Bleakley v Registrar of Friendly Societies and Credit Unions

[2017] NZHC 471

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2016-485-989 [2017] NZHC 471

BETWEEN

BRUCE BLEAKLEY, PETER TAYLOR

AND WYN OSBORNE AS TRUSTEES, OF THE NEW ZEALAND ASSOCIATION OF CREDIT UNIONS Appellants

AND

THE REGISTRAR OF FRIENDLY SOCIETIES AND CREDIT UNIONS Respondent

Hearing:	14 March 2017
Counsel:	D J Friar and B J Ward for Appellants H Rennie QC for Respondent D M Hughes and J V R James for First Credit Union G H J Brant for Westforce Credit Union
Judgment:	16 March 2017

JUDGMENT OF ELLIS J

[1]      The appellants are the trustees of the New Zealand Association of Credit Unions (NZACU).  The NZACU is registered under s 146 of the Friendly Societies and Credit Unions Act 1982 (the Act).  Its Rules are approved by the Registrar of Friendly Societies and Credit Unions (the Registrar) under that Act.  The NZACU’s component membership is made up of individual credit unions, whose activities are also governed by the Act.

[2]      In these proceedings the NZACU appeals against a decision by the Registrar that the NZACU is permitted only to provide services to its members, and not to

non-members, as it had been doing.1    Essentially the Registrar held that while the

1      The appeal is brought under s 151 of the Act.  The non-members (also known as “Associates”)

are building societies.

BLEAKLEY & ORS v THE REGISTRAR OF FRIENDLY SOCIETIES AND CREDIT UNIONS [2017] NZHC 471 [16 March 2017]

NZACU’s Rules appeared to permit services to be provided to non-members, those rules were inconsistent with s 143 of the Act, and therefore ultra vires.  The Registrar directed that the rules be amended to reflect that position.

[3]      First Credit Union (First) is presently a member of the NZACU.   First’s custom constitutes at least 30 per cent of NZACU’s business.   Westforce Credit Union (Westforce) was, until recently, a member of the NZACU.  Westforce gave up its membership in August 2016.

[4]      Westforce seeks to be joined as a party to, and First seeks to intervene in, the

NZACU’s appeal.

Background

[5]      The services provided by the NZACU are financed in part by base capital notes (BCNs), issued by the NZACU and subscribed for by its members.2   These are a form of deeply subordinated debt, which do not give members a right to call for their repayment.

[6]      While it was still a member, Westforce became concerned that the NZACU had been providing services to non-members.   Westforce considered that this was contrary to the Act and caused financial risk to its members.   Westforce also had concerns that First was considering withdrawing from the NZACU.

[7]      In February 2016 Westforce wrote to the Registrar about its concerns.   In August it withdrew from the NZACU.   Before it did so, however, a transitional arrangement  was  arrived  at,  whereby  the  NZACU  would  continue  to  provide services  to Westforce  until  1  September  2017,  with  the  possibility of  a  further extension. This was recorded in a variation agreement dated 15 September 2016.

[8]      In September 2016 First became aware of Westforce’s complaint.  First, too, had  concerns  about  the  provision  of  services  to  non-members,  because  of  the

potential effect on its risk profile.   First set out these concerns in a letter to the

2      First holds approximately 40 per cent of the base capital notes issued by the NZACU.

Registrar on 3 October 2016.  In that letter First made it clear that notwithstanding

Westforce’s withdrawal from the NZACU the issue it had raised was still a live one.

[9]      On 18 November 2016, after considering the information provided by both Westforce, First and the NZACU, the Registrar determined that the NZACU was permitted only to provide services to its members and that aspects of the Rules were ultra vires.  On 2 December, the Registrar wrote to the NZACU requiring it to cease providing services to non-members who, by then, included Westforce in terms of its transitional agreement.  On 5 December, the NZACU wrote to Westforce advising of this position.

[10]     NZACU filed the present appeal on 15 December 2016.  The Registrar was named as the sole respondent.

[11]     On 19 December 2016 the Registrar’s solicitor (Mr Rendle) wrote to counsel for NZACU saying that the two “complainants” (ie Westforce and First) should be named as parties to the appeal and that he proposed to send them a copy of the notice of appeal.  On 20 December 2016 Mr Rendle did just that.

[12]     On  20  January  2017  the  lawyers  for  First  wrote  to  the  lawyers  for  the NZACU saying that First was entitled to be heard on the appeal and should be named as an “interested party”.   The letter sought the NZACU’s consent to that course. That request was declined by letter dated 3 February.

[13]     On 13 February there was a mention of the appeal before Dobson J.  Counsel appeared  on  behalf  of  First  and  Westforce.    Mr  Rennie  QC  appeared  for  the Registrar.   Directions were made both as to the timetabling of the proposed intervention by First and Westforce and the provision of documents and filing of evidence in relation to the substantive appeal, which has been set down for two days in early June.  It seems that the issue of whether the Registrar was a properly named respondent was not raised, although immediately following the timetable directions, Dobson J’s minute recorded that:

Mr Rennie indicated that the Registrar will, in all other respects, be abiding

the Court’s decision.

[14]     On 22 February:

(a)       First applied to be joined to the appeal as an “interested party”; and

(b)      Westforce applied to be joined to the proceeding.3

[15]     NZACU opposes both applications, although it does not oppose intervention by Westforce, on terms.  It also accepts that Westforce could bring a separate appeal in its own right (in relation to the legality of its transitional arrangement) and does not oppose the late filing of such an appeal.

[16]     On 10 March 2017 the Registrar filed an appearance, advising that he wishes to appear and be heard on the appeal.  As I understand it, it appears that on the same day he advised NZACU that he did not consider he had been properly named as a respondent. That was consistent with Mr Rennie’s advice to the Court at the hearing this week, namely that the Registrar’s position was that:

(a)       he was not properly named as a respondent, in terms of r 20.9;4 but

(b)      he did wish to appear and be heard on the appeal; and

(c)      the nature and extent of the matters on which he wished to be heard would, in part, be determined by the outcome of the two  joinder applications; and

(d)he was of the view that those who made submissions to the Registrar in relation the impugned decisions were entitled to participate in the appeal “as parties, intervenors, and/or in exercise of natural justice rights”.

[17]     Beyond that advice, however, the Registrar did not participate in the hearing of the joinder applications.

3      To the extent it was not clear on the face of the documents filed that First sought to intervene while Westforce sought to be formally joined as a party, it has subsequently become so.

4      No formal application for removal has, however, been made.

Discussion

[18]     The present applications raise something of a “chicken and egg” issue.  That is because (as my summary of the Registrar’s position above, and the discussion which follows, shows) the presence or absence of a contradictor can be relevant to the question of joinder but, conversely, the extent to which the Registrar himself takes on a contradictor role might depend on the presence or absence of another respondent or intervenor.

[19]     Notwithstanding this element of circularity, however, it is both necessary and appropriate to consider the role of the Registrar first, before addressing the joinder applications.

The role of the Registrar

[20]     Rule 20.9(2) of the High Court Rules provides that a decision-maker is not to be named as a respondent to an appeal from a decision made by him or her.  The history and reasons for that rule were most recently and thoroughly canvassed by this Court in Fonterra Co-operative Group Ltd v Grate Kiwi Cheese Co Ltd.5    Miller J said:

[19]     Several rationales for the principle that a decision-maker ought not become a protagonist in an appeal from its own decision emerge from the authorities and the Rules: involvement in an appeal from its own decision lends the decision-maker an appearance of partiality; in particular, it is difficult to be and appear impartial in proceedings before the decision-maker that  may  follow  the  appeal;6   alternatively,  the  decision-maker  may  be functus officio, with no further role to play in the case; the decision-maker can provide appropriate assistance without being named; it is for the Court to decide when such assistance is appropriate, and the Rules confer a discretion not to hear from the decision-maker so long as it is not a party; and the decision-maker may be put to unnecessary expense if named.

[21]     The reference here to a decision-maker’s ability to be heard without party status is, of course, reflected in r 20.17 which provides that, in general, a decision-maker is entitled to be represented and heard at the hearing of an appeal on all matters arising in

it.  But to the extent that the decision-maker does choose to exercise his r 20.17 right

5      Fonterra Co-operative Group Ltd v Grate Kiwi Cheese Co Ltd (2009) 19 PRNZ 824 (HC).

6      At this point it is useful to observe that the risk of apparent partiality is a live one in the present case because one of the options open to the Court determining an appeal under s 151 is to refer the matter back to the Registrar.

(as the Registrar has indicated he will here), the authorities are clear that counsel should adopt a position of assisting the Court rather than taking a proactive role.   In Secretary for Internal Affairs v Pub Charity, the Court of Appeal made it plain that, in general, the proper course for decision-makers is to abide the decision of the court and not enter the fray.7   Any submissions which are made should be confined to matters such as the decision-maker’s jurisdiction or the general administration of the relevant legislation.  In many respects the impugned decision should speak for itself.8

[22]     In short, therefore, although the Registrar has a right to be heard in this appeal, it is a limited right which is subject to the Court’s oversight and control.  He is not a party. I record that while it would ordinarily follow that the Registrar could not himself take this Court’s decision in the appeal on further appeal that issue does not arise here because  s 151(5)  provides  that  the  determination  of  this  Court  will  be  final  and conclusive.  But the Registrar cannot be liable for costs.

[23]     I appreciate that this state of affairs can, on occasion, be far from satisfactory. Sometimes there will be no potential “contradictor” other than the decision-maker. That will often be less than satisfactory from the Court’s point of view.   But the reality is that in the present case there are two other entities who made submissions to the Registrar in relation to the subject-matter of the impugned decision and who wish actively to oppose the appeal.   I am unable to see any reason why the Registrar’s involvement needs to be of a more expansive kind than an orthodox application of the rules requires.  In my view he was wrongly named as a respondent here.

Joinder and intervention

[24]     As  noted  earlier,  Westforce  seeks  to  be  joined  as  a  party  to  the  appeal whereas First seeks only to intervene.

7      Secretary for Internal Affairs v Pub Charity [2013] NZCA 627, [2014 NZAR 177 at [27].

8      It may be noted in passing that paragraph [6] of Williams J’s decision in de Montalk v The Onehunga Workingmen’s Club  HC  Auckland  AP  137/01, 29  May  2002  suggests  that  the Registrar of Friendly Societies and Credit Unions was removed as a respondent in that case.

[25]     The distinction between, and principles relevant to, applications for joinder and intervention have recently and helpfully been canvassed by this Court in Capital and Merchant Finance Ltd v Perpetual Trust Ltd.9  There, Thomas J said:

[8]       It important at the outset to note that Mr Stewart does not seek to be added as a plaintiff or a defendant, but as an interested party. The difference is significant.   Whereas additional plaintiffs or defendants have a right to appeal, an interested party or intervener has no such right. The High Court Rules do not specifically provide for the addition of interested party to a proceeding. However, the Court has recognised the existence of this jurisdiction both under the rules and in the exercise of the Court's inherent jurisdiction.

[9]       The case law does not reveal a clear test for whether the Court should  add  interested  parties  or  interveners  in  civil  cases.  It  appears, however, that the Court may be influenced by broader considerations than on applications for joinder of plaintiffs or defendants. This corresponds to the more limited rights acquired by interested parties/interveners.

[26]     Thomas J then said that it was helpful to begin by considering the Court's ability to join plaintiffs and defendants. She noted that r 4.56(1)(b) provides that a person may be “added as a plaintiff or a defendant” because they “ought to have been joined” or their presence before the court is “necessary to adjudicate on and settle all questions involved in the proceeding”.

[27]   After surveying a number of cases where parties have been joined to proceedings   as   defendants   and   other   cases   involving  intervention   Thomas J concluded:

[40]      The judgments of Diagnostic Medlabs and Sanofi-Adventis suggest that a proposed intervener must meet the same standard facing an intending plaintiff or defendant; namely it must show that its legal rights or liabilities will be directly affected by the proceeding. However, in my view, in the context of applications for joinder of interveners/interested parties, a party may, in exceptional circumstances, be added even though that criterion is not satisfied.   This reflects the fact that an intervener acquires more limited rights than a joined plaintiff or defendant and that other factors, such the assistance to the Court, may be persuasive.

[41]      The following propositions can be distilled from the authorities on the joinder of interveners/interested parties:

(a)      An  applicant  must  show  that  its  legal  rights  against  or liabilities in relation to the subject matter will be directly

9      Capital and Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd [2014] NZHC 3205, [2015] NZAR 228 (footnotes omitted).

affected. Commercial, financial, or reputational interests in the outcome will only be sufficient in exceptional circumstances.

(b)       If the intending intervener’s presence before the Court will not improve the quality of information before the Court, that will count heavily against its addition to the proceedings.

(c)       A relevant consideration is the extent to which the proposed intervener can rely on one of the parties to protect its rights and obligations.

(d)       If either party would be prejudiced by the intervention, or if the intervention would create an impression of partiality, the application will not be granted.

(e)       In  cases  where  development  of  the  law  is  likely,  the application is more likely to be granted if the proposed intervener has special expertise to assist the Court on wider public policy issues.

(f)       The  underlying  issue  is  whether  it  would  be  unjust  to adjudicate on the matter in dispute without the intervener being heard. Several of the factors mentioned above tie into this issue.

(g)       Where intervention is justified, the degree of participation granted to the intervener should be the minimum necessary to protect the intervener’s interests.

[28]     I would add to that list the proposition that intervenors may be liable for costs and may, on occasion, be awarded costs.   Sometimes, however, the terms of their intervention may be such that they are immune from a costs award against them.10

In summary, the principal (and possibly only) differences between an intervener and a party strictly so-called are that:11

(a)       intervenors have no appeal rights (an issue which does not arise in the present case); and

(b)the  Court  will  (perhaps)  more  readily  limit  the  scope  of  an intervention.12

10     The position in relation to the costs of intervenors is, in part, governed by s 99A of the Judicature Act 1908. But see the useful discussion of the wider issue in Earthquake Commission v Insurance Council of New Zealand Inc [2015] NZHC 457, (2015) 22 PRNZ 427.

11     The position is necessarily different when either the Attorney-General or the Solicitor-General seeks to intervene in a proceeding to represent some wider public interest.

12     Even the role of a person who is joined as a “full” party may be circumscribed by the Court, at least in a judicial review context: Westhaven Shellfish Ltd v Chief Executive of Ministry of Fisheries (2002) 16 PRNZ 501 (HC).

[29]     Otherwise there appears little necessary or significant difference between: (a)          the threshold for intervention and the threshold for joinder; or

(b)the role that might be played by an intervener and someone who is joined as a party strictly so-called.

This case

[30]     I deal with each of the two applications separately.

[31]     As far as Westforce is concerned, NZACU quite properly accepts that the effect of the impugned decision on its transitional agreement (namely that the agreement is invalid) gives it a direct interest in the appeal.  Westforce’s interest in that regard is not the same as NZACU’s because Westforce supports the Registrar’s wider decision on the vires issue but says that it does not follow that the agreement must fall.   Mr Brant described that as a slightly “schizophrenic” position and that may indeed be so.  But the signal point for present purposes is that Westforce has a discrete legal interest in the subject matter of the appeal on which it is entitled to be heard.   Canvassing that issue will necessarily require engagement with the wider vires issue and, in that context, Westforce would support the impugned decision, at least in a limited way.

[32]     I tend to agree with Mr Friar for NZACU, however, that the proper course would have been for Westforce to have filed its own appeal against the Registrar’s decision.   Because the Registrar’s decision does not separately deal with the transitional agreement the Court would be assisted by the filing of a notice of appeal that clearly articulates the reasons why Westforce says it should have been carved out from the more general vires point.

[33]     NZACU very reasonably does not oppose Westforce filing such a notice now, notwithstanding that it is out of time.  Nor would NZACU oppose the two appeals being progressed and heard together.  In my view that it what should occur.  It would not therefore be necessary for Westforce to be made a party to NZACU’s appeal; all arguments that it wishes to advance can be made in the context of its own appeal.

[34]     First’s  position  is  a  little  different.    It  wishes  to  support  the  Registrar’s decision.  There are, it seems, wider policy arguments it may wish to make in that regard.  Issues of evidence may arise, although the nature and extent of it will almost inevitably be contested, particularly if First is joined only as an intervener (as it seeks).13

[35]     I consider that First should be granted leave to intervene, for the reasons that follow.

[36]     First, there is the limited nature of the Registrar’s role in the appeal and the consequent desirability of having some other contradictor.  As noted earlier that role will not be wholly fulfilled as a consequence of Westforce’s own appeal because Westforce only partly supports the Registrar’s decision.   Moreover, given that Westforce has now withdrawn from the NZACU, its interests are now fundamentally different from members such as First.  In light of those matters I consider that First’s participation in the appeal is likely to assist the Court.

[37]     Secondly (and like Westforce), First was involved in the process leading to the making of the impugned decision which refers to the participation by the two credit unions.  First has subsequently been described by the Registrar as one of the two “complainants”.  This prior involvement in the process necessarily differentiates it from other indirectly affected parties (other members of NZACU) and thus renders any “floodgates” concern nugatory.

[38]     Thirdly, I agree with the submission that the restrictive approach to joinder and intervention in ordinary civil litigation  is less apt in a context such as the present.  This is an appeal from the exercise of a statutory power by the executive. This is not a case of a third party seeking to intervene in a private dispute between a plaintiff and a defendant.  First has a clear interest in the subject matter of impugned decision (and the appeal) even if that interest is not “direct”, in the sense that the

outcome will have some immediate practical effect on it.  In these ways the case is,

13     Section 151 is, in that respect, an unusual appeal provision; it expressly states that the Court may receive any evidence that may assist it, whether or not it would be otherwise admissible in a Court of law.

indeed, more analogous to an application for judicial review.14  And as Gendall J said in Deadman v Luxton:15

It may often be the case that there is more scope for rights of others to be affected in judicial review proceedings, than in other types of “plaintiff versus defendant” civil litigation, because frequently the challenge to the exercise of the statutory power or decision of a public body will have consequential effects upon others who obtained beneficial entitlements or expectations following upon the exercise of such power.

[39]     A flexible and pragmatic approach is, in my view, required.  I consider that

First should be permitted to intervene accordingly.

[40]     In terms of the parameters that are to be placed on that intervention: (a)        First is to be served with all documents;

(b)      First may file written submissions in the appeal; and

(c)       whether First is heard orally (and to what extent) will be determined by the Court hearing the appeal.

[41]     As far as First’s ability to file evidence is concerned the starting point is that the core issue is one of statutory interpretation.   Notwithstanding the apparently expansive terms of s 151(4) I would have thought that there is little scope for NZACU or First placing evidentiary material before the Court that was not before the Registrar.  In particular, the question of whether in fact the services historically provided by the NZACU to Associates do in fact benefit NZACU’s members cannot be relevant to the central vires issue.   That said, however, I do acknowledge that some background information about the services actually provided and any flow on effects may be of assistance in terms of context.

[42]     In light of the tight (but still do-able) timetable operating in relation to this appeal I think the preferable course would be to permit First to file evidence in

accordance with that timetable if it wishes, on a de bene esse basis.  If objection is

14     This appeal could, in fact, have equally been mounted by the NZACU as an application for review. Had that course been followed, First would almost certainly be entitled to be a party.

15     Deadman v Luxton HC Wellington CP71/99, 4 May 1999 at 6.

taken to its scope or contents by NZACU that will need to be determined by the judge hearing the appeal.

[43]     Lastly, I consider that the usual rules about costs should apply.   By that I mean that First will be potentially liable for costs and may potentially have costs awarded in its favour.   The considerations discussed in Earthquake Commission v Insurance Council of New Zealand Inc will, no doubt, govern those issues.16

Result

[44]     In formal terms, therefore, I make the following orders:

(a)      the Registrar is struck out as the respondent in this appeal.  He retains his right to be heard and to appear to assist the Court, although his exercise of that right will, no doubt, be influenced by the other orders I make below;

(b)leave  is  granted  to  Westforce  to  file  its  own  appeal  against  the Registrar’s decision dated 18 November 2016, out of time.  It is to file and serve a notice of appeal within three working days of the date of this judgment;

(c)      Westforce’s  appeal  is  to be managed  and  heard  together with  the present appeal.17    For that reason it may not be necessary to have a separate first call of the new appeal (although I reserve leave below); and

(d)the application by Westforce to be joined as a party to the present appeal is dismissed, but on the basis that whatever submissions it makes in its own appeal can be taken into account by the Judge in

determining the present appeal;

16     Earthquake Commission v Insurance Council of New Zealand Inc, above n 10.

17     I would not anticipate that this will require hearing time beyond the two days presently allocated

(e)      the application by First to intervene in this appeal is granted.  Subject to further order of the Court the parameters of the intervention right are those set out in [39] and [40] above;

(f) the timetable ordered at [4](g) to (i) of Dobson J’s minute dated

13 February shall apply to both Westforce’s appeal and to First in this appeal.

[45]     As far as the costs of the present matters are concerned I would be inclined to let them lie where they fall.  The rather unclear position in relation to the Registrar’s status in the appeal seems to me to be a complicating factor in terms of the various positions taken.  If counsel disagree, memoranda may be filed.

[46]     In the event that further issues arise leave is reserved to the parties (and to

First) to seek to have either or both appeals called in a Judge’s Chambers List at short notice.

Solicitors:           Bell Gully, Wellington for Appellants

H Rennie QC for Respondent

Rebecca Ellis J

Stace Hammond, Hamilton, for Westforce Credit Union

Anthony Harper, Auckland, for First Credit Union