Waiting on the Supremes

Will forthcoming judgments restate or extend legal understanding?

There is a number of reserved Supreme Court judgments, possibly occupying the judges over their summer vacation, with material interest for commercial and public lawyers. Unsurprisingly, many such final appeals seek to expand on settled legal comprehension. Given certainty’s value in law, such expansions should only be because the informing doctrines have themselves advanced, rather than they may operate harshly in the appellants’ individual circumstances. Similarly, statutory interpretation turns on identifying the will of Parliament, distinctly from regulators’ preferences for enforcement. Whether those concepts will be applied here awaits these judgments.

In Hotchin v The New Zealand Guardian Trust Company Limited (heard 26 March 2015), Mr Hotchin sought NZGT’s contribution to any liability he may have under compensation claims brought by the FMA against him as a director of the Hanover Group. Section 17(1)(c) of the Law Reform Act 1936 permits one tortfeasor to obtain a contribution to its liability from another “liable in respect of the same damage”.

The Court of Appeal upheld the High Court’s decision that s 17(1)(c) of the Law Reform Act 1936 required ‘co-ordinate liability’ between tortfeasors, if they were to be liable jointly to pay compensation for inflicting the same harm. The Court of Appeal held, under the statue or in equity, there must be “a common or shared obligation giving rise to common liabilities where the nature of the harm resulting is the same or indivisible” ([68]). The nature and extent of Mr Hotchin’s prospective liability was different from that contended against NZGT.

On further appeal, Mr Hotchin argued, distinctly from the position in equity, the statute was silent as to the nature of ‘joint’- it was sufficient two (or more) people were liable in tort (although not necessarily the same tort), and for the same damage. Responding, NZGT contended ‘joint’ meant ‘symmetric’ or ‘common’, to justify liability for the same damage.

The Supreme Court’s judgment is likely to be informative of future conduct of multiparty litigation, and particularly in circumstances in which loss may be attributed to a range of prospective defendants. The plaintiff’s choice of claim(s) against particular defendant(s) does not prevent such defendants seeking contribution from others – even if, as here, those others are not original parties to the proceeding. A broader entitlement to contribution will complicate case management and trial, not least if the defendant’s claim for contribution may have a different legal foundation than that claimed against the defendant by the plaintiff. On the other hand, should other tortfeasors be enabled to avoid liability for the same damage as claimed against the defendant, simply because of the plaintiff’s choice of claim against particular defendants?

  • PS: NZSC judgment (15 March 2016) – majority requires same damage only; minority would also require common liability. See this blog’s case comment.

In Ririnui v Landcorp Farming Limited and The Attorney-General (heard 17-19 August 2015), the question was to what extent may the Courts’ judicial review jurisdiction be relied upon to set aside otherwise lawful contracts?

In its role as owner of Crown land, Landcorp has a protocol with the Office of Treaty Settlements by which to understand what land in its possession the Crown may wish to rely for Treaty settlement purposes. Landcorp sold a farm by public tender after receiving advice from OTS the land was not required for Treaty settlement purposes. OTS wrongly assumed all Treaty claims to the farm had been settled, whereas Ngāti Whakahemo’s remained outstanding. Ngāti Whakahemo’s chair, Mr Ririnui, issued judicial review proceedings to set the sale aside. The High Court granted relief.

The Court of Appeal held OTS’s advice was not reviewable, being indeterminative of Landcorp’s functions, not adversely affecting Ngāti Whakahemo’s rights, and amounting to a policy or political decision. No relief against OTS could redress the sale. Further, the SOE Act prevented Landcorp’s shareholding Ministers from intervening to prevent the sale (as Ngāti Whakahemo had sought they do), and – even if they could, by application of company law principles as between shareholders and their company – not to such an extent as would cause Landcorp to breach its obligations to the farm’s purchaser. And Landcorp’s alleged bad faith in dealings with Ngāti Whakahemo was not material in its decision to sell the farm.

Courts jealously guard the scope of judicial review. While acknowledging that, the Court of Appeal applied well-understood principles against intervention in Crown commercial dealings or policy matters. But the Landcorp/OTS protocol was intended to provide a measure of security for Treaty claimants. Should the Crown’s multiple emanations enable it to avoid relief as may be available if its decision (as Landcorp) to sell the land was affected by its material error (as OTS) on the status of the land?

  • PS: NZSC judgment (9 June 2016) – by majority (Elias CJ, Arnold and Glazebrook JJ), ministerial decisions based on OTS’s erroneous advice were wrongful exercises of public power, and declarations accordingly; by majority  (William Young, Glazebrook and O’Regan JJ), agreement for sale and purchase of land not to be set aside

In Proprietors of Wakatū and Rore Pat Stafford and others v Attorney-General (heard 12-15 October 2015), the appellants alleged general trust and equity obligations – distinctly from the Treaty – owed to them by the Crown in relation to their interests in land acquired by the New Zealand Company and pre‑empted by the Crown in the 1840s. The subsequent Crown grant to the Company excepted an intended reservation of one-tenth (the ‘Nelson Tenths’) to the appellants’ predecessors. In fact, the reservation was never made.

Given other avenues for redress, the Court of Appeal resisted any dilution of the orthodox elements of fiduciary duty – requiring a duty of loyalty to, and an undertaking to protect the interests of, the appellants. The 1840s circumstances did not support such a characterisation of the relationship with the Crown. Neither could it be said the intended reservation constituted an express trust – the essential intention, subject matter and objects all being uncertain. Without the intention to create an express trust, there was no room for a resulting trust on the former’s failure. Finding a constructive trust would impermissibly require the political arrangements of the day to be given a private law overlay.

These expressions of common law orthodoxy sit uncomfortably with 21st century acknowledgements of the Crown’s historical poor conduct. The Crown’s response is its obligations were in public, not private, law and their admitted breach addressed through Treaty settlements. That cannot mean private law liabilities are excluded, but is there really justification in bending those concepts to provide a remedy here?

Sportzone Motorcycles Limited (in liquidation) and Motor Trade Finances Limited v Commerce Commission (heard 10-11 November 2015) concerned the determination of unreasonable fees under the Credit Contracts and Consumer Finance Act 2003. The Act prohibits ‘unreasonable’ credit and default fees, in the determination of which a court is directed to have regard to the amount of the fee compared to the creditor’s reasonable costs ‘in connection with’ or ‘in relation to’ specified activities in the obtaining of credit.

The Court of Appeal held, for reasons of statutory interpretation and legislative policy, a ‘close connection’ was required. A fee exceeding a creditor’s average reasonable costs of those close connections was prima facie unreasonable. The onus was on the creditor to prove less closely connected costs were nonetheless reasonable. The fee is to recover these reasonable costs, but not to provide a return on them. Even if ‘unreasonable’ fees enable lower interest charges, borrowers will have suffered loss by reason of imposition of the unlawful fee alone.

The Court of Appeal’s formulation (upholding the judgment below) leaves little room for a court to have regard to other than these ‘closely connected’ costs. But the CCCFA appears to direct the determining court’s attention to the unreasonableness of the fee in general, and not (save to have regard) to its connection to specified costs in particular. Does the CCCFA only proscribe unreasonable fees, or is it effectively to prescribe cost-based fees? To put it another way, is the CCCFA fees regime intended to be a material advance on the CCCFA’s prohibition of oppressive contracts, which are tested by reference to ‘reasonable standards of commercial practice’? Broad considerations of reasonableness in relation to fees would seem to conflate the two concepts.

  • PS: NZSC judgment (12 May 2016) – unanimous decision CCCFA indicated a transaction-specific approach to fees. The Court agreed with Toogood J in the High Court that a helpful formulation in determining the reasonableness of a fee is to ask whether the cost is sufficiently close and relevant to the steps in the lending process to which the fee relates that it can reasonably be said it was incurred in relation to those steps. See this blog’s case comment.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s