Commerce Commission v NGB Properties Limited - [2023] NZHC 2005

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2023-485-11

[2023] NZHC 2005

UNDER the Commerce Act 1986

BETWEEN

COMMERCE COMMISSION

Plaintiff

AND

NGB PROPERTIES LIMITED

Defendant

Hearing: 30 June 2023

Appearances:

J C L Dixon KC and F J Cuncannon for the Plaintiff J D Every-Palmer KC for the Defendant

Judgment:

28 July 2023

JUDGMENT OF COOKE J

(Penalty)

[1] The defendant, NGB Properties Limited (NGB), is a property holding company. It has the same shareholders and two common directors as Juted Holdings Ltd (Juted). Juted is the operating entity of the Mitre 10 MEGA store at the Gate Pa Shopping Centre in Tauranga.

[2] The Mitre 10 branded group of companies operates throughout New Zealand in competition with other retailers, but particularly Bunnings Ltd (Bunnings).

[3] In late 2018 Bunnings acquired a property at 1148 and 1150 Cameron Road located near to the Mitre 10 MEGA in Tauranga (the Gilmores site). The Gilmores site adjoins 1170 and 1176 Cameron Road (the Cameron Road site). Together the Gilmores and Cameron Road sites are large enough to establish a Bunnings Warehouse which would be able to fully compete with the Mitre 10 MEGA store. On 8 November

COMMERCE COMMISSION v NGB PROPERTIES LIMITED [2023] NZHC 2005 [28 July 2023]

2019 Juted purchased the Cameron Road site, nominating NGB as purchaser. Juted’s acquisition prevented Bunnings fully competing with its Mitre 10 MEGA store.

[4] After its acquisition of the Cameron Road site on 3 July 2020 NGB gave a covenant in relation to that site the purpose of which is to prevent the site from being used for a competitive hardware business by future owners. NGB has admitted that the entry of this covenant contravened s 28 of the Commerce Act 1986 (the Act).

[5] The issue before the Court is the penalty that should be imposed for this admitted breach under s 80 of the Act. The parties have agreed to a penalty of
$500,000 and have presented submissions in support of it.

Agreed facts

[6] For the purposes of the penalty hearing the parties have presented an agreed statement of facts. For the purpose of this judgment I will focus on the facts that I consider material for the purposes of determining the penalty notwithstanding that the parties agreement as to the facts is a little more extensive.

[7] As indicated, there is competition between Mitre 10 and Bunnings for the provision of hardware and home improvement supplies. There are various categories of stores involved in this competition, including competition between larger stores including “Mitre 10 MEGA” and “Bunnings Warehouse”.

[8] There is a market for retailing of hardware and home improvement goods by such warehouses within central Tauranga. The parties have not agreed the precise bounds of that market, although it is accepted that there is some competition arising outside of central Tauranga, and also from other smaller retailers inside and outside central Tauranga. The closest Bunnings retail store…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NZHC 2005
Decision Date: 28 July 2023

CaseChat Overview and Summary

The case of Commerce Commission v NGB Properties Limited involved a dispute under the Commerce Act 1986, with the Commerce Commission bringing proceedings against NGB Properties Limited for contravening section 28 of the Act by entering a covenant intended to restrict competition in the hardware and home improvement retail market in Tauranga, New Zealand. The primary legal issue before the court was determining the appropriate penalty for the admitted breach.

NGB Properties Limited, a property holding company with the same shareholders and directors as Juted Holdings Ltd, purchased the Cameron Road site adjacent to a Bunnings Warehouse, with the intention of preventing Bunnings from establishing a competitive store. The court had to consider the nature and seriousness of the breach, the potential harm to competition, and the personal circumstances of NGB Properties Limited, including its cooperation with the Commission and its actions to rectify the situation once it became aware of the legal implications.

The court concluded that the breach, while serious, was less so due to the absence of actual anti-competitive effects or financial gain. The encumbrance was removed promptly in response to the Commission's concerns, and NGB Properties Limited had not previously contravened the Act. Considering these factors, the court found the proposed penalty of $500,000 to be within the appropriate range, balancing the need for deterrence with the mitigating circumstances.

In its judgment, the court ordered NGB Properties Limited to pay a pecuniary penalty of $500,000 for its admitted contravention of section 28 of the Act. The court also noted that costs would lie where they fell, in accordance with the parties' agreement.

Orders