Commerce Commission v Lodge Real Estate Limited
[2020] NZHC 1909
•31 July 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-3045
[2020] NZHC 1909
BETWEEN COMMERCE COMMISSION
Plaintiff
AND
LODGE REAL ESTATE LIMITED
First defendant
LUGTON’S LIMITED
Second defendantMONARCH REAL ESTATE LIMITED
Third defendantContinued overleaf
Hearing: 29 July 2020 Appearances:
LCA Farmer and VMA Fowler for the plaintiff
L J Taylor QC and M A Cavanaugh for the first and seventh defendants
M S Anderson for the third and sixth defendants
Date of judgment:
31 July 2020
JUDGMENT OF JAGOSE J
This judgment was delivered by me on 31 July 2020 at 4.30pm.
Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Counsel/Solicitors:
L J Taylor QC, Wellington Wotton + Kearney, Auckland Meredith Connell, Auckland
COMMERCE COMMISSION v LODGE REAL ESTATE LTD [2020] NZHC 1909 [31 July 2020]
ONLINE REALTY LIMITED
Fourth defendant
SUCCESS REALTY LIMITED
Fifth defendant
BRIAN KING
Sixth defendant
JEREMY O’ROURKE
Seventh defendant
[1] For the purposes of the penalty hearing to be heard before me in September 2020, the Commission seeks particular discovery of Lodge’s and Monarch’s financial year-end statements for each of the financial years 2013, 2014, and 2015, as well as the most recent financial year-end statement (if not 2020, then 2019).
Context
[2] So far as the orthodox test is concerned,1 the parties essentially only dispute if the Commission can make out its first ground: are the documents sought relevant, and if so how important will they be? Taking the subsequent two grounds to be met here, it then is an issue for my discretion if an order is appropriate.
[3] The Commission seeks penalties under s 80 of the Commerce Act 1986, as it relevantly applied at the time of the defendants’ contravention:
80 Pecuniary penalties
(1) If the court is satisfied on the application of the Commission that a person—
(a)has contravened any of the provisions of Part 2; or
(b)has attempted to contravene such a provision; or
(c)has aided, abetted, counselled, or procured any other person to contravene such a provision; or
(d)has induced, or attempted to induce, any other person, whether by threats or promises or otherwise, to contravene such a provision; or
(e)has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by any other person of such a provision; or
(f)has conspired with any other person to contravene such a provision,—
the court may order the person to pay to the Crown such pecuniary penalty as the court determines to be appropriate.
(2) The court must order an individual who has engaged in any conduct referred to in subsection (1) to pay a pecuniary penalty, unless the court considers that there is good reason for not making that order.
(2A) In determining an appropriate penalty under this section, the court must have regard to all relevant matters, in particular,—
1 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760 at [14].
(a)any exemplary damages awarded under section 82A; and
(b)in the case of a body corporate, the nature and extent of any commercial gain.
(2B) The amount of any pecuniary penalty must not, in respect of each act or omission, exceed,—
(a)in the case of an individual, $500,000; or
(b)in the case of a body corporate, the greater of— (i) $10,000,000; or
(ii)either—
(A) if it can be readily ascertained and if the court is satisfied that the contravention occurred in the course of producing a commercial gain, 3 times the value of any commercial gain resulting from the contravention; or
(B) if the commercial gain cannot be readily ascertained, 10% of the turnover of the body corporate and all of its interconnected bodies corporate (if any).
Submissions
[4] For the Commission, Leo Farmer argues the financial statements are relevant to the agencies’ penalty, as reflecting their size and resources, and establishing general and specific deterrent by exceeding any comprehended ‘licence fee’, and to ensure disgorgement of any consequential commercial gain. He contends those assessments cannot reliably be made from the limited financial information adduced in the liability phase of this proceeding, and would confirm the Commission’s apprehension the maximum penalties here would be $10 million. The statements also would allow some insight into the individual defendants’ financial circumstances, as proprietors of the corporate defendants. The Commission had comparable financial statements of other defendants whose settlements with the Commission were approved by this Court.
[5] For Lodge, Les Taylor QC argued relevance was prescribed by s 80. The statements were not relevant because the defendants’ solicitors assured the Commission in writing nothing in the financial statements would enable a calculation of commercial gain or turnover exceeding $10 million for the purposes of s 80(2B), and the maximum commercial gain for the purposes of s 80(2A) was easily assessable as the cost saving secured by avoiding the Trade Me fee as given in evidence at trial. He specifically disavowed any claim the defendants may not be able to pay any penalty ordered by this Court, meaning the financial statements could not be relevant for that
reason either. The availability of the settling defendants’ financial statements was only because that was a term of the settlements, rather than any necessity for sentencing. For Monarch, Mark Anderson adopted Mr Taylor’s submissions.
Discussion
[6] ‘Relevance’ for the purposes of s 80 is more confined than relevance for the purposes of HCR 8.19, which is to be regarded in terms of HCR 8.7.
[7]HCR 8.19 enables an order for particular discovery:
[… i]f at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered
1 or more documents or a group of documents that should have been discovered ….
By “should have been discovered”, HCR 8.19 refers to parties’ continuing obligation to give discovery of relevant documents after a discovery order is made against them.2 The ‘generous’ approach to the words nonetheless is within that ambit.3 HCR 8.7’s obligation is to:
… disclose the documents that are or have been in that party’s control and that are—
(a) documents on which the party relies; or
(b) documents that adversely affect that party’s own case; or
(c) documents that adversely affect another party’s case; or
(d) documents that support another party’s case.
[8] Plainly the statements fall within HCR 8.7. I do not know enough about the comparator penalty decisions to understand if those entities’ financial statements were material in their assessments of penalty. I understood Mr Taylor to say they were not; if so, they may not assist if those coordinate decisions are the more influential.
2 HCR 8.18. By “discovery order” is meant “an order that requires each party to a proceeding to discover the existence of documents to every other party”: HCR 8.1 (definition of ‘discovery order’).
3 For example, see Southland Building Society v Barlow Justice Ltd [2013] NZHC 1125 at [18]– [30]; Hoyle v Hoyle [2015] NZHC 3001 at [24].
[9] The Commission does not say it has any foundation to doubt the solicitors’ assurances as to s 80(2B)’s criteria, and neither do I. But I am markedly less comfortable about accepting the principals’ back-of-envelope (if that) assessments of their prospective costs for the purposes of s 80(2A), as may be given in anger (and therefore exaggerated).4 The corporates’ commercial gain is a mandatory consideration. I need at least some insight into their financial affairs, and some foundation for the derivative position of the individual defendants. I am conscious also s 80 directs me to “have regard to all relevant matters”, which even with the solicitors’ assurances is not effective to make the financial statements irrelevant. The statements thus are “important”, and making the orders sought is appropriate in light of the defendants’ resistance to their disclosure.
[10] I therefore exercise my discretion to grant the Commission’s applications dated 26 June 2020 for further discovery from the first and third defendants.
—Jagose J
4 Commerce Commission v Lodge Real Estate Ltd [2017] NZHC 1497 at [53] and [70].
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