COURTS
The Supreme Court encounters a chorus of critics
By Anthony Grant, barrister, Radcliffe Chambers

I can’t recall a time when our most senior local court – the Court of Appeal before 2004 and the Supreme Court since then – has been the subject of so much criticism. Here are some illustrations.

Tax practitioners – both lawyers and accountants – criticise its approach to the interpretation of the anti-avoidance provisions in the Income Tax legislation. Ernst & Young partner Jo Doolan was quoted in The National Business Review (NBR) on 18 February 2011 as saying, “We’ve got clients, both corporate and high net worth individuals, who are looking to base themselves elsewhere because of the current tax climate.”

In the same article, a KPMG tax partner, John Canton, was said to have placed much of the blame for this on the Supreme Court’s decision in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115.

Tax barrister Geoff Harley spoke a couple of weeks ago to a large gathering of accountants and lawyers. His topic was the Supreme Court’s decision in Penny and Hooper v Commissioner of Inland Revenue [2011] NZSC 95. He said the Court had got the facts wrong (in [3], [11], [14], [35], and footnote 7 of the judgment), and he proceeded from that platform to criticise various aspects of the Court’s reasoning.

Writing in the latest part of the New Zealand Business Law Quarterly, Paul Scott, a senior lecturer at Victoria University of Wellington, was highly critical of the Supreme Court’s decision in Commerce Commission v Telecom Corporation of New Zealand Ltd & Anor [2010] 1 NZLR 577. Justice Blanchard has said extrajudicially that the decision in that case has aligned New Zealand law with that of Australia and has widened section 36 of the Commerce Act 1986. Scott says bluntly, “The decision has done nothing of the sort. The Supreme Court has missed the point, misread Australian law, and taken a wrong turn...” He adds that the decision “is also internally inconsistent”.

In a company law case last year, a litigant was refused leave to appeal to the Supreme Court. He contended that in refusing leave, the Supreme Court had not given proper consideration to his claims and he took the exceptional action of asking our highest Court to recall its judgment. In response, the Supreme Court acknowledged some fault, saying, “The recall application is advanced on the basis that our judgment did not engage appropriately with one of the applicants’ arguments… [W]e accept that we did not accurately capture that argument in our earlier judgment” (Fong and Anor v Wong and Anor [2010] NZSC 152 at [1]).

The Government is so displeased with the Supreme Court’s decision in the Urewera Police raid case (Hamed v R [2011] NZSC 101) that it has been trying to pass urgent legislation to override an important aspect of that decision.

In the realm of interpretation of contracts, four of a panel of five judges held in Gibbons Holdings Ltd v Wholesale Distributors Ltd [2008] 1 NZLR 277 that the subsequent conduct of parties can be used as an aid to interpret a contract. This decision was criticised in the Law Quarterly Review: (2008) Vol 124 LQR 6. In the polite way that these things can be done, the Court of Final Appeal in Hong Kong put the Supreme Court’s decision to one side in Marble Holdings Ltd v Yatin Development Ltd [2008] 4 HKLRD 950 at [22].

The Hong Kong decision is of particular interest to New Zealanders since Sir Thomas Gault – who has an excellent reputation internationally – sat as one of the judges on the Hong Kong Court in Marble Holdings. He was a member of the Supreme Court at the time the Gibbons case was argued and an acting judge of the Court at the time the decision was delivered, although not a member of the panel that decided the case. His participation in a decision that politely rejected the Supreme Court’s decision in a case involving such an important topic as the interpretation of contracts has raised eyebrows overseas about what I will call euphemistically the “reliability” of the Supreme Court.

In the March 2011 edition of Trusts and Trustees, Frances Barlow QC – one of England’s leading Chancery QCs – said that the Supreme Court’s decision in Kain v Hutton [2008] 3 NZLR 589 “mis-state[d] the true principle of construction concerning the exercise of powers’’; that its decision was “contrary to established authority”; and that the decision “represent[ed] the triumph of form over substance”.

On 27 May 2011, the NBR criticised the Supreme Court in very harsh terms. It was said to be “remote from reality”; its judges were “pussyfooters” who “turn commonsense … into a farce” and who have “failed to make any impact on the quality and certainty of the rule of law in New Zealand”.

Although I was criticised for referring to the NBR’s criticisms in one of my articles, I repeat some of the NBR’s statements here solely to illustrate the unusual way in which the Court is being criticised.

The “Bill Wilson affair” is probably the most high-profile case involving criticism of the Supreme Court. One of the judges of the Court chose to resign in October 2010 following complaints of inadequate disclosure of his investment interests with a barrister who had appeared in a case over which he had presided.

Word of these negative developments, and others, has been steadily spreading abroad and it is not doing us any good.

In the last edition of NZLawyer, I wrote an open letter to the current Attorney-General and to his Opposition spokesman in the Labour Party, David Parker, asking – among other things – if their Parties intend to promote the appointment of some non-permanent judges to the Supreme Court. I also asked if they are satisfied with our system of civil justice and, if not, what their parties propose to do about it.

It will be interesting to see if they think there may be benefit in some changes that will (a) lessen the type of criticism to which I have referred; and (b) attract international investors to the country through their confidence in our legal system.

Or whether they think the system is fine and that all the critics are wrong.

For information about Anthony Grant, see www.anthonygrant.com.

NZLawyer magazine, issue 170, 7 October 2011