Commerce Commission v Koppers Arch Wood Protection (NZ) Ltd HC Auckland CIV 2005-404-2080
[2007] NZHC 2146
•16 March 2007
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EMBARGOED FROM RELEASE OTHER THAN TO PARTIES AND COUNSEL FOR 48 HOURS AFTER DELIVERY BY
REGISTRAR
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV.2005-404-2080
BETWEEN COMMERCE COMMISSION Plaintiff
ANDKOPPERS ARCH WOOD PROTECTION (NZ) LIMITED
1st Defendant (Settled)
ANDKOPPERS ARCH INVESTMENTS PTY LIMITED
2nd Defendant (Settled)
AND KOPPERS AUSTRALIA PTY LIMITED
3rd Defendant (Discontinued)
AND TERRENCE GEORGE MULLEN
4th Defendant (Protesting Jurisdiction))
AND COLIN ROBERT NEWELL
5th Defendant (Settled)
AND ERNEST STANLEY BRYON
6th Defendant (Discontinued)
ANDT P L LIMITED (FORMERLY FERNZ TIMBER PROTECTION LTD)
7th Defendant
ANDNUFARM LIMITED (FORMERLY FERNZ CORPORATION LTD)
8th Defendant
ANDFCHEM (AUST) LIMITED (FORMERLY FERNZ AUSTRALIA LTD)
9th Defendant
AND MARK EDWARD GREENACRE
10th Defendant (Settled)
COMMERCE COMMISSION V KOPPERS HC AK CIV.2005-404-2080 [16 March 2007]
AND ANDREW ROBERT POYNTER
11th Defendant (Protesting Jurisdiction)
AND ELIAS AKLE
12th Defendant (Protesting jurisdiction)
AND OSMOSE NEW ZEALAND
13th Defendant (Settled)
AND OSMOSE AUSTRALIA PTY LIMITED
14th Defendant (Settled)
AND NEIL HARRIS
15th Defendant (Protesting Jurisdiction)
Hearing: 21-24 August 2006
Counsel: D J Goddard QC, M-A Borrowdale and N Wills for Plaintiff
J G Miles QC and S Keene for 11th Defendant
L McEntegart and T P Mullins for 12th and 15th Defendants
No appearance other parties
Judgment: 16 March 2007
RESERVED JUDGMENT OF WILLIAMS J
Re: application by plaintiff to set aside protests to jurisdiction by
11th, 12th and 15th Defendants
This judgment was delivered by
Hon. Justice Williams on
Friday 16 March 2007 at 4:00pm
pursuant to R 540(4) of the High Court Rules
……………………………..
Registrar/Deputy Registrar
Date: ……………………...
AThe applications by the plaintiff to dismiss the protests to jurisdiction by the 11th, 12th and 15th defendants are granted.
BHad it been necessary so to do, the application under R 220 by the plaintiff for leave to serve the 11th, 12th and 15th defendants outside New Zealand would have been granted.
2
CThe Registrar is to allocate a penalty hearing in relation to the 4th defendant in consultation with counsel for the plaintiff and that defendant.
DIf costs relating to the principal applications are in issue, they are to be resolved as set out in para [294]
TABLE OF CONTENTS
Paragraph
Introduction, Procedure and Background [1] The Claim Summarized [8]
Legal and Evidential Issues [21]
(1) Applicable Test [22] (2) Timing of Applicable Test [26] (3) Original or Amended Claim? [31] (4) All Causes of Action or Any Cause of Action? [37] (5) Evidence [40] (6) “Necessary or Proper”? [47] (7) Limitation [50] (8) Conspiracy and Accessory Liability: [63] (a) General [64] (b) Accessory Liabiliry [79] (c) Conspiracy [86]
A Good Arguable Case Against Messrs Poynter, Akle and Harris?
(1) General [94]
(2) Facts:
(a) Mr Akle [97] (b) Mr Harris [129] (c) Mr Poynter [161]
Submissions:
(1) Commission:
(a) Mr Poynter [182] (b) Mr Akle [188] (c) Mr Harris [196]
(2) Protesting Defendants:
(a) Mr Poynter [201] (b) Mr Akle [212]
(c) Mr Harris [234]
Discussion:
1. General [240]
2. Mr Akle [253]
3. Mr Poynter [263]
4. Mr Harris [269] Result [275] R 220 application [276]
Costs [283]
Introduction, Procedure and Background
[1] This judgment deals with applications by the plaintiff, the Commerce Commission, to set aside protests to jurisdiction by the 11th, 12th and 15th defendants, Messrs Poynter, Akle and Harris respectively.
[2] On 21 April 2005 the Commission commenced this claim against fifteen companies and individuals asserting anti-competitive behaviour under the Commerce Act 1986 (the “Act”) s 27 either directly or by way of accessory liability and seeking injunctive relief, pecuniary and other penalties.
[3] Of the fifteen, eleven resided or had registered offices outside New Zealand. The Commission did not seek leave under R 220 to serve any defendant out of the jurisdiction, relying instead on the jurisdiction of this Court to implead overseas defendants without leave under R 219(a)(d)(h). The Commission has since disavowed reliance on R 219(a) and, since it no longer seeks injunctive relief, has also disavowed reliance on R 219(d). The only basis on which the Commission now claims the protesting overseas defendants were properly impleaded and served is under R 219(h) which gives this Court jurisdiction over defendants overseas:
(h)Where any person out of New Zealand is a necessary or proper party to a proceeding properly brought against some other person duly served or to be served within New Zealand
[4] On 21 August 2006, the Commission also applied for leave to serve the 4th,
11th, 12th and 15th defendants outside New Zealand under R 220. That was a precaution against a possible decision adverse to the Commission on the protests to jurisdiction. Accordingly, it may require later discussion.
[5] Of the eleven overseas defendants, initially ten filed protests to jurisdiction but, as a result of discussions and settlements with six defendants - four of them overseas - and discontinuance by the Commission against two further overseas defendants (see the judgments of 6 April 2006 and 4 October 2006 approving penalties against seven defendants), shortly before this hearing there only remained four live protests to jurisdiction filed by four individual defendants residing
overseas, the 4th, 11th, 12th and 15th defendants.
[6] However, on 18 August 2006, the Commission and the 4th defendant, Mr Mullen, entered into a co-operation agreement and Mr Mullen withdrew his protest to jurisdiction. A penalty hearing in relation to Mr Mullen will follow in due course.
[7] Therefore, as far as these applications are concerned:
a) On 20 April 2005 the Commission issued this claim against Messrs Poynter, Akle and Harris nominating R 219(a) (d) (h) as the basis for the jurisdiction of New Zealand courts over them. It now relies only on R 219(h).
b) On 11 August 2005 Messrs Poynter and Akle and, on 28 November
2005, Mr Harris filed protests to jurisdiction, in each case asserting the Commission had no good arguable case that any of the causes of action against them fell within R 219 or that any of them engaged in conduct to which the Act might apply. All said they were foreign citizens resident in Australia (Messrs Poynter and Akle) or the USA and, now, France (Mr Harris) and none carried on business in New Zealand.
c) On 14 March 2006 the Commission applied pursuant to R 131 to set aside those protests saying, under R 219(h), that each of the three protesting defendants were necessary or proper parties to the claim, one which had been properly brought against other defendants served in New Zealand.
d)In their notices of opposition filed on 23 June 2006 Messrs Poynter, Akle and Harris effectively repeated the basis of their R 131 protests. In addition, Mr Poynter asserted that he was never an officer, employee or agent of Osmose, received no income from any New Zealand-based entity in the Fernz Group, was never responsible for pleaded actions by Fernz NZ’s business and ceased his involvement in the wood preservative chemicals industry prior to the enactment of the Commerce Amendment Act 2001 so all claims against him were statute-barred and the other causes of action disclosed no substantial or serious legal issue for trial.
The Claim Summarized
[8] The claim centres around the New Zealand wood preservative chemical market between mid-1998 – mid-2002. Such chemicals – especially copper chrome arsenate (“CCA”) - are principally used by sawmillers, timber treatment operators and the like. Market size in the relevant period varied between $14m-$25m pa and the principal suppliers were the Koppers Group and, until 1 February 2001, the Fernz Group. On that date the Osmose Group bought the Fernz Group and was thereafter the principal operator in the market with Koppers.
[9] Mr Poynter is pleaded to have been an officer, employee, or had managerial responsibility for Fernz NZ, Nufarm and Fchem (the Fernz Group) until about October 2000. He is said to have been a director of Fernz NZ for the ten months before that date.
[10] Mr Akle is pleaded to have been an officer, employee, or had management responsibility for Fernz up to its sale to Osmose and thereafter for Osmose. He is said to have been a senior executive with both.
[11] Mr Harris is said to have been an officer, employee or had management responsibility for Osmose concerned in its management and direction after it bought Fernz. He was a director of Osmose NZ.
[12] The claim centres around a number of what it calls “understandings” these being the “overarching understanding”, the “Fletcher Forests understanding”, the
1998 and 2000 “Price Rise understandings”, the 2001 “Proposed Fletcher Forests understanding”, the “Southern Alps Industries (SAI) understanding”, the “Central Otago Lumber (COL) understanding”, the “McAlpines understanding”, the “proposed Capex understanding” and the “TimTech understanding”. In the usual way it pleads separate causes of action for the defendants of entering into, giving effect to and incurring accessory liability in respect of the various understandings and alleges party liability against various executives.
[13] More particularly, the claim asserts that Koppers and Fernz/Osmose entered into the overarching understanding that in their wood preservation chemical business they would share pricing information, not compete on price or for each other’s major customers and would avoid unrestrained competition. Higher than truly competitive prices resulted. The specific understandings were entered into on behalf of the principal suppliers to ensure lack of true competition in the market. They include an understanding relating to the supply of chemicals to Fletcher Challenge Forests Ltd in May 1998-1999 and an understanding as to price rises in 1998 and 2000 resulting in similar increases and an agreement to refrain from competitive bidding for supply to a company called Timber Treatments in mid-1998. Osmose is pleaded as having attempted to enter into an arrangement with Koppers in about April 2001 for the latter not to compete on price or to bid for Fletcher Forests’ wood preservative chemical tender. In mid-2001 Koppers and Osmose agreed Koppers would withdraw an offer it had made to supply chemicals to SAI. In mid-2001 Koppers and Osmose agreed that Koppers would withdraw an offer to supply chemicals to COL. In mid-2001 Koppers and Osmose agreed to exchange pricing information on
which each would submit a tender for chemicals to McAlpines. In November 2001
Osmose thought Koppers, as part of its chemical supply offer to Lumbercorp some months earlier, had offered to fund capital expenditure at a discounted rate and attempted to arrive at an understanding that neither would do so in offering CCA. Finally, in about mid-2001 Osmose and Koppers agreed to undertake measures to hinder or restrict entry into the market by TimTech Chemicals by restricting supply, preventing or restricting manufacturing and locking customers into long-term supply contracts to shut TimTech out.
[14] It is of significance that many of those understandings and their giving effect to the same have now been admitted by various defendants.
[15] Mr Poynter of Fernz is alleged to have been one of those, with Messrs Akle and Harris of Osmose, who entered into the overarching and some of the specific understandings and gave effect to them.
[16] He is pleaded to have been advised of the overarching understanding by Mr Greenacre, another Fernz executive, in late 1997. In relation to that understanding, Mr Poynter was originally pleaded to have attended a meeting with Koppers’ employees in about March 1998 and possibly another in June that year. However, symptomatic of the emergent nature of pleadings in cases such as this, in his reply, Mr Goddard QC, senior counsel for the Commission, accepted it was unable to rely on the March 1998 agreement as giving rise to liability as it was statute-barred – though would be relied on as narrative – and withdrew the allegation concerning the June 1998 agreement as having no evidential foundation. However, he said Mr Poynter had communications consistent with his knowing of the overarching understanding including contacts with Koppers, a meeting with a further competitor, meetings overseas with Koppers in June 1998, meetings with Messrs Bryon and Newell of Koppers between October 1999 and April 2000 when complaints were made about the aggressive behaviour of Mr Boyle of Koppers, a meeting with Messrs Langton (also of Koppers) and Boyle in September 2000 and general awareness of Mr Greenacre’s activities in furtherance of the overarching understanding and failing, as Mr Greenacre’s immediate superior and a director of
Fernz to require him to desist. He is also pleaded to have offered to act as intermediary between Koppers and Osmose.
[17] It is pleaded that Mr Akle was party to setting up the overarching understanding and a number of the specific understandings. He is said to have attended meetings in June 1998 and 2001 between Fernz and Koppers and to have been involved in setting up communication arrangements between the two. He is said to have known of and condoned the McAlpines and COL understandings and the attempted capex understanding in 2001 and attended meetings with Koppers concerning the 1998 price rise understanding. He is pleaded to have played a significant role with Mr Greenacre in implementing the TimTech understanding.
[18] Mr Harris is pleaded to have been briefed on and known of the setting up of the overarching understanding and to have attended meetings in New Zealand in that regard in 1999, 2000 and 2001. He is said to have been involved in or to have known of the Fletcher Forests, SAI, COL and McAlpines understandings, the proposed capex understanding and the TimTech understanding. He, too, is said to have been aware of Mr Greenacre’s activities and to have been in the position as a director of Osmose NZ to require him to refrain from his contravening behaviour but failed so to do.
[19] Messrs Poynter and Akle are pleaded to have contravened or attempted to contravene s 27 through their involvement in the Fernz Group breaches by having knowledge of the essential facts established in those breaches including the existence of the agreements and understandings and the steps taken to implement them, and by being directly or indirectly knowingly concerned in the breaches or conspiring with other defendants so to do.
[20] Messrs Akle and Harris are similarly alleged to have contravened or attempted to contravene s 27 by knowing the essential facts establishing the breaches by Osmose including the existence of the agreements and understandings and the implementation steps, and being directly or indirectly knowingly concerned in breaches by the Osmose Group or conspiring with other defendants to breach the Act.
Legal and Evidential Issues
[21] More detailed description of each protesting defendant’s pleaded involvement appears later in this judgment but there are a number of legal issues relating to these R 131 protests which require addressing before analysing the factual and legal position of each of the protesting defendants. They include:
(1) Applicable Test
[22] For the purposes of this hearing it was not in contest that the claim was properly brought against persons duly served within New Zealand. Accordingly, in terms of R 219(h) the only question was whether Messrs Poynter, Akle and Harris were “necessary or proper” parties to the claim, considering those terms disjunctively. That, in its turn, raised the issue of the appropriate test to be applied to applications such as this.
[23] There is some mild difference in terminology – but little, if any, in meaning – chosen to describe the test in these cases. The differing views and the New Zealand position are as summarised in Bomac Laboratories Ltd v F Hoffman-La Roche Ltd (2002) 7 NZBLC 103,626 (103,633-103,635 para [28]):
[28]The “ultimate issue” when determining an application under R131 is “… whether the Court is satisfied that there are sufficient grounds for it properly to assume jurisdiction …” (Kuwait Asia Bank EC v National Mutual Life Nominees Ltd (No 2) [1989] 2 NZLR 50 (CA) per Cooke P at 54 (23-24), affirmed (semble) on this point in Kuwait Asia Bank EC v National Mutual Life Nominees Ltd [1990] 3 NZLR
513 (PC) at 525) or whether the argument is “sufficiently strong to warrant” that result (Kuwait Asia Bank (CA) (supra) at 55-56). The statement of the issue in these terms begs the question of what is the appropriate test for determining the sufficiency of grounds. I have identified the principles to be applied in answering that question as follows:
[a] The starting point … is that a foreigner resident abroad will not be lightly subjected to the local jurisdiction (Société Générale de Paris v Dreyfus Brothers (1885) 29 Ch 239; Kuwait Asia Bank (CA) (supra) at 54; Kuwait Asia Bank (PC) (supra) at 524 and 528). This precept has recently been described as one of “restraint concerning a foreign citizen resident overseas” (Stone and Kelly v Newman, CA3/02, judgment 21 March 2002, per McGrath J at para 26). However, developments in transport, communication and
technology have reduced its practical importance. The principle of forum conveniens has similarly diminished its constitutional relevance (Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438 (HL) per Lord Goff at 455);
[b] The criterion for determining whether the Court has jurisdiction can not be “light” because it will determine the issue conclusively (Kuwait Asia Bank (CA) (supra) at 53). Accordingly, the test is whether the plaintiff has a “good arguable case” against the particular defendant (Kuwait Asia Bank (CA) (supra) at 54; Kuwait Asia Bank (PC) (supra) at
535 (semble); Stone (supra) at paras 21-26, 27 & 29) … ;
[c]The presence of the qualitative element of “good” necessarily means that the test is more rigorous than the threshold of tenability or arguability applied on an application to strike out (Biddulph v Wyeth Australia Pty Ltd [1994] 3 NZLR 49 per Eichelbaum CJ at 58, 25-30); Rea v Jordan Sandman Were Ltd (1992) 6 NZCLC 67,986 at
67,991). In my opinion … the constituent elements of the test are the existence of, first, a substantial or serious legal issue for trial (Seaconsar (supra) at 456-457) and, second, a credible or plausible factual basis for arguing the legal issue (Stone (supra) at para 24). On satisfaction of these two requirements the claim will have a sufficiently strong foundation to warrant a New Zealand Court assuming jurisdiction;
[d] The test is applied at two distinct stages of the Court’s inquiry (which in practice often merge) into, first, whether the plaintiff has complied with the letter and spirit of R219, and, second, the merits of the plaintiff’s claim. The second stage of this inquiry is undertaken within the Court’s inherent jurisdiction to decline jurisdiction (Kuwait Asia Bank (PC) (supra) at 525-529);
… …
[f]In conjunction with the good arguable case test, when deciding whether it is “satisfied” within the meaning of R131, the Court should consider the association or connection of the proceeding with New Zealand (Kuwait Asia Bank (CA) (supra) at 54). … (However, the relevance of this factor to a consideration of the merits, as opposed to forum conveniens, has recently been thrown into authoritative doubt (Seaconsar (supra) per Lord Goff at 456 (C-E)));
[g] Finally, and significantly, the plaintiff bears the onus of proving a good arguable case both in terms of compliance with R219 and on the merits (Kuwait Asia Bank (CA) (supra); Stone (supra)). Comments to the contrary (Biddulph (supra) at 57) appear, with great respect, to be wrong. However, the onus shifts to a defendant resisting an
application in reliance on an affirmative defence such as the application of the Limitation Act 1950 (Asian Pacific Finance Ltd v Waddell, CA275/98, unreported, judgment
20 September 1999, per Keith J at para 18).
(See also Baxter v RMC Group plc [2003] 1 NZLR 304, 310-313 paras [21]-[24]).
[24] Both Bomac and Baxter took the view that any distinction between “good arguable case” and “substantial or serious legal issue” is more semantic than real. In Stone v Newman (2002) 16 PRNZ 77 the Court of Appeal appeared to agree when it held (at 85, para [26]) :
What is a good arguable case is a straightforward test which comes down to a matter of judgment, in all the circumstances, having regard to the principle of restraint concerning a foreign citizen resident overseas.
[25] The use of the phrase “good arguable case” in this judgment is intended to comprehend all other descriptions of the test including Mr Goddard’s “a claim which is not merely speculative or conjectural”.
(2) Timing of Applicable Test
[26] Next, Mr Goddard submitted that the time at which compliance with R 219(h) should be assessed should be the time of service on the particular defendant. He further submitted the “good arguable case” test must be satisfied at the same time. Counsel for the protesting defendants took the same view. No authority was cited.
[27] Though Mr Goddard is almost certainly correct that the validity of a claim at its commencement or the regularity of service cannot be affected by subsequent events – later bankruptcy of an overseas defendant, for example, may affect continuation of the claim but not its valid commencement or service – and, though nothing turns on it in this matter nor will it affect the result in the usual run of R 219 cases where service is effected promptly, it may be doubtful whether counsel’s submission is correct.
[28] Commencement of a claim against an overseas defendant necessarily means that, until successfully challenged, the Court has assumed jurisdiction over that
defendant, at least to that extent. There is nothing in R 106ff as to the contents of a statement of claim or in R 125 requiring service on all defendants which differentiates between defendants within and without the jurisdiction. The rules draw no distinction as to the propriety of naming any particular defendant in terms of service on multiple defendants either within New Zealand or overseas. They may be served months apart. But whether the claim is properly commenced against them and served under R 219 does not vary according to the time of service. Service would therefore not appear to affect the question whether the Court has jurisdiction nor, when a defendant is overseas, whether the plaintiff can comply with R 219 nor whether there was a “good arguable case” for the plaintiff to commence the claim against that defendant. Service merely brings the claim to the defendant’s attention and triggers the respective parties’ rights including an overseas defendant’s right to protest jurisdiction for the claim to be commenced and served.
[29] Such must also be the case under R 220. In order to decide whether to grant leave to serve a defendant overseas, the Court is assuming to that point that the claim has been properly commenced against that defendant and is merely deciding whether leave should be granted to serve that defendant overseas or whether leave should be refused and the claim against that defendant later deemed discontinued under R 127(2).
[30] For those reasons, the better view may be that compliance with R 219 (or R 220) and demonstration that the plaintiff has a “good arguable case” against a protesting defendant and thus whether the Court was right to assume jurisdiction over that defendant should be judged as at the time of commencement of the claim rather than as at the time of service. But, as mentioned, the distinction makes no difference in this case, nor will it in most.
(3) Original or Amended Claim?
[31] The claim itself, as is common in proceedings under the Act, has undergone significant amendment since commencement, largely because of admissions of liability, settlements and co-operation agreements entered into with those of the defendants who no longer oppose the claim and interviews and documents that have
thus become available to the Commission since April 2005 from some of those defendants and their employees.
[32] At the commencement of this hearing on 21 August 2006, the Commission filed an amended claim (dated 10 August 2006) reflecting those admissions, co- operation and evidence. Certain original allegations were refined, nine causes of action were abandoned as not supported by evidence and the relief sought was altered, particularly by deletion of the application for injunctive relief. The Commission said no new causes of action were pleaded. As mentioned, Mr Goddard accepted during the hearing that certain allegations included in the amended claim were statute-barred. Thus the claim will require yet further amendment.
[33] It was contended by the protesting defendants that whether the Commission was entitled to invoke R 219(h) should be assessed in terms of the original claim. However, noting that New Zealand and English practice differs in this regard, Wylie J held in Equiticorp Industries Group Ltd v Hawkins [1991] 3 NZLR 700, 708, a decision where service on overseas defendants without leave was challenged on the basis that R 219 was inapplicable, that:
Applications such as the present are not challenging orders already made by the Court. They are rather challenging, at least in part, the plaintiff’s assumption that his case does come within R 219. I fail to see why that should not be determined on the basis of the pleadings and any amendments thereto and any other material properly before the Court at the time the applications are dealt with.
(See also Bomac at 103,632 para [21]).
[34] Mr McEntegart, leading counsel for Messrs Akle and Harris, supported by Mr Miles QC, senior counsel for Mr Poynter, argued that, despite the contrary submissions from the Commission, the amended claim did contain new causes of action. The allegations of conspiracy amounted to new causes of action within settled authority such as Smith v Wilkins & Davies Construction Company Limited [1958] NZLR 958 and Gabites v Australasian T & G Mutual Life Assurance Society Ltd [1968] NZLR 1145. Even if such were not the case, Equiticorp v Hawkins and Bomac should not be followed. It was wrong in principle to decide an application to
set aside a protest to jurisdiction on a claim which was not the version served which sparked the protest but on a claim improved by subsequent discovery, interviews and admissions.
[35] Accepting that Equiticorp v Hawkins posed a hurdle for his clients, Mr McEntegart nonetheless submitted that Wylie J’s distinction as to the Court’s involvement in proceedings under R 220 as compared with R 219 was a distinction without difference.
[36] In this judgment it is proposed to adopt the Equiticorp approach, work off the amended claim and the numerous documents put in evidence. As elaborated upon in paras [45] and [46] an issue in protests to jurisdiction and applications to set the same aside where R 219 is invoked is whether plaintiffs are correct in asserting the Court had jurisdiction under that rule over the defendant. It would be artificial and unrealistic to freeze plaintiffs’ pleadings as at that period. Documents discovered after issue and the filing of a protest might definitively establish that the plaintiff’s issuance of proceedings or the defendants’ protest had no basis or required significant amendment to conform to subsequently discovered facts and circumstances. It would be a waste of resources to argue a protest application on the basis of original pleadings when those involved all knew the underlying factual and, therefore, legal situation had changed.
(4) All Causes of Action or Any Cause of Action?
[37] For the Commission, Mr Goddard submitted that if a plaintiff satisfies the Court that R 219 applies that there is a good arguable case on any cause of action against any protesting defendant, the protest should be wholly set aside, not just in relation to that cause of action, as the plaintiff will have established the Court’s jurisdiction to try all claims against that defendant. That submission was based on that view as expressed in Bomac (at 103,637 para [45]) and Baxter (at 313 para [28]) and appears also to be the position in Australia (Bray v F Hoffman La Roche Ltd (2003) 200 ALR 607, 616 para [39] per Carr J, at 642 para [190] per Branson J). Comments which, on one construction, could be contrary to those views appearing in Churchill Group Holdings Ltd v Aral Property Holdings Ltd (HC Auckland
CP574/IM01, 30 September 2003 pp 32-33 para [86]) arose because of the narrow way in which the R 131 protest application was propounded in that case and the observations in Securities Commission v Midavia Rail Investments BVBA [2006]
2 NZLR 207, 253 para [161] that a protest to jurisdiction can be upheld on one ground but not on others or may relate to one but not all aspects of the claim related to the contrary case to the present and were made in reliance on precedents cited in that case which omitted reference to Baxter and Bomac.
[38] The decision of the Court of Appeal in Jones v Flower (1904) 24 NZLR 447
– or at least the headnote to the decision – is to the contrary in saying that leave to serve New Zealand proceedings out of the jurisdiction can only be granted when the whole of the relief sought comes within the Rule. Mr McEntegart relied on the decision.
[39] But Jones v Flower was a case where, unlike the present, leave was required. Further, that view of the law appears only to be enunciated expressly by one Judge (at 456 per Chapman J) and, in any event, more modern authority such as Bomac and Baxter takes the contrary view. It would also appear to be more in accord with R 219(h) and logic: the rule speaks of a “proceeding”, not individual causes of action. That suggests that if any part of a claim can be shown to have been properly brought against an overseas defendant under R 219(h) the whole of the “proceeding” should be held to have been properly brought against that defendant because that person has been shown to be properly a defendant in New Zealand litigation. That then leaves overseas defendants to their other remedies under the Rules in respect of claims. Thirdly, Jones v Flower speaks only of requiring leave “when the whole of the relief claimed comes within the rule” when it is commonplace in modern litigation for different relief to be claimed against different defendants, whether within New Zealand or overseas or against the same defendants under different causes of action. RR 219 and 220 results should be affected by the terms of the Rules, not the relief claimed. For all those reasons it would appear, with respect, that though the decision in Jones v Flower is one of the Court of Appeal, its authority may be regarded as having been overtaken by developments in the law and litigation in the ensuing century.
(5) Evidence
[40] As to the evidential requirements for applications to dismiss R 131 protests, Mr McEntegart particularly relied on the passage from Stone (at 85 paras [25]-[26]) which immediately precedes the passage cited above (para [24]):
[25]In that context the focus of the Court in considering an application to dismiss for want of jurisdiction under r 131 must be on the allegations made in the statement of claim and the affidavit evidence the plaintiff has put forward in support of them. The Judge will of course have regard to the plausibility of that evidence, in light of all the material before the Court, including that in the defendant’s affidavits. But in considering whether the plaintiff’s account meets the required standard the Court should take into account the inability of the plaintiff to obtain for [sic: “full”?] discovery at this stage especially in relation to matters that might be within the exclusive knowledge of the foreign defendant. On the other hand where the principal documentary evidence in the case appears to be available and the plaintiff's assertions contradicting it vague or improbable, a Judge is certainly not required to accept uncritically the factual assertions on which it is submitted on behalf of a plaintiff that there is a good arguable case.
[26] We do not think it constructive to be more specific as to what constitutes a good arguable case in this context. In particular we do not regard the gloss that “the plaintiff is probably right upon it”, offered in the judgment of the Court of Appeal in Attock Cement Co Ltd v Romanian Bank for Foreign Trade [1989] 1 WLR 1147 (CA) at p 1155, as helpful in New Zealand.
[41] The claim was commenced on the basis of what the Commission had then been able to discover during its inquiry - including utilizing the extended statutory powers of discovery and interview then available - plus the co-operation of Mr Boyle, a Koppers employee from 1996 and its managing director from September 2000. At that stage it could not access the records of any defendant or interview them.
[42] Since then, as noted, a number of defendants have settled with the Commission, mostly on the basis of discovering documents and making themselves or their employees available both for interview and to give evidence at the substantive hearing.
[43] In light of that, a number of affidavits were filed in opposition to or supporting the protests to jurisdiction. They included affidavits from defendants or former employees such as Messrs Boyle, Bryon and Greenacre.
[44] Objection was taken on behalf of the protesting defendants to that evidence. Details will be discussed as the judgment proceeds but Mr Goddard made the point – rightly, in the Court’s view – that whilst the Commission’s entitlement to implead the protesting defendants is to be judged either at the time the claim was commenced or at service, the evidential basis for consideration of that question is not frozen at that date.
[45] Virtually all claims rely or are affected, at least in part, on evidence obtained by plaintiffs after commencement. Many interlocutory procedures such as post- commencement discovery and interrogatories are designed for that very purpose. Commission inquiries and claims are no different. It is entitled to support its claim by reference to material obtained since the claim was commenced, particularly that obtained through co-operation agreements and disclosure following settlement. It cannot be the case that the Commission, having impleaded a defendant on the basis of liability inferentially derived from a few documents or statements, should be debarred in an application such as this from, say, using an affidavit later supplied pursuant to a co-operation agreement from a participant at a meeting where anti- competitive behaviour occurred who gives direct evidence of that defendant’s involvement in contravening conduct.
[46] The Commission is also entitled to re-consider its position and its pleadings in light of additional information obtained: indeed, in this case, the Commission’s amended claim discontinued a number of its original causes of action, the Commission having concluded, following receipt of further information, that they could no longer be justified. If the protesting defendants are entitled, as they are, to the advantage of re-formulated pleadings shrinking or excluding what was formerly alleged as their contravening conduct derived from the Commission’s receipt of later information, it cannot be the case that they can object to the receipt of information after commencement of the claim which crystallizes or amplifies their pleaded involvement in such conduct.
(6) “Necessary or Proper”?
[47] Mr Miles relied on authority that because penalty proceedings are quasi- criminal in nature the evidence must show an “unambiguous intent” to make the anti-competitive arrangement or understanding happen (Commerce Commission v Wellington Branch NZ Institute of Driving Instructors (1990) 4 TCLR 19, 24) and should have regard to the seriousness of the allegations and the relief sought (Commerce Commission v Caltex New Zealand Limited (1999) 9 TCLR 305, 314; Port Nelson Limited v Commerce Commission [1994] 3 NZLR 435, 437; Commerce Commission v Roche Products (NZ) Limited (2003) 10 TCLR 688, 702 para [57]). However, those were substantive, not interlocutory, decisions and are therefore only tangentially relevant to the present application.
[48] Mr Miles submitted that the phrase “necessary or proper party” in R 219(h), being used disjunctively, can result in a foreigner being held to be a “proper” though not strictly a “necessary” party (or, conceptually, the reverse), thus emphasising the judicial discretion involved (Pratt v Rural Aviation (1963) Limited [1969] NZLR 46,
47). That the proceeding is for penalties was a significant factor to be considered in that regard as were the merits of the claim including the foreign defendants’ involvement.
[49] An additional factor bearing on discretion was, Mr Miles submitted, the ineffectuality of any relief by way of penalty ordered, given the Commission’s acknowledgment in relation to other foreign-based defendants that, in practical terms, penalties imposed in New Zealand are unenforceable overseas. In a finely- balanced case, Mr Miles submitted a factor affecting discretion was that Court resources were being utilized to achieve an unenforceable result (Tyburn Productions Ltd v Conan Doyle [1990] 1 All ER 909, 919; Pearce v Ove Arup Partnership Ltd [1999] 1 All ER 769, 798).
(7) Limitation
[50] One of the grounds on which Mr Poynter supported his protest to jurisdiction was that the claims against him were time-barred under s 80(5). Up until 25 May
2001, s 80(5) required proceedings for pecuniary penalties to be “commenced within three years after the matter giving rise to the contravention arose”.
[51] Mr Poynter said he was employed by Fernz until October 2000 but had no managerial involvement with Fernz Timber Protection (“Fernz TP”) after April
2000. He said the Commission was first notified of the alleged anti-competitive behaviour by TimTech, in December (or, possibly, October) 2001, began its investigation about May 2002 and commenced the claim on 21 April 2005. Mr Miles accordingly submitted the claims against his client were out of time. Though not arguing the point, Mr McEntegart submitted that, were the limitation argument good, it would also apply to his clients.
[52] Mr Miles, however, recognised that the Commerce Amendment Act 2001 which came into force on 25 May 2001 both enacted harsher penalties and substituted the following for the former s 80(5):
[5]Proceedings under this section may be commenced within 3 years after the matter giving rise to the contravention was discovered or ought reasonably to have been discovered. However, no proceedings under this section may be commenced 10 years or more after the matter giving rise to the contravention.
[53] That notwithstanding, Mr Miles noted that s 26 of the 2001 Amendment provided in its transitional provisions that nothing in the Amendment should enable “proceedings to be brought that were barred before the commencement of this Act”. He also relied on the Interpretation Act 1999 s 17(1)(b) which provides that repeals do not affect existing rights or interests and referred to s 18(2) of that Act which provides that repealed enactments continue to have effect for completing a matter or bringing or completing proceedings that relate to an existing right or interest. Accepting that the test for statutory retrospectivity can be one of fairness (Secretary of State for Social Security v Tunnicliffe [1991] 2 All ER 712, 724: “the greater the unfairness, the more it is to be expected that Parliament will make it clear if that is intended” in retrospective legislation) Mr Miles relied on the observations in Yew Bon Tew v Kenderaan Bas Mara [1982] 3 All ER 833 where the Privy Council, considering the retrospectivity of a statute, held (at 836):
Apart from the provisions of the interpretation statutes, there is at common law a prima facie rule of construction that a statute should not be interpreted retrospectively so as to impair an existing right or obligation unless that result is unavoidable on the language used. A statute is retrospective if it takes away or impairs a vested right acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability, in regard to events already past. There is however said to be an exception in the case of a statute which is purely procedural, because no person has a vested right in any particular course of procedure, but only a right to prosecute or defend a suit according to the rules for the conduct of an action for the time being prescribed.
But these expressions ‘retrospective’ and ‘procedural’, though useful in a particular context, are equivocal and therefore can be misleading. A statute which is retrospective in relation to one aspect of a case … may at the same time be prospective in relation to another aspect of the same case … ; and an Act which is procedural in one sense may in particular circumstances do far more than regulate the course of proceedings, because it may, on one interpretation, revive or destroy the cause of action itself.
Whether a statute is to be construed in a retrospective sense, and if so to what extent, depends on the intention of the legislature as expressed in the wording of the statute, having regard to the normal canons of construction and to the relevant provisions of any interpretation statute.
[54] Their Lordships went on to hold (at 839) that an “accrued right to plead a time bar, which is acquired after the lapse of the statutory period, is in every sense a right, even though it arises under an Act which is procedural” because “when a period of limitation has expired, a potential defendant should be able to assume that he is no longer at risk from a stale claim”. In that passage the Privy Council was discussing the decision in The Ydun [1899] P 236 where, having regard to the inter- relationship between the facts and the coming into force of the statute in question, there was a period during which the claim would not have been statute-barred and “the right to sue remained, for a while, totally unimpaired”. Their Lordships went on to say (at 840) that “an accrued entitlement on the part of a person to plead the lapse of a limitation period as an answer to the future institution of proceedings is just as much a ‘right’ as any other statutory or contractual protection against a future suit”.
[55] Ultimately, Mr Miles submitted, it was for the Court to decide whether the passing of the Commerce Amendment Act 2001 stopped time running on the Commission’s claim against the protesting defendants and allowed it another three year limitation period following enactment of the amendment or whether the Court
should conclude that the limitation period had accrued before the claim was filed and was incapable of revival.
[56] Mr Goddard submitted the reasonable discoverability test applied and the protests should not be upheld on the basis of limitation in default of a full hearing. He made the point that anti-competitive behaviour is habitually covert. Discovery is difficult. He pointed to passages in supporting affidavits which he said arguably showed the protesting defendants’ alleged anti-competitive behaviour only came to light after 21 April 2002, about the time the investigation commenced.
[57] When this claim was commenced on 21 April 2005 the 2001 Amendment was, of course, in force. Pursuant to the authorities discussed, the protesting defendants then had rights in relation to limitation to raise such a defence if they were sued and could show their alleged contravening behaviour occurred more than three years before it was discovered or ought reasonably to have been discovered. It must follow that that does not avail the protesting defendants at this stage of the claim since whether they are entitled to rely on a limitation defence will depend on the results of a hearing into whether their impugned actions or inaction were discovered by the Commission or ought reasonably to have been discovered before
21 April 2002. That may resolve into the question whether the Commission should have acted more quickly to bring the alleged anti-competitive behaviour of the protesting defendants to light after receiving the complaint. It would be premature to try to resolve the protesting defendants’ limitation rights at this juncture before evidence has been heard on the question as to when the protesting defendants’ alleged anti-competitive behaviour was discovered or ought reasonably to have been discovered.
[58] In light of the above, up until 25 May 2001, even though the Commission had taken no action against them, the protesting defendants must be taken to have had a right to plead a limitation defence for any action or omission on their part for which they, in the future, were sued and which occurred prior to 25 May 1998. However, from 25 May 2001 the limitation period for acts or omissions of the protesting defendants was extended to three years after the contravening act or omission was either discovered or ought reasonably so to have been (with a longstop limitation
period of 10 years). That meant that, absent discovery of the contravention three years before the proceedings were commenced on 21 April 2005 or absent a finding that the contravention ought reasonably to have been discovered more than three years before that date, a limitation defence would only available to the protesting defendants if the actions or omissions for which they were sued occurred prior to
21 April 2002.
[59] That means that for the period 25 May 1998-25 May 2001 the right to plead a limitation defence was only available to the protesting defendants if the Commission sued them for actions before the earlier date. And the Amendment means that the right to plead a limitation defence is only available to the protesting defendants in relation to the claim commenced on 21 April 2005 if they were sued by the Commission for actions or omissions prior to 21 April 2002 of if their contravention was discovered prior to that date or ought reasonably to have been discovered prior to that date. Thus the date of discovery of the contravening conduct, or the date when with reasonable diligence it ought to have been discovered, becomes critical and the three year limitation period runs thereafter.
[60] Satisfaction or otherwise of that test will normally, as Mr Goddard submitted, require full evidence directed to the statutory test, something not yet undertaken in relation to the protesting defendants.
[61] To this point in the discussion, therefore, the conclusion must be that, even if limitation may ultimately prove crucial as far as the protesting defendants are concerned, their raising of the issue is premature and must await a full hearing on the date of discovery of the contravention pleaded against them or the date when it ought reasonably to have been discovered.
[62] That is not to overlook Mr Miles’ further point that s 26 of the 2001 amendment expressly left unaffected proceedings time-barred before 25 May 2001, a provision which conforms with the Interpretation Act 1991 ss 17(1)(b) and 18(2). In part, this point has already been covered. Further, however, the answer, as Mr Goddard submitted, is that s 80(5) in its earlier form depended on the existence of “proceedings” as did s 26 of the 2001 Amendment and on 25 May 2001 there
were no “proceedings” extant. Thus, s 26 only operates to bar proceedings commenced later than 25 May 2001 which would have been time-barred before that date, that is to say proceedings which allege contravention prior to the dates earlier mentioned. Accepting that the right to plead a limitation defence is a “right” for the purposes of the Interpretation Act 1999 ss 17(1)(b), 18(2), it must follow that the appropriate conclusion is the same, though by a different route to that earlier discussed, namely, that actions or omissions by the protesting defendants prior to 25
May 1998 fall outside the ambit of the claim and whether impugned actions or inaction between 25 May 1998-21 April 2002 are statute-barred will depend on whether those actions or inaction were discovered or ought reasonably to have been discovered by the Commission prior to the latter date.
[63] The pleaded limitation defences are accordingly rejected as premature.
(8) Accessory Liability and Conspiracy: (a) General
[64] In light of the admissions and settlements with defendants both in and outside New Zealand it was not, as earlier mentioned, in issue that the claim was properly brought against defendants served in New Zealand and so it was also not in issue that the Commission has, or had, a good arguable case of anti-competitive behaviour in New Zealand in breach of s 27 against most individual and corporate defendants. The question is therefore whether there is a similar case in respect of each protesting defendant that he was either a party to the overarching or one or more of the specific understandings, was an accessory in that respect, or was part of a conspiracy to contravene the Act.
[65] Messrs Poynter and Akle on behalf of the Fernz Group and Messrs Akle and Harris on behalf of the Osmose Group are pleaded to have been officers, employees or had knowledge or responsibility for their employers and to have had actual knowledge of the essential facts establishing the breaches by the parties including the relevant market circumstances, the existence of the agreements and understandings pleaded, and the steps taken to give effect to them. Each is also pleaded to have
been “directly or indirectly knowingly concerned in and/or conspired with others” in those actions listed in a schedule to the amended claim.
[66] In discussing this aspect of the matter, it is, again, helpful to clear one issue away before considering the detail.
[67] In the first place, as later analysis will show, though some of the actions of the protesting defendants forming part of this claim occurred or are pleaded to have occurred or been given effect to in New Zealand, the Commission accepts that most of the actions of those defendants on which it relies took place outside this country, particularly in Australia.
[68] In many cases, that would have required consideration of s 4(1), extending the Act’s reach to conduct out of this country, were it not for the fact the Commission accepted that s 4(1) did not apply as none of the protesting defendants were resident or carried on business in New Zealand.
[69] Mr Miles submitted the Commission’s concession meant its application to set aside the protests must fail. If s 4 could not be satisfied, then, he submitted, the Act could have no application to persons outside New Zealand. However, for the reasons which follow, the Court does not accept that submission. If persons outside this country do or omit acts which infringe the Act, they can be named as parties to New Zealand litigation and, provided the service and other High Court Rules are observed, they are properly parties to New Zealand litigation. Though any penalties imposed on them may ultimately be proved to be unenforceable, it may be in their interest to participate in that litigation to lessen or avoid the risk of findings being made which affect their personal or commercial reputations.
[70] Here, the Commission relied for its jurisdictional reach as far as the protesting defendants were concerned on s 80 which exposes persons to pecuniary penalties if the Commission satisfies the Court they have contravened or attempted to contravene the statutory anti-competitive provisions; have aided, abetted, counselled or procured others to contravene; have been in any way, directly or
indirectly, knowingly concerned in or party to such contravention; or have conspired with others in that regard.
[71] The Commission argued that each protesting defendant came within the statutory anti-competitive provisions in that they engaged in a course of conduct to which s 80 applied, part or parts of which took place in this country and involved directing one or more communications to New Zealand, or, alternatively, that they were party to an agreement or conspiracy under s 80 and other parties acted in New Zealand pursuant to the agreement or conspiracy, either because the New Zealand actor was the overseas defendant’s agent or because, by analogy with criminal law conspiracy, overt acts were done in New Zealand by persons pursuant to the agreement or conspiracy. Mr Goddard submitted it was sufficient if only some of the contravening conduct occurred in this country.
[72] The point was discussed, though applying to the reverse situation, in Bomac where it was argued that innocent agency might apply to New Zealand companies acting through the instrumentality of another but the Act would not apply where the entity was neither resident nor trading in this country. Harrison J declined that argument, holding (at 103,644 paras [82] and [83]):
[82]… s 4(1) applies in a discrete situation to the conduct out of this jurisdiction by a company resident or carrying on business in New Zealand. But I am examining the reverse situation – namely, whether a foreign corporation has engaged in proscribed conduct within New Zealand. Section 4(1) is irrelevant to that inquiry.
[83]In my opinion Bomac has a good or strongly arguable legal case to support this limited type of agency …
[73] Counsel for the protesting defendants submitted the passage from Bomac was inapplicable, partly because of the reverse situation discussed by the Judge and partly because the limited type of agency he found sufficient in that case did not occur in this claim.
[74] Mr Goddard, however, submitted that if legislation does not define its territorial scope, Courts look to underlying policy to ascertain what is required to give effect to the statute. In R v Jameson [1896] 2 QB 425, 430, 431, an application to quash indictments following the famous (perhaps infamous) Jameson Raid in
South Africa on grounds of inapplicability of the English statute under which the participants were charged, the Court of Appeal noted that a canon of international law was that “if any construction … otherwise be possible, an act will not be construed as applying to foreigners in respect of acts done by them outside the dominions of the sovereign power enacting” but that it was necessary, in deciding territorial reach, to “consider the mischief that was aimed at by the Act”. What must be here considered is accordingly whether there is a sufficient connection with New Zealand to make laws proscribing (in this case) anti-competitive behaviour and properly involve the protesting defendants in ensuing litigation..
[75] In the Trade Practices context, it was held in Bray v F Hoffman-La Roche Ltd (2002) 190 ALR 1, 40 at paras [144]-[147] relying on Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, 567-568 that the sending of communications from outside a country to persons within a country can amount to conduct occurring in the recipient country.
[76] In light of that, the Act applies where part of the allegedly anti-competitive conduct took place within New Zealand and it must also be the case that the sending of communications to New Zealand from outside this country can amount to conduct within New Zealand if received and acted on within this country. That is not only the effect of Bray but is the logical result of the forwarding of such a communication.
[77] Following on from that, it must be immaterial whether the conduct in New Zealand follows contravening conduct or an agreement or conspiracy to contravene made outside the country if later acts in furtherance of that contravention occur, at least in part, within New Zealand (Bomac at 103,640 para [59]).
[78] A person also engages in contravening conduct under the Act in New Zealand if they act by directing an agent, even an innocent agent, who carries the contravening conduct into effect in this country though unaware of the contravening motivation behind their actions (Bomac at 103,643-645 paras [75]-[89]).
(b) Accessory Liability
[79] The next aspect is to consider what the Commission must show as to the level of knowledge required for accessory liability. This was discussed by Miller J in Commerce Commission v New Zealand Bus Limited (2006) 11 TCLR 679 at 728-731 paras [223]-[239]. The case was concerned with the business acquisition provisions in ss 47 and 83 but the latter is effectively identical to s 80. The Judge held ([223]- [231]):
[223]It is true that much of s 83(1) is drawn from the criminal law, which requires that an accessory do something positive by way of assistance or encouragement. But the legislature has gone beyond the notions of aiding, abetting, inciting, counselling, procuring, or conspiring. Section 83(1)(e) attaches to a person who has been “in any way, directly or indirectly, knowingly concerned in, or party to, the contravention” of s 47. In that context, “party to” simply means “participates in” or “takes part in”: Re Maidstone Buildings Provisions Ltd [1971] 1 WLR 1085; [1971] 3 All ER 363 at p
1092; p 368. …
The mental element of accessory liability
[224]The Commission accepted that each of the accessory provisions in s 83(1) require that a person liable is [sic: “as”?] a secondary party have “an element of intention based on knowledge”, but contended that liability is established if the person was aware or should have been aware of the relevant facts giving rise to the contravention. Mr Goddard contended, first, that since s 47(1) creates a form of strict liability, it is sufficient to show the accessory knew the essential facts, without proof of an intention to assist the principal and, second, that constructive knowledge of the essential facts suffices. For these propositions he relied upon Yorke v Lucas (1983)
49 ALR 672; (1983) 80 FL:R 143 (FCA), confirmed by the High
Court of Australia, reported at (19895) 158 CLR 661; (1985) 61
ALR 307.
[225]The obvious derivation of most of s 83 from s 66 of the Crimes Act confirms that accessory liability includes a mental element. With respect to aiding and abetting, the Court of Appeal in Specialised Livestock Imports Ltd v Borrie 20/9/02, CA72/01 at para 155 cited R v Samuels [1985] 1 NZLR 350 (CA) for the proposition that the essence of aiding and abetting is intentional help. In Yorke v Lucas, the Full Federal Court also held that conspiracy involves intention, requiring an agreement between two or more people to carry out a proscribed act. It also held that the word “counsel” is probably equivalent to “instigate”, and adopted A-G’s Reference (No 1 of
1975) [1975] 1 QB 773; [1975] 2 All ER 684 for the proposition that to procure means to produce by endeavour. The Court held that
counselling and procuring involve an element of intent. In the New
Zealand statute, s 83(1)(e) expressly requires that the accessory
“knowingly” participate.
[226]Yorke v Lucas dealt with accessory liability for misleading and deceptive conduct under the Trade Practices Act 1974 (Cth). …
…
[228]However, Yorke v Lucas does not appear to state the law in Australia with respect to the mental element of accessory liability. In Giorgianni v R (1985) 156 CLR 473; (19985) 58 ALR 641, the High Court disapproved of both R v Glennan and Lenzi v Miller. … The High Court held that both knowledge of the circumstances and intention to aid, abet, counsel or procure were necessary to render a person liable as a secondary party. That corresponds to the position in New Zealand criminal law, which recognises that inadvertent or accidental assistance is not culpable.
[229]Giorgianni v R was followed in Specialised Livestock Imports Ltd v Borrie (above), which concerned the accessory liability provisions of the Fair Trading Act. The Court held, per McGrath J, that as those provisions import the requirements of the criminal law, accessories must know of the principal’s contraventions and intentionally participate in them.
[230]I conclude that an accessory is liable under s 83 only if its participation was intentionally aimed at the commission of the acts that form the principal’s contravention, namely the acquisition of assets or shares. Mr Goddard pointed out that it will be a rare case in which participation is not deliberate. That may be true of the major participants, but it need not be so of those at the margins of the transaction.
[231]Nor does it appear that Yorke v Lucas is still good law to the extent that it holds that constructive knowledge suffices for accessory liability. In Giorgianni v R Gibbs CJ also held, at p 483; p 648 that it is not enough to render a person liable as a secondary party that he ought to have known all the facts and would have done so if he had acted with reasonable care and diligence. More recent decisions under s 75B have treated a requirement for actual knowledge as settled law: Caple v All Fastener [2005] FCA 1558, Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1.
[80] Then, after rejecting the proposition that constructive knowledge was sufficient, other than, perhaps, constructive knowledge equating “wilful blindness” (at 730 para [233]) the Judge went on to consider the requisite state of an accessory’s knowledge in the following passage:
What must an accessory know?
[236]It was common ground that an accessory must know essential facts, being facts that sufficiently establish a contravention of s 47. Mr Goddard contended that it need not know that the facts contravene the section. For the latter proposition he cited Rural Press Ltd v ACCC (2003) 216 CLR 53; (2003) 203 ALR 217, in which the High
Court confronted a submission that the defendants must be shown to know that the principal’s conduct was engaged in for the purpose or had the likely effect of substantially lessening competition. Gummow, Hayne, and Heydon JJ held that:
“It is wholly unrealistic to seek to characterise knowledge of circumstances in that way. Only a handful of lawyers think or speak in that fashion, and then only at a late stage of analysis of any particular problem. In order to know the essential facts, and thus satisfy s 75B(1) of the Act and like provisions, it is not necessary to know those facts are capable of characterisation in the language of the statute.” [Para 48].
[237]I accept that the Commission need not show that the accessory was conscious that the facts known to it established a contravention of s 47. … a requirement that an accessory know the transaction contravened s 47 would deprive s 83 of most of its substance: as the Court pointed out in Rural Press, few people think in those terms. Nor would it be consistent with accessory liability provisions in the criminal law, where it is immaterial to liability that the accessory did not appreciate that the principal was committing an offence.
[238] What then are the essential facts that an accessory must know? … [239] The test must be directed to the facts that have led the Court to
conclude, as against the acquirer, that the acquisition is likely to substantially lessen competition. In that context, the essential facts must begin with the knowledge of the number and size distribution of the market participants. That in turn involves an appreciation of the extent to which substitution occurs, since that defines the boundaries of the market. There must also be some appreciation of the things that create market power (such as barriers to entry, product differentiation, and vertical integration). This is an imposing list, but it comprises things that any substantial and longstanding market participant is likely to know, at least in general layman’s terms, because success in business depends on them. Nor must the Commission prove a comprehensive knowledge of the facts; it is enough if the known facts establish a breach. Turning to the transaction, the essential facts must include facts that led to the Court’s conclusions about the likely market position of the merged firm and what is likely to happen to the assets or shares concerned if the transaction does not proceed, since these facts establish the factual and counterfactual against which the Court applied the competition test. The essential facts must further include facts that establish a significant competitive advantage is likely to result from the transaction. That knowledge is likely to be derived from awareness of the market position of the merged firm upon the merger.
[81] In this case, apart from their personal actions, the Commission also alleges the protesting defendants could have acted to restrain or forbid others who are alleged or have admitted entering into or giving effect to conduct breaching s 27 and failed so to act. The legal requirements for proof in that area are as described by the
Court of Appeal in R v Brough (CA507/96 27 February 1997). The appellant mortgage broker was convicted as a party to fraud where a finance proposal was based on a false valuation prepared by the appellant’s secretary and another in the appellant’s presence. The Court of Appeal held (pp 9-10):
Where it is alleged that a person is a party to an offence by omitting to act, the Crown must prove the essential element of intentional encouragement on the part of the person described as inactive. An intention to encourage is normally an essential ingredient: R v Witika (1991) 7 CRNZ 621 Cooke P at
622. However, this element is not always necessary. Liability for an omission will arise where A, who has a legal duty to act and a right or power
of control over B, fails to observe or discharge the duty by exercising that control to prevent B committing an offence: Adams on Criminal Law § CA
66(1).03, Ashton v Police [1964] NZLR 429 Tompkins J at 431.
Where the Judge told the jury that if it found that a person knew what was going on, knew it was illegal, and declined to stop it, that person was a party, his direction falls within the second principle to which we have referred. If the appellant knew, as he must have known, that to doctor the valuation was illegal, he had a duty to stop it. He had the power to do so … He failed to do so. … the jury will have appreciated that not taking any action, that is omitting an act, can make a person a party when it is done, as the Judge put it, “for the purpose of aiding another party to commit an offence”, that is, where that was the person’s intention.
[82] To assess what the Commission is required to demonstrate to have a good arguable case against each of the protesting defendants, it is appropriate to return to the amended claim.
[83] Apart from pleading that the protesting defendants entered into the various understandings on behalf of the corporate defendants, the amended claim, more importantly for present purposes, pleads they contravened or attempted to contravene s 27 by virtue of their involvement in the corporate breaches, were directly or indirectly knowingly concerned in those breaches or conspired with other defendants in that regard. That is to say the current pleading is to the effect that the protesting defendants’ liability is accessory to that of the corporate defendants, not that they are personally liable for entering into the various understandings themselves or were personally responsible for contravening conduct other than via their employers.
[84] In accordance with those authorities, other than in conspiracy claims, it follows that to establish a good arguable case for accessory liability the Commission, broadly, needs to show it has a good arguable case that the protesting defendant in
question deliberately did or refrained from some act to assist or encourage, or participated in, the proved or admitted breaches by the corporate defendants or their employees with the intention of so assisting and with knowledge of the contravening facts, though not necessarily knowing those actions constituted a specific breach of the Act. The Commission must also show their actions were in New Zealand or were communicated to New Zealand and they knew they would be acted on and carried into effect in this country by another company employee who was knowingly acting in contravention of the Act or knew, broadly, that his actions may be contravening the Act.
[85] Alternatively, a good arguable case could be shown that the protesting defendant, having a legal duty to ensure contravening conduct did not occur, and broadly knowing the other employee’s actions contravened the Act, had the ability to stop them engaging in contravening conduct in New Zealand by requiring them to desist from such conduct and deliberately refrained from so doing.
(c) Conspiracy
[86] Turning to the requirements for conspiracy, Mr Goddard submitted that contravening conspiracies under s 80(1)(f) require proof, as with criminal conspiracies, of an agreement to contravene coupled with, as evidence, overt acts to implement the conspiracy in New Zealand. That applies even if the conspiratorial agreement were reached overseas, provided at least one overt act in furtherance of the conspiracy took place in this country. (R v Sanders [1984] 1 NZLR 636, 639; DPP v Doot [1973] AC 807).
[87] Sanders was an unsuccessful appeal against conviction on a charge of conspiracy to import heroin into New Zealand where the conspiratorial agreement was made in Australia and the only overt acts of the appellant in New Zealand were travelling to the airport to meet the co-conspirator following two earlier calls to him. Though, naturally, the decision is influenced by the provisions of the Crimes Act
1961 ss 6, 7 and 310, the Court of Appeal held (at 638-639):
The word "conspires" is not itself defined nor is the concept of criminal
"conspiracy" given any more precise definition. And the case for the
applicant is that a conspiracy involves no more than an agreement to commit a criminal act made between two or more conspirators which accordingly is a crime in itself and complete so soon as the agreement is reached; acts done in performance of the conspiracy are merely evidence of an agreement which the conspirators have already reached. For this proposition Mr Hart relied upon the statement of Lord Pearson in R v Doot [1973] AC 807, 827:
"When the conspiratorial agreement has been made, the offence of conspiracy is complete, it has been committed, and the conspirators can be prosecuted even though no performance has taken place: Reg v Aspinall, 2 QBD 48 per Brett JA at pp 58-59."
Therefore, on the basis that jurisdiction over crime belongs to the country where the crime is committed it was argued that our local Courts have no jurisdiction to try a conspiracy made outside New Zealand. If Lord Pearson’s statement ended there the submission now sought to be made might be well founded. But, Lord Pearson’s statement did not end there. He went on at once to say:
"But the fact that the offence of conspiracy is complete at that stage does not mean that the conspiratorial agreement is finished with. It is not dead. If it is being performed, it is very much alive. So long as the performance continues, it is operating, it is being carried out by the conspirators, and it is governing or at any rate influencing their conduct. The conspiratorial agreement continues in operation and therefore in existence until its discharge (terminated) by completion of its performance or by abandonment or frustration or however it may be."
In Doot’s case, … the House of Lords held that the English Courts had jurisdiction to try conspiracies entered into abroad but implemented in England; … It did so for various reasons: that a conspiracy intended to be implemented in England was no less a threat to society, even if initially formed outside the United Kingdom; therefore the location of the formation of the agreement was irrelevant (Lord Wilberforce, p 817, 818); that a conspiracy does not end with the making of the agreement - it will continue so long as there are two or more parties intending to carry out the design (Viscount Dilhorne, p 823); and, the conspiratorial agreement was and remained a continuing agreement and the conspirators continued to conspire until the offence they were conspiring to commit was in fact committed (Lord Salmon, p 835).
And continued (at 639-640):
… For all that apparent distinction it is noteworthy that the very words of s 7 "where any act or omission forming part of any offence, or any event necessary to the completion of any offence, occurs in New Zealand, the offence shall be deemed to be committed in New Zealand" contemplate that not all acts or omissions forming part of the offence need be committed in New Zealand; some, perhaps almost all, may occur outside. It is sufficient if one act or omission forming part of the offence or "any event necessary to the completion of any offence" occurs in New Zealand. In the use of these words s 7 effectively recognises that the ingredients of a crime may be satisfied by activity which continues on from some earlier starting point. In
the same way the agreement in the present case had its origins in Australia but remained effective as a continuing agreement in New Zealand.
[88] Mr Goddard submitted that Sanders is applicable by way of analogy in the present context and further, that in order to give meaning to the language of the Crimes Act 1961 s 7, the contravening acts in New Zealand need not be those of a protesting defendant (R v Johnston HC Rotorua, T.24/85 10 March 1986, Ellis J, upheld on appeal R v Johnston (1986) 2 CRNZ 289, 291).
[89] Although counsel were unable to point to any New Zealand case under the Act to that effect, there seems no reason, either in logic or in principle, not to import by analogy the elements of criminal conspiracy into proof of claims for pecuniary penalties under the Act. The relief sought is at least quasi-criminal. The policy of the Act is clearly to penalize anti-competitive behaviour which breaches statutory requirements. Importing the elements of criminal conspiracy could not be said to be prejudicial to defendants in pecuniary penalty claims given that such impose evidential requirements no less stringent than required in criminal prosecutions.
[90] To demonstrate the necessary knowledge for conspiracy, the protesting defendant must know, again broadly put, what he is pleaded to have agreed to, that is to say to have had an intention to be party to an agreement to commit the contravention in New Zealand to which the conspiracy is directed, even if the participant or the employee effecting it in New Zealand through having a broad- based understanding may not have known the act is in fact a contravention. Thus the conspiracy claims require the Commission to show a good arguable case that the particular defendant agreed with another to do things in New Zealand referable to, say, the overarching understanding of which the defendant knew and that that defendant knew that, broadly, the essential facts leading to the overarching understanding were in contravention of the Act and there was at least one overt act in New Zealand by the protesting defendant or another employee with the knowledge just discussed to give effect to the conspiracy. Similarly, as far as the claims of conspiratorial involvement in the other understandings are concerned. Because many of the actions pleaded would have been lawful if undertaken unilaterally or within a particular corporate group, the Commission may also have to prove that the way in which the pleaded actions were undertaken offended s 27.
[91] Because significant emphasis was placed on it by Mr McEntegart, it is necessary to note that in relation to the conspiracy allegation he, relying on Union Shipping NZ Ltd v Port Nelson Ltd [1990] 2 NZLR 662, 713, sought to draw a distinction between the phrase “conspiring … in the contravention of” the Act in s 82(1)(e) and an assertion that a person “has conspired … to contravene” the Act in s 80(1)(f), the former demonstrating a conspiracy formed before the contravening conduct occurred and the latter, in its terms, dealing with conduct in the past. Mr McEntegart submitted there was no evidence of Mr Akle agreeing with other alleged conspirators to undertake contravening conduct before it occurred.
[92] There are several difficulties facing Mr McEntegart’s submission. First, Port Nelson was dealing with s 82 not, as here, s 80. Secondly, s 82 creates an action for damages against persons engaging in contravening conduct whereas s 80 exposes a person to liability for pecuniary penalties if that person has contravened the Act or conspired with others to contravene. Thirdly, the passage from Port Nelson on which Mr McEntegart relied was principally concerned with inducing contravention of the Act under s 82 (1)( c) and whether unsuccessfully demanding that another party entering into contravening conduct fell within that section. Finally, and perhaps of most importance, s 82 creates liability for loss or damage caused by engaging in conduct that contravenes the Act or conspiring with another in contravention, that is to say it focuses on the damage flowing from such engagement or conspiracy whereas s 80 is retrospective, looking back to whether contravention has occurred or there has been a conspiracy to contravene. Given that conspiratorial liability can arise, at least in the criminal arena, from the forming of an unlawful agreement without it necessarily being carried into effect, s 82 focuses on whether loss can be proved to have flowed from the contravening conduct or the conspiracy to contravene which has actually occurred and caused loss, while s 80 says nothing about loss flowing from the contravention or the conspiracy.
[238] Further, as to the allegations against Mr Harris relating to the TimTech understanding though Mr Greenacre said senior management, including Mr Harris, was aware of the “common strategy”, “common desire” or “general knowledge” of Koppers and Osmose to stop TimTech access and the communications to and from Mr Harris regarding TimTech’s market activity, Mr McEntegart made the point that none of those documents expressly referred to any understanding with Koppers. “General knowledge” about actions concerning TimTech were not the equivalent of knowledge of and giving effect to the TimTech understanding. The same related to evidence about cheap access to raw materials and ascertaining the identity of TimTech’s suppliers to try to restrict its business. That was normal competitive behaviour, Mr McEntegart submitted, and not obviously linked to any understanding with Koppers.
[239] Concerning the suggestion that Mr Harris’s conduct in New Zealand rendered him potentially liable, Mr McEntegart stressed that Mr Harris was in New Zealand only on three relevant occasions, the 1999 and 2002 Waipuna meetings and the airport meeting after the latter. Communications from outside the country to parties within New Zealand that might be construed as conduct in New Zealand by Mr Harris were limited to his email about the competitor’s alliance with TimTech, the registration email and that concerning possible expansion into South Africa to block TimTech’s access to raw materials. Neither alone nor in combination did they
amount to a good arguable case of conduct by Mr Harris in New Zealand rendering him a necessary or proper party to New Zealand proceedings, not even when associated with his directorship of Osmose NZ.
Discussion:
1. General
[240] In considering whether the Commission has demonstrated a good arguable case for proceeding against any or all of the protesting defendants under any of the causes of action in the amended claim, it is appropriate to set evidence of their actions or inaction against the commercial context in which they are said to have occurred.
[241] This claim is concerned with the actions and interactions between two groups of companies both operating in the same market and each operating on both sides of the Tasman. Constant interactions between New Zealand and Australian members of the same group are accordingly inevitable, even commonplace, as both sought to maximize their financial performance and that of the group. Therefore, although the jurisdictional reach of the Court and the dicta in Bray need to be kept constantly in mind, it is somewhat artificial to try to maintain as rigid a division between actions in New Zealand and those of Australia as the protesting defendants sought to do. When Trans-Tasman travel and communications were as frequent and normal in Koppers and in Fernz/Osmose as the evidence demonstrates, even keeping the territorial limitations in Bray in mind, retrospective dissection of the parties’ actions along a rigid Tasman division can be unrealistic.
[242] And, given Osmose Group’s domicile in the USA, much the same can be said of the ordinary commercial transactions between that country and New Zealand.
[243] The second consideration in the commercial context of these applications is that it is perfectly legitimate and the stuff of commerce for any company to seek to destroy its competitors. Provided legitimate means are employed, the law does not intervene if a company takes competitors’ markets, turns competitors into loss-
making entities and drives them out of business. Such is an everyday occurrence in a fully competitive market.
[244] Following on from that, what is fundamentally at issue in this claim is not the means employed within each of the Koppers and Fernz/Osmose Groups to that end but that by dint of co-operation between them, the two major suppliers of wood preservative chemicals to the New Zealand market, the means described in the amended claim were employed and they were means which breached s 27.
[245] Following on from that again, and a third significant commercial factor impinging on this application, is that the Commission is not in the position of having to plead the various understandings and prove them at trial: it has the admissions of breach by most of the corporate and many of the individual defendants. Messrs Poynter, Akle and Harris, therefore, protest the jurisdiction of this Court to adjudicate on the Commission’s claims against them against the background that their employers and a number of their competitors and fellow employees at the time - those who could direct their actions and those whose actions they could direct - have admitted their part in conduct significantly contravening the Act and are prepared to give evidence against them if the Commission’s application to set aside their R 131 protests is successful.
[246] Caution must, however, be exercised in relation to the evidence adduced in relation to these applications. Despite the admissions and discovery provided by defendants who or which have acknowledged their contravening conduct, the evidence remains partial, the documentary record incomplete and in any event since many of the discussions were undocumented, conclusions are as yet only available by inference in many instances. Also to be borne in mind is that Mr Greenacre was initially obstructive to the point where he was prosecuted by the Commission and accordingly his evidence should be treated with some reserve. Further discovery may improve – or worsen – the position of the protesting defendants. If they remain in the case at trial, the Judge will doubtless need to rule on the credibility of Mr Greenacre (and other witnesses).
[247] Nonetheless the protests of Messrs Poynter, Akle and Harris need to recognise the formal roles each played in the overall management of the Koppers and Fernz/Osmose Groups that are demonstrated by the evidence to date of their participation in the commercial life of those companies.
[248] Two further general matters need to be borne in mind.
[249] The first is that satisfaction of the good arguable case test is not an unduly exacting hurdle for a plaintiff to clear. As the authorities show, it is much lower than the test to strike out a proceeding and lower than, say, the test for summary judgment, still less judgment after trial. So, were the Commission’s applications to set aside the protests successful, such a conclusion would say little as to the ultimate strength of the Commission’s case against them.
[250] On the other hand, Parliament has been at pains to proscribe certain commercial misconduct under statutes such as the Commerce Act 1986, the Securities Act 1978, and the Securities Markets Act 1988. Such statutes are clear indication of the public interest in ensuring persons who contravene such legislation, even those who reside outside this country provided they are properly impleaded, being brought before the Courts of this country so their allegedly contravening conduct can be inquired into and, if appropriate, orders made against them.
[251] Following on from those general remarks, there are several stages in considering whether the Commission has shown that the protests of each of the three protesting defendants should be set aside: what actions or inaction by the particular protesting defendant have been shown to have occurred; whether those actions or inaction are shown to have been in New Zealand or come within the dicta in Bray; thirdly, whether those actions or inaction have been shown to give rise to accessory liability in terms of NZ Bus; and, finally, whether the Commission can demonstrate a good arguable case against each of the protesting defendants under its conspiracy causes of action.
[252] In considering those questions, and to avoid further repetition in an already lengthy judgment, all the foregoing material has been taken into account so a summary is all that is required.
2. Mr Akle
[253] On the first of those issues, Mr Akle initially had the general financial oversight for the Fernz TP group including New Zealand. That increased over the years to the point where he was said to have been responsible for purchasing raw materials for both Australasian markets and to be Mr Greenacre’s “right hand man”. His designation in schematic representations of corporate liability included New Zealand. Though resident in Sydney, he visited New Zealand on occasion and took personal responsibility for some of Fernz NZ’s business such as Lumbercorp. He gave general advice to New Zealand executives such as Mr Boucher and Dr Crimp. He was notified of concerns expressed by employees about Koppers’ breaches of the overarching understanding and of transactions involving COL and McAlpines. He may have been personally involved in the McAlpine’s bid. The evidence indicated he was involved in the implementation of strategies to exclude TimTech from the New Zealand market.
[254] More specifically, he attended the important June 1998 meeting with Koppers at which, so it is said, the overarching understanding was put in place or resurrected and the 1998 price rise understanding was agreed and he was involved in the 2001 meeting with Koppers’ representatives and in arrangements for communications between the two firms. The evidence shows that it is arguable that those meetings resulted in actions being taken which affected both the New Zealand and Australian markets.
[255] All that, in the Court’s view, leads to the conclusion that the Commission has demonstrated a good arguable case that Mr Akle knew of and participated in the overarching, 1998 price rice and TimTech understandings pleaded against him – and admitted by most other participants - by his actions in, or effected in, New Zealand.
[256] The evidence also disclosed numerous communications by, from, or copied to Mr Akle and persons in New Zealand which resulted in them or him taking action in this country.
[257] That summary of the evidence detailed earlier accordingly answers the first and second questions in the Commission’s favour as regards Mr Akle.
[258] As to the accessory liability and conspiracy allegations, there is evidence that at the June 1998 meeting with Koppers those present instigated or resurrected the overarching understanding. Mr Akle was present and must be taken to have heard what passed between the participants. From his commercial experience – and given that New Zealand and Australian law are broadly identical in this area – he must be taken, too, to have known that the overarching understanding and the 1998 price rise understandings contravened the law. That knowledge must be taken to have underpinned his later actions as described earlier. At the very least, the evidence demonstrates a good arguable case that Mr Akle aided or abetted persons knowingly to contravene the Act – as most have admitted - or, in some cases such as Lumbercorp, contravened them himself as part of giving effect to those understandings by Koppers and Fernz/Osmose.
[259] Similarly, any agreement or understanding on the part of those attending the June 1998 and 2001 meetings between Fernz/Osmose and Koppers might amount to a conspiracy by those persons on behalf of their employers to contravene, followed by actions described in the evidence on their part, or, to their knowledge, by others, to give effect to the conspiracy. In terms of Sanders and Bray, it is not fatal to the Commission’s case that the meetings occurred outside New Zealand, particularly, again, given the evidence of actions by Mr Akle and others in this country to give effect to the overarching and 1998 price rise understandings.
[260] Similar conclusions must be reached in relation to the TimTech understanding. Koppers and Fernz/Osmose agreed a joint strategy to try to exclude TimTech from the New Zealand market and Mr Akle took the actions described in furtherance. He was aware of and participated in actions in New Zealand or actions which were taken by others in New Zealand including contact with Koppers. He met
a supplier to endeavour to dissuade it from supplying TimTech’s New Zealand orders.
[261] For much the same reasons as apply to the overarching and 1998 price rise understandings, the Court’s view is that the Commission has shown a good arguable case that Mr Akle may have contravened s 80(1)(a)-(e). Further, when his participation in the June 1998 and 2001 meetings with Koppers and the communications between the two companies coupled with the arrangements between Koppers and Fernz/Osmose relating to TimTech are taken into account, the conclusion must be that the Commission has proved a good arguable case against Mr Akle in relation to the TimTech understanding.
[262] The Commission’s application to set aside Mr Akle’s protest to jurisdiction is accordingly granted.
3. Mr Poynter
[263] Mr Poynter’s appointments and corporate positions were earlier described. Mr Greenacre said he told Mr Poynter in early 1998 of the “open secret” concerning the overarching understanding. His later actions confirmed that knowledge. He could have directed Mr Greenacre to desist but failed so to do. He later confirmed the contact between Fernz/Osmose and Koppers to the point where he offered to act as intermediary between the two and at a 2000 lunch with Koppers’ representatives complained about Mr Boyle’s aggressively competitive behaviour. The meeting with Koppers’ representatives to discuss the arsenic acid agreement may have included wider inferences affecting the New Zealand market being taken by participants. He contacted a competitor such as Quantum just before the 1998 price rise understanding was effected and Mr Moon’s notes are telling as to what was agreed. He was insistent on seeing and discussing the Fletcher Forests’ tender with Mr Greenacre before it was sent.
[264] All those demonstrate that the Commission has shown a good arguable case against Mr Poynter on the first question in relation to the overarching, 1998 price rise and Fletcher Forests understandings.
[265] As to the second question, while some actions by Mr Poynter occurred in this country such as the meeting with Quantum, most proved contact with New Zealand was by way of the communications earlier reviewed coupled with his awareness of Mr Greenacre’s actions in this country in response and his failure as a director to require him to refrain.
[266] That leads to the conclusion that the Commission has shown a good arguable case that Mr Poynter would have been aware of the contravening actions and the fact that they were proscribed. The Commission has accordingly shown that it has a good arguable case for accessory liability against Mr Poynter.
[267] As to the conspiracy allegation, although the Commission now accepts that Mr Poynter’s attendance at the March 1998 meeting with Koppers cannot be pleaded against him, it remains part of the narrative and, since, as mentioned, the Commission’s case is that the overarching understanding was either instigated or resurrected at the June 1998 meeting and the 1998 price rise understanding then agreed upon, it follows that the allegation of conspiracy against Mr Poynter is proved to the good arguable case standard even though his attendance at the March 1998 meeting can give rise to no relief. His acts and those of others are evidence of his participation. The conspiracy assertions as far as the 1998 price rise and Fletcher Forests understandings are concerned are grounded in Mr Poynter’s awareness that Mr Greenacre’s activities in giving effect to what had been agreed and failing to restrain him. That, too, shows a good arguable case against Mr Poynter on that aspect of the claim.
[268] The Commission must accordingly be held to have demonstrated a good arguable case against Mr Poynter in relation to the factual and legal allegations against him in the amended claim and its application to set aside his R 131 protest is accordingly granted.
4. Mr Harris
[269] Mr Harris was, Mr Greenacre said, briefed on the anti-competitive arrangement in the New Zealand market whilst in this country for due diligence
relating to Osmose’s purchase. He could have directed Mr Greenacre to refrain but chose not to do so. His participation in the meetings in New Zealand in June 2002 whilst here for the Bledisloe Cup test showed Mr Harris was aware of the overarching understanding at that stage because he protested at Koppers’ failure to comply. That the overarching understanding ended at that meeting or following the chance encounter a day or so later is not to the point: what took place during that New Zealand visit by Mr Harris reflects back on his knowledge of the overarching understanding since he became involved with Fernz. As mentioned, there was also evidence of Mr Greenacre reporting the COL and SAI understandings to him, his knowledge and participation in the proposed capex understanding and the email and other correspondence earlier reviewed.
[270] The communications concerning the TimTech understanding were also reviewed earlier. Mr Harris was briefed on it and was involved in advice about the price request, including the possibility of the Commission’s involvement. Again he could have directed Mr Greenacre to take no further action but failed so to do.
[271] It also needs to be borne in mind that, on his own admission, Mr Harris was responsible to the Osmose group for Osmose NZ’s business and visited this country thrice annually to superintend it. That, in combination with the more detailed evidence, indicates an involvement by Mr Harris in Osmose NZ’s business which lends weight to the Commission’s assertions as to his knowledge of the contravening conduct.
[272] The Commission has accordingly demonstrated a good arguable case against Mr Harris for his actions or inaction as pleaded in the amended claim including actions when he was in New Zealand and by communications to and from New Zealand acted on by persons in this country and be known to and acquiesced in by Mr Harris. A good arguable case is accordingly shown that Mr Harris was party to the pleaded understandings and, by his failure to take remedial action, to have arguably aided, abetted, counselled and procured others in the contravening behaviour or to have been knowingly concerned in the same.
[273] As to the conspiracy allegation, the Commission’s good arguable case is that Mr Harris joined the conspiracy concerning the overarching understanding during the due diligence process and acted in accordance with it by his failure to terminate it until the June 2002 meetings along with his continued involvement throughout that period. That, too, amounts to proof of a good arguable case in relation to the conspiracy allegations concerning Mr Harris.
[274] The Commission must accordingly be held to have made out a case for the dismissal of Mr Harris’ protest to jurisdiction.
Result
[275] The Commission having demonstrated a good arguable case against each of the protesting defendants in relation to the allegations against them in the amended claim, all three applications to set aside their R 131 protests are accordingly granted. They have each been shown to be necessary or proper parties under R 219(h) to proceedings properly brought by the Commission against other persons duly served in this country.
R 220 application
[276] In light of the foregoing, it is unnecessary to deal with the Commission’s R
220 application but, for completeness, it merits brief discussion.
[277] For much the same reason, as extensively discussed, had it been necessary, the Court would have granted leave to the Commission to serve Messrs Akle, Poynter and Harris with the amended (or further amended) claim out of New Zealand. In addition to the R 219(h) points, the amount in dispute is significant, the relief sought is unique to this country and, although United States courts have jurisdiction in this area and the ACCC has issued proceedings based on many of the same incidents as give rise to the present pleading, with a number of the remaining defendants being New Zealand domiciled and with the principal witnesses being in this country, the comparative cost and convenience of proceeding in New Zealand outweighs proceeding in Australia or the USA (or in France where Mr Harris now
lives). With the increasing resort to evidence by videolink, Messrs Poynter and Akle may not even be obliged to come to New Zealand for the trial.
[278] In addition, significant factors as far as Messrs Akle and Poynter are concerned is that they are Australian citizens living in that country and accordingly, though this application has been assessed on conventional lines, it is difficult to follow why quite so much time and resource has been expended on their behalf in endeavouring to avoid their being included in the Commission’s claim.
[279] Employed by a group of companies which operated on both sides of the Tasman throughout the relevant period, their direct and indirect involvement with matters at the heart of this claim occurred on both sides of the Tasman. Constant communications and travel between the two countries was to be expected. It was seemingly largely a matter of chance whether actions or communications were in, to or from one country or the other. As an example, it was only because one rugby test of a series happened to be in New Zealand and happened to be attended by Mr Harris that the Commission was able to rely on that fortuity as giving it a jurisdictional basis for part of its claims against him. Therefore, while it remains important that foreign nationals are only impleaded in litigation in another country on proper grounds, the closeness between New Zealand and Australia and the regularity of travel and communications between the two being such as is affects that concept.
[280] Australia is almost certainly the foreign country most familiar to New Zealanders and vice versa. Though fiercely rivalrous in some areas, in many others the two countries make common cause. Their habits, customs and, in some cases – this is an example – their laws are similar. The anti-competitive provisions of the Commerce Act 19896 and the Trade Practices Act 1974 (C’th) are so similar that precedents from one side of the Tasman are commonly followed on the other.
[281] More particularly, in the years since 1983 Australia and New Zealand have prospered from the Closer Economic Relations Trade Agreement. During that period there have been continued calls for closer co-operation, greater harmonization, even, in some areas, amalgamation. Even if complete alignment of substantive law in this area remains elusive, there can be little argument against
alignment of adjective law such as this, leaving litigants such as Messrs Poynter and
Akle to the same remedies as their New Zealand counterparts. Indeed, in December
2006, amongst its numerous proposals, the Trans-Tasman Working Group recommended such (Trans-Tasman Court Proceedings And Regulatory Enforcement Report Recommendation 1 p 4).
[282] Not only do those observations apply generally, but they would also have been factors to be taken into account had it been necessary to decide and grant the Commission’s R 220 application.
Costs
[283] If counsel are unable to agree on the applicable scale of costs or quantum, memoranda (maximum 5 pages) may be filed with that from the Commission being due 28 days from delivery of this judgment and that from the protesting defendants
42 days after that date, with counsel certifying, if they consider it appropriate so to do, in their memoranda that all issues of costs may be determined without further
hearing.
Solicitors:
………………………………..
WILLIAMS J
Commerce Commission (MA Borrowdale/N Wills) P O Box 2351 Wellington, for plaintiff Dawson Harford & Partners (S Stokes) P O Box 106-347 Auckland for 7th-9th Defendants Russell McVeagh (S Keene/E C Gellert) P O Box 8 Auckland for 11th Defendant
Lee Salmon Long (D Salmon/T P Mullins) P O Box 2026 Auckland for 12th and 15th defendants
Copy for:
David Goddard QC, P O Box 12-016 Wellington, for Commerce Commission
Julian G Miles QC, P O Box 4338 Auckland, for 11th defendant
P J Davison QC, P O Box 105-513 Auckland for7th, 8th and 9th Defendants
Liam McEntegart, P O Box 5844 Wellesley Street Auckland, for 12th and 15th Defendants
Tanusha Iyengar/Tim Frampton, Commercial List, High Court Auckland
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