New Zealand’s lack of class action suits an issue, says Court of Appeal Judge
By Darise Ogden
DEFICIENCIES IN New Zealand’s civil law have posed a distinct impediment to the development of “public interest law”, Justice Hammond has stated in Carter Holt Harvey Limited v Commerce Commission [2009] NZCA 40. The lack of class action or representative actions in New Zealand means that any group action brought on behalf of consumers is brought by the Commerce Commission (Commission) under section 43(1) of the Fair Trading Act 1986 (Act). The problem with this, said his Honour at [152], is that the enforcement provisions in the Act are at best rudimentary. In Carter Holt Harvey Limited v Commerce Commission, the Court of Appeal found that the case brought by the Commission was out of time.
Having determined that Carter Holt Harvey (CHH) had been involved in actions that contravened the Act – supplying timber that was graded as MGP10 at a higher price than standard grade timber, but which failed to meet the relevant standards consistently – the Commission chose to use its statutory authority to both prosecute CHH and to bring an application for redress on behalf of end users and competitors who had suffered loss as a result of CHH’s actions.
First alerted to the issue in 2002, the Commission filed civil proceedings on 27 October 2006, following CHH pleading guilty to 20 charges under section 10 of the Act, and being fined $900,000. The issue before the Court of Appeal centred on just when it was that the Commission had “discovered” or “ought to have reasonably discovered” that CHH’s breach of the Act had caused end users and competitors to suffer loss or damage. Under section 43(5), applications under section 43(1) must be made within three years of the matter giving rise to the application occurring.
The Court of Appeal held that time began running on 24 October 2003 upon the filing of the affidavit of Commission investigator Mervyn Theobald in relation to a search warrant application. Said Justice Baragwanath at [81]: “As a responsible officer of the Commission his conclusion of high probability may well be attributable to it as satisfying the [section] 43(5) test.” Justice Hammond agreed (at [147]), “[I]n my view, by the time it took the formal step of applying for a search warrant for all three mills, and on the basis of the context in which that application was made, and the information contained in the affidavit in support of that application, the Commission was well appraised of the requisite information to apprehend harm, as would have a reasonable observer.”
Ruling that the proceedings were out of time gave Justice Hammond “no satisfaction whatsoever” (at [148]). “There is evidence that [CHH] behaved in an aggressive and bullying sort of way to try and ‘scare off’ the Commission. This may have something to do with the caution with which the Commission proceeded and which, regrettably, has led to the Commission’s proceeding (to assist consumers) getting out of time.”
The issue as to whether or not the Commission had knowledge was only one part of the equation. Justices Baragwanath and Chambers also found that the knowledge of the person who suffered the loss (ie the end user or the competitor) was also relevant. “[W]hether the proceedings be criminal or civil, the focus, for limitation purposes, will be on both prosecutor/applicant and loss-sufferer,” said Justice Chambers at [172]. “In the case of a prosecution where the prosecutor does not seek compensatory orders, the focus will be solely on when the prosecutor acquired knowledge or should have acquired knowledge. Where the prosecutor seeks compensatory orders in addition to a fine, the prosecutor will be able to recover compensation only in respect of those loss-sufferers who, had they prosecuted or applied under [section] 43(1) on the date on which the prosecutor commenced the prosecution, would have been in time.”
Even where the Commission has filed its proceedings within time, the Commission cannot seek redress for consumers who discovered or ought to have discovered their loss outside the three-year limitation period. That is entirely fair, said Justice Chambers, as those loss-sufferers had sat on their rights. It would be quite unfair, he said, for the defendant to have to meet the loss-sufferer’s stale claim just because later on a third party commenced a proceeding which, in respect of the third party, happened to be within time (at [173]).
His Honour also acknowledged that a person-by-person analysis may seem time-consuming and somewhat cumbersome. However, he said, it is the consequence of ensuring that no one steals a march on a defendant by delaying a claim and then finding an in-time agent to bring the claim (at [179]). That, he said, “would be an abuse of the special privilege accorded by [section] 43(1) of permitting an agent to sue in what is effectively a representative capacity”.
NZLawyer, issue 109, 3 April 2009