporate defendants (together, the appellants) (the Liability Judgment). The Judge subsequently quantified the amount owing, in the sum of approximately $65 million (the Quantum judgment). The Judge found that the appellants had no reasonably arguable defences to claims made against them (as either borrowers or guarantors) by Bank of New Zealand (BNZ) arising out of two substantial loan facilities provided to Lothian Partners Capital Ltd (Lothian), and Pyne Holdings Ltd (Pyne Holdings). Specifically, the Judge found it was not reasonably arguable that BNZ’s claims were time-barred under the Limitation Act 2010, as Mr Kerr had acknowledged liability to pay the outstanding debts on behalf of both himself (as guarantor) and the corporate appellants (as borrowers or guarantors) during the primary limitation period, giving rise to fresh claims. The Judge further found that Galt Nominees Ltd (Galt) and Glencoe Land (Joint Venture) Ltd (Glencoe JV) had no reasonably arguable defence to BNZ’s claim for recovery of an indemnity costs award of$243,419.84 (Costs Award) arising out of an unsuccessful injunction application brought by those companies against the BNZ. Mr Kerr, Lothian and Pyne Holdings were also liable to pay the Costs Award in their capacity as co-guarantors of Galt’s obligations under the Lothian Facility Agreement.
Did the Judge err in finding that Mr Kerr had acknowledged his personal liability as guarantor during the primary limitation period, giving rise to fresh claims against him? Held: No.
The corporate appellants are all closely associated with Mr Kerr. He is, or was previously, a director of each of them. Following the defaults on the loan facilities, Mr Kerr assumed overall responsibility for ensuring repayment of the outstanding debt on behalf of all of the appellants. His acknowledgements of liability were not made solely on behalf of the corporate appellants. Mr Kerr was the sole point of contact with BNZ following the defaults for almost eight years in respect of the Lothian Facility, and almost six years in respect of the Pyne Holdings Facility. He engaged in a sustained, consistent pattern of communication with BNZ during this time regarding the outstanding debt and his proposals for repaying it. In his correspondence, Mr Kerr used terms such as “my facilities” and “my companies”. He almost always signed his communications “George” and they were sent from his personal email address without any identifying corporate logos or email signatures. Mr Kerr consistently used possessive terms like “we” and “our” and language such as “we expect,” “we understand,” and “we wish to make a proposal” in his communications. Mr Kerr did not differentiate himself from the corporate appellants at any stage. Rather, the tone and content of Mr Kerr’s communications indicated that he was speaking both for himself and “his” companies. Viewed objectively, the inevitable inference is that Mr Kerr was acknowledging his personal liability as a guarantor of both facilities, in addition to acknowledging the liability of the corporate appellants under those facilities.
Did the Judge err in finding that Mr Kerr’s acknowledgements of liability extended to both principal andinterest? Held: No.
As Mr Kerr acknowledged liability to pay interest, it is immaterial that he sought to negotiate to pay a lesser sum than BNZ were seeking as he did not specifically record that limitation.
Did the Judge make errors in her assessment of quantum? Held: No.
The appellants did not raise an arguable defence to the quantum claimed by the BNZ. The various challenges to quantum were almost entirely based on the expert evidence of Mr Cornmell on behalf of the appellants. Mr Kerr, who was the person best placed to provide factual evidence regarding the challenged transactions, did not specifically address any of them in his evidence. In the absence of such evidence from Mr Kerr (or any other Pyne Holdings or Lothian witness) there was an insufficient evidential foundation for Mr Cornmell’s opinions. The factual evidence that was before the Court, including affidavit evidence filed by BNZ and the contemporaneous documents, indicated that there was no substance to the various issues identified by Mr Cornmell. Ultimately, as the appellants were unable to show that there was specific, credible evidence of arguable errors in BNZ’s assessment of quantum, the Judge did not err in entering summary judgment.
Is the Costs Award recoverable? Held: Yes.
The limitation of liability clauses in the Galt and Glencoe JV Guarantees do not preclude BNZ from recovering the Costs Award. The obligation in those guarantees to pay BNZ’s enforcement costs, on an indemnity basis, is a distinct and separate contractual obligation imposed on Glencoe JV and/or Galt to meet any costs BNZ may incur in enforcing their obligations as guarantors. This obligation is in addition to Galt and Glencoe JV’s obligations as guarantors to meet the guaranteed indebtedness under the relevant facility agreement.
Is BNZ entitled to recover indemnity costs in respect of the appeals? Held: Yes.
As the successful party, BNZ is entitled to an award of indemnity costs in respect of the appeal in accordance rule 53E(3)(e) of the Court of Appeal (Civil) Rules 2005 and its entitlement to recover indemnity costs under the terms of the relevant contracts.
Case name
Case number
[2024] NZCA 674
Date of Judgment
17 December 2024
Summary
Hague Convention — Care of Children Act 2004 — Section 105(1)(d) — Section 106(1)(d) — Habitual residence — Child objection to being returned — Exercise of discretion to refuse to make an order for return — Appeal allowed
Mr McDonald and Ms Sanchez are the parents of Andrew and Sophia. Andrew and Sophia have been living with their father in a small town in New Zealand since November 2021. Ms Sanchez lives in Spain. The parents’ original intention (based on an agreement following their separation, which was reflected in orders made by a Spanish court) was that the children would spend a year living in New Zealand and then return to Spain. However in December 2022 Mr McDonald told Ms Sanchez that he and the children would not be returning to Spain.
Ms Sanchez sought the return of the children to Spain under s 105 of the Care of Children Act 2004 (the Act), which, together with other provisions of the Act, gives effect to the Hague Convention on the Civil Aspects of International Child Abduction (the Convention). In a decision dated 9 November 2023, Judge Dravitzki made an order for the return of the children: [Sanchez] v [McDonald] [2023] NZFC 12247 (Family Court judgment). Mr McDonald appealed from that decision. In a decision dated 31 July 2024, Osborne J dismissed Mr McDonald’s appeal, upholding the order for the return of the children to Spain: McDonald v Sanchez [2024] NZHC 2110 (High Court judgment). Mr McDonald appeals from the High Court judgment, having been granted leave to do so by this Court: McDonald v Sanchez [2024] NZCA 542.
The appeal raises two issues. The first is whether the children were habitually resident in Spain when Mr McDonald declined to return them to Spain in December 2022. The Convention provides for the return of children to their State of habitual residence. This is reflected in s 105(1)(d) of the Act. If the children were habitually resident in New Zealand rather than Spain in December 2022, no order for their return can be made.
The second issue concerns the children’s views about returning to Spain. Andrew and Sophia (aged almost 14 and almost 12 at the time the appeal was heard) object to returning to Spain. They want to continue living in New Zealand. Under the Convention and s 106(1) of the Act, the Court has a discretion to decline to make an order for the return of the children when the prerequisites for return under s 105 of the Act are established if one or more of the exceptions set out in s 106(1) is made out. In this case, the relevant exception is found in s 106(1)(d), which provides that the Court may exercise its discretion if the child objects to being returned and has attained an age and degree of maturity at which it is appropriate to give weight to the child’s views. The issue is how this Court should exercise its discretion in light of Andrew and Sophia’s objections, it being common ground that they are at an age and maturity at which it is appropriate to give significant weight to their views.
Held: the appeal is allowed. The order made in the Family Court for the return of the children is set aside.
The children were habitually resident in New Zealand in December 2022. They were not habitually resident in Spain. Habitual residence is a question of fact to be considered having regard to all the relevant circumstances. The Courts below set too high a threshold for acquisition of habitual residence and put too much emphasis on the parents’ original plan for the children to live in New Zealand for one year, and on the court orders giving effect to that plan. The Courts below gave insufficient weight to the circumstances of the children and the extent of their connection to New Zealand as at December 2022. The parents’ agreement and the Spanish court orders are important background factors. But they are not determinative. Circumstances and plans can change. By December 2022, having spent just over a year in New Zealand, the children were happy and settled. They had integrated into social, family and community environments in the small town in New Zealand. Andrew had developed his own authentic intentions about remaining in New Zealand unless required to leave. Their residence had the necessary stability to be described as “habitual”. The children were habitually resident in New Zealand in December 2022. It was therefore not open to the Family Court to make an order for the return of the children to Spain. The appeal must be allowed.
If Andrew and Sophia were habitually resident in Spain in December 2022 for the purposes of s 105(1)(d) of the Act, this Court would have exercised its discretion under s 106(1) to decline to make an order for their return in light of their clear and authentic objections to returning to Spain.
Section 106(1)(d) of the Act is engaged in this case. In circumstances where one of the exceptions to return under s 106(1) is engaged and a court is required to decide whether to exercise its discretion under that provision, the welfare and best interests of the particular child must be the first and paramount consideration, as required by s 4(1) of the Act.
The Courts below erred in treating “Convention principles” relating to deterrence of child abduction as a significant factor weighing in favour of an order for return. When an exception to return is made out, there is no presumption of return. There are no “Convention principles” which a court should weigh against the interests of the particular child, and which might result in an order for return being made even though that is contrary to the welfare and best interests of that child.
Andrew and Sophia are happy and settled in New Zealand. Returning to Spain would be a major change for them and would be challenging. Requiring the children to return to Spain despite their clearly expressed and reasoned wishes is likely to be stressful and have significant adverse effects on their wellbeing. Remaining in New Zealand would be less disruptive to their current lives. Maintaining a substantial and meaningful relationship with their mother is very important for the children’s welfare and best interests. But this factor is not sufficient to outweigh the other dimensions of the children’s welfare that are best advanced by remaining in New Zealand. Having regard to all the relevant factors and their objections, the welfare and best interests of Andrew and Sophia would be promoted by remaining in New Zealand, with appropriate measures in place to ensure substantial and meaningful contact with Ms Sanchez. In those circumstances this Court would have declined to make an order for their return.
Mr McDonald and Ms Sanchez are the parents of Andrew and Sophia. Andrew and Sophia have been living with their father in a small town in New Zealand since November 2021. Ms Sanchez lives in Spain. The parents’ original intention (based on an agreement following their separation, which was reflected in orders made by a Spanish court) was that the children would spend a year living in New Zealand and then return to Spain. However in December 2022 Mr McDonald told Ms Sanchez that he and the children would not be returning to Spain.
Ms Sanchez sought the return of the children to Spain under s 105 of the Care of Children Act 2004 (the Act), which, together with other provisions of the Act, gives effect to the Hague Convention on the Civil Aspects of International Child Abduction (the Convention). In a decision dated 9 November 2023, Judge Dravitzki made an order for the return of the children: [Sanchez] v [McDonald] [2023] NZFC 12247 (Family Court judgment). Mr McDonald appealed from that decision. In a decision dated 31 July 2024, Osborne J dismissed Mr McDonald’s appeal, upholding the order for the return of the children to Spain: McDonald v Sanchez [2024] NZHC 2110 (High Court judgment). Mr McDonald appeals from the High Court judgment, having been granted leave to do so by this Court: McDonald v Sanchez [2024] NZCA 542.
The appeal raises two issues. The first is whether the children were habitually resident in Spain when Mr McDonald declined to return them to Spain in December 2022. The Convention provides for the return of children to their State of habitual residence. This is reflected in s 105(1)(d) of the Act. If the children were habitually resident in New Zealand rather than Spain in December 2022, no order for their return can be made.
The second issue concerns the children’s views about returning to Spain. Andrew and Sophia (aged almost 14 and almost 12 at the time the appeal was heard) object to returning to Spain. They want to continue living in New Zealand. Under the Convention and s 106(1) of the Act, the Court has a discretion to decline to make an order for the return of the children when the prerequisites for return under s 105 of the Act are established if one or more of the exceptions set out in s 106(1) is made out. In this case, the relevant exception is found in s 106(1)(d), which provides that the Court may exercise its discretion if the child objects to being returned and has attained an age and degree of maturity at which it is appropriate to give weight to the child’s views. The issue is how this Court should exercise its discretion in light of Andrew and Sophia’s objections, it being common ground that they are at an age and maturity at which it is appropriate to give significant weight to their views.
Held: the appeal is allowed. The order made in the Family Court for the return of the children is set aside.
The children were habitually resident in New Zealand in December 2022. They were not habitually resident in Spain. Habitual residence is a question of fact to be considered having regard to all the relevant circumstances. The Courts below set too high a threshold for acquisition of habitual residence and put too much emphasis on the parents’ original plan for the children to live in New Zealand for one year, and on the court orders giving effect to that plan. The Courts below gave insufficient weight to the circumstances of the children and the extent of their connection to New Zealand as at December 2022. The parents’ agreement and the Spanish court orders are important background factors. But they are not determinative. Circumstances and plans can change. By December 2022, having spent just over a year in New Zealand, the children were happy and settled. They had integrated into social, family and community environments in the small town in New Zealand. Andrew had developed his own authentic intentions about remaining in New Zealand unless required to leave. Their residence had the necessary stability to be described as “habitual”. The children were habitually resident in New Zealand in December 2022. It was therefore not open to the Family Court to make an order for the return of the children to Spain. The appeal must be allowed.
If Andrew and Sophia were habitually resident in Spain in December 2022 for the purposes of s 105(1)(d) of the Act, this Court would have exercised its discretion under s 106(1) to decline to make an order for their return in light of their clear and authentic objections to returning to Spain.
Section 106(1)(d) of the Act is engaged in this case. In circumstances where one of the exceptions to return under s 106(1) is engaged and a court is required to decide whether to exercise its discretion under that provision, the welfare and best interests of the particular child must be the first and paramount consideration, as required by s 4(1) of the Act.
The Courts below erred in treating “Convention principles” relating to deterrence of child abduction as a significant factor weighing in favour of an order for return. When an exception to return is made out, there is no presumption of return. There are no “Convention principles” which a court should weigh against the interests of the particular child, and which might result in an order for return being made even though that is contrary to the welfare and best interests of that child.
Andrew and Sophia are happy and settled in New Zealand. Returning to Spain would be a major change for them and would be challenging. Requiring the children to return to Spain despite their clearly expressed and reasoned wishes is likely to be stressful and have significant adverse effects on their wellbeing. Remaining in New Zealand would be less disruptive to their current lives. Maintaining a substantial and meaningful relationship with their mother is very important for the children’s welfare and best interests. But this factor is not sufficient to outweigh the other dimensions of the children’s welfare that are best advanced by remaining in New Zealand. Having regard to all the relevant factors and their objections, the welfare and best interests of Andrew and Sophia would be promoted by remaining in New Zealand, with appropriate measures in place to ensure substantial and meaningful contact with Ms Sanchez. In those circumstances this Court would have declined to make an order for their return.
Case number
[2024] NZCA 645
Date of Judgment
09 December 2024
Summary
Interim relief — Serious issue to be tried — Contract law — Termination of a banking relationship by a bank — Implied terms restricting exercise of a termination clause — Breach of fiduciary duty — Estoppel by convention
In July 2022 the Bank of New Zealand (BNZ) gave notice to various trusts, partnerships and companies associated with the Gloriavale Christian Community (Gloriavale entities) of its intention to terminate the provision of banking services to those entities. This decision to terminate was considered by BNZ to be appropriate in light of its internal human rights policy.
The Gloriavale entities attempted to establish alternative banking arrangements but were unsuccessful. The Gloriavale entities therefore sought an interim injunction in the High Court on a without-notice basis to prevent BNZ from terminating its banking relationship with the Gloriavale entities. Pleadings were not prepared at the time, but the application was made on the basis that termination would be a breach of contract or a breach of fiduciary duty. Dunningham J granted an interim injunction pending a full application for interim relief being made: Christian Church Community Trust v Bank of New Zealand [2022] NZHC 3271 (first injunction decision).
The Gloriavale entities then filed proceedings and sought further interim relief pending trial. The Gloriavale entities claim that BNZ’s termination of its banking relationship with them would constitute a breach of contract because, on a proper interpretation of the contract governing the banking relationship (the BNZ standard terms), BNZ is limited in its ability to terminate the banking relationship for any reason. The Gloriavale entities also claim that termination of the banking relationship would be a breach of fiduciary duty, and that BNZ is estopped from doing so.
Cull J, in a decision dated 8 September 2023, was satisfied that there was a serious question to be tried in relation to the breach of contract cause of action, and that the balance of convenience and overall justice of the case favoured continuing the interim injunction until determination of the Gloriavale entities’ substantive claims: Christian Church Community Trust v Bank of New Zealand [2023] NZHC 2523, [2023] 3 NZLR 190 (second injunction decision). BNZ sought and was granted special leave to appeal from the second injunction decision: Bank of New Zealand v Christian Church Community Trust [2024] NZCA 246.
BNZ says there is no serious question to be tried on any of the causes of action. BNZ says in particular that it is clear as a matter of common law and interpretation of the BNZ standard terms that it had an express and unencumbered unilateral right under cl 8.2 of the BNZ standard terms to terminate its provision of banking services to the Gloriavale entities for any reason. The Gloriavale entities say the Judge was right to grant an interim injunction in the circumstances. They say that there are serious questions to be tried as to whether BNZ’s decision to terminate the banking relationship breached cl 8.2 and the fiduciary duty it owed to the Gloriavale entities, and whether BNZ is estopped from terminating the relationship; and the balance of convenience and overall justice of the case favours BNZ continuing to provide banking services until the claims have been determined.
Held: the appeal is allowed. The injunction granted in the High Court is set aside.
It is not seriously arguable that cl 8.2, properly interpreted, limits the reasons for which BNZ may terminate its banking relationship with the Gloriavale entities. Rather, under cl 8.2 BNZ can terminate the banking relationship for any reason.
Although the question of what approach should be adopted in relation to implied terms concerning the exercise of contractual discretions is unsettled, it is arguable that there is an implied term in the BNZ standard terms that BNZ must exercise the cl 8.2 power for the purpose for which that power was conferred under the contract. But even if such an implied term did exist, it would not add anything in this case because the purpose of cl 8.2 was to enable BNZ to bring the banking relationship to an end if it wishes to do so for any reason, and BNZ is not seeking to invoke this clause for an ulterior motive. It is not seriously arguable that BNZ has breached such an implied term.
For the purposes of this interlocutory appeal, it is also arguable that BNZ’s exercise of cl 8.2 is subject to a term implied in law to the effect that the power to terminate must not be exercised dishonestly, in bad faith, or capriciously or arbitrarily. But the Gloriavale entities do not contend that BNZ’s decision to terminate was made dishonestly or in bad faith, and it is not seriously arguable that the decision was made capriciously or arbitrarily. So while it is arguable that an implied term of this nature exists in respect of cl 8.2, it is not seriously arguable that BNZ has breached such an implied term.
It is not however seriously arguable that as a matter of law a further term should be implied into cl 8.2 that would require BNZ to act reasonably in making a termination decision, or that would impose process obligations before BNZ makes a decision to terminate under cl 8.2. An implied term of this nature would be inconsistent with the express terms of the BNZ standard terms, in particular cl 8.2, and the general scheme of that contract. Nor is it seriously arguable that such a term could be implied in fact in the particular context of the BNZ standard terms. The BNZ standard terms do not lack business efficacy without such an implied term, and such a term would be inconsistent with the express terms of the contract.
It is also not seriously arguable that BNZ owes the Gloriavale entities a fiduciary duty which would be breached if BNZ terminated its banking relationship with them, or that BNZ is estopped indefinitely from terminating the relationship.
If (contrary to the Court’s view) the BNZ standard terms could be interpreted as imposing process obligations in relation to the circumstances in which BNZ can terminate a banking relationship, there would be a serious question to be tried on the facts in relation to whether these obligations had been met by BNZ in this case. The Gloriavale entities’ case would however be weak, as it would require a trial court to accept that BNZ had process obligations in connection with cl 8.2 that are not easy to reconcile with the express terms and scheme of the BNZ standard terms. In those circumstances the practical consequences of continuing or setting aside the injunction pending trial would have to be considered. In this case the interim injunction would have been declined in any event because it would not have been in the interests of justice to compel BNZ to continue providing banking services to the Gloriavale entities for a further extended period until trial.
In July 2022 the Bank of New Zealand (BNZ) gave notice to various trusts, partnerships and companies associated with the Gloriavale Christian Community (Gloriavale entities) of its intention to terminate the provision of banking services to those entities. This decision to terminate was considered by BNZ to be appropriate in light of its internal human rights policy.
The Gloriavale entities attempted to establish alternative banking arrangements but were unsuccessful. The Gloriavale entities therefore sought an interim injunction in the High Court on a without-notice basis to prevent BNZ from terminating its banking relationship with the Gloriavale entities. Pleadings were not prepared at the time, but the application was made on the basis that termination would be a breach of contract or a breach of fiduciary duty. Dunningham J granted an interim injunction pending a full application for interim relief being made: Christian Church Community Trust v Bank of New Zealand [2022] NZHC 3271 (first injunction decision).
The Gloriavale entities then filed proceedings and sought further interim relief pending trial. The Gloriavale entities claim that BNZ’s termination of its banking relationship with them would constitute a breach of contract because, on a proper interpretation of the contract governing the banking relationship (the BNZ standard terms), BNZ is limited in its ability to terminate the banking relationship for any reason. The Gloriavale entities also claim that termination of the banking relationship would be a breach of fiduciary duty, and that BNZ is estopped from doing so.
Cull J, in a decision dated 8 September 2023, was satisfied that there was a serious question to be tried in relation to the breach of contract cause of action, and that the balance of convenience and overall justice of the case favoured continuing the interim injunction until determination of the Gloriavale entities’ substantive claims: Christian Church Community Trust v Bank of New Zealand [2023] NZHC 2523, [2023] 3 NZLR 190 (second injunction decision). BNZ sought and was granted special leave to appeal from the second injunction decision: Bank of New Zealand v Christian Church Community Trust [2024] NZCA 246.
BNZ says there is no serious question to be tried on any of the causes of action. BNZ says in particular that it is clear as a matter of common law and interpretation of the BNZ standard terms that it had an express and unencumbered unilateral right under cl 8.2 of the BNZ standard terms to terminate its provision of banking services to the Gloriavale entities for any reason. The Gloriavale entities say the Judge was right to grant an interim injunction in the circumstances. They say that there are serious questions to be tried as to whether BNZ’s decision to terminate the banking relationship breached cl 8.2 and the fiduciary duty it owed to the Gloriavale entities, and whether BNZ is estopped from terminating the relationship; and the balance of convenience and overall justice of the case favours BNZ continuing to provide banking services until the claims have been determined.
Held: the appeal is allowed. The injunction granted in the High Court is set aside.
It is not seriously arguable that cl 8.2, properly interpreted, limits the reasons for which BNZ may terminate its banking relationship with the Gloriavale entities. Rather, under cl 8.2 BNZ can terminate the banking relationship for any reason.
Although the question of what approach should be adopted in relation to implied terms concerning the exercise of contractual discretions is unsettled, it is arguable that there is an implied term in the BNZ standard terms that BNZ must exercise the cl 8.2 power for the purpose for which that power was conferred under the contract. But even if such an implied term did exist, it would not add anything in this case because the purpose of cl 8.2 was to enable BNZ to bring the banking relationship to an end if it wishes to do so for any reason, and BNZ is not seeking to invoke this clause for an ulterior motive. It is not seriously arguable that BNZ has breached such an implied term.
For the purposes of this interlocutory appeal, it is also arguable that BNZ’s exercise of cl 8.2 is subject to a term implied in law to the effect that the power to terminate must not be exercised dishonestly, in bad faith, or capriciously or arbitrarily. But the Gloriavale entities do not contend that BNZ’s decision to terminate was made dishonestly or in bad faith, and it is not seriously arguable that the decision was made capriciously or arbitrarily. So while it is arguable that an implied term of this nature exists in respect of cl 8.2, it is not seriously arguable that BNZ has breached such an implied term.
It is not however seriously arguable that as a matter of law a further term should be implied into cl 8.2 that would require BNZ to act reasonably in making a termination decision, or that would impose process obligations before BNZ makes a decision to terminate under cl 8.2. An implied term of this nature would be inconsistent with the express terms of the BNZ standard terms, in particular cl 8.2, and the general scheme of that contract. Nor is it seriously arguable that such a term could be implied in fact in the particular context of the BNZ standard terms. The BNZ standard terms do not lack business efficacy without such an implied term, and such a term would be inconsistent with the express terms of the contract.
It is also not seriously arguable that BNZ owes the Gloriavale entities a fiduciary duty which would be breached if BNZ terminated its banking relationship with them, or that BNZ is estopped indefinitely from terminating the relationship.
If (contrary to the Court’s view) the BNZ standard terms could be interpreted as imposing process obligations in relation to the circumstances in which BNZ can terminate a banking relationship, there would be a serious question to be tried on the facts in relation to whether these obligations had been met by BNZ in this case. The Gloriavale entities’ case would however be weak, as it would require a trial court to accept that BNZ had process obligations in connection with cl 8.2 that are not easy to reconcile with the express terms and scheme of the BNZ standard terms. In those circumstances the practical consequences of continuing or setting aside the injunction pending trial would have to be considered. In this case the interim injunction would have been declined in any event because it would not have been in the interests of justice to compel BNZ to continue providing banking services to the Gloriavale entities for a further extended period until trial.
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.