Commerce Commission v Southern Cross Medical Care Society
[2003] NZCA 248
•29 October 2003
IN THE COURT OF APPEAL OF NEW ZEALAND
CA138/02
BETWEENTHE COMMERCE COMMISSION
Appellant
ANDSOUTHERN CROSS MEDICAL CARE SOCIETY
Respondent
Hearing:16 July 2003
Coram:Gault P
Fisher J
Heath JAppearances: J G Fogarty QC and P H Rainsford for Appellant
J A Farmer QC and M H Hill for Respondent
Judgment:29 October 2003
JUDGMENT OF THE COURT DELIVERED BY FISHER J
Introduction
[1] The question raised by this appeal is whether the Commerce Commission ought to be exposed to an adverse costs order where it unsuccessfully opposes an appeal against one of its own determinations declining authorisation or clearance under Part V of the Commerce Act 1986. The Commission argues that as a matter of general principle it should not be required to pay costs where all the Commission has done is to assist the High Court by presenting necessary evidence and argument in opposition to such an appeal. Southern Cross argues that successful appellants ought to receive their costs in the usual way.
Factual background
[2] The Commission declined Southern Cross’s application for unconditional clearance under s 66 of the Commerce Act to acquire shares in another medical insurance company, Aetna Health (NZ) Limited. Southern Cross appealed to the High Court. The Commission was named as the only respondent. It represented the sole opposition to the appeal in the High Court.
[3] A three day defended hearing followed before Williams J and Dr Ralph Lattimore in the High Court. The hearing was conducted on a conventional adversarial basis. Southern Cross sought to overturn the Commission’s decision. The Commission sought to uphold it. In a reserved decision the High Court found for Southern Cross and reversed the Commission’s decision declining clearance. Costs were left for determination on memoranda to be filed by the parties.
[4] That was followed by a further hearing of two days in which the High Court dealt with three applications – one to amend or recall its judgment in certain respects, another for leave to appeal to the Court of Appeal, and a third for a stay. Both parties achieved a degree of success on those matters. Again, leave was reserved to the parties to pursue costs by memoranda if they thought fit.
[5] The Commission appealed from the substantive judgment to the Court of Appeal. After a three day hearing the appeal was dismissed. The Court of Appeal ordered the Commission to pay $20,000 and disbursements by way of costs to Southern Cross for the hearing in the Court of Appeal.
[6] Memoranda were then exchanged in the High Court regarding costs in that Court. It was common ground that if costs were ordered, the appropriate scale would be category 3 band C of the High Court Rules. That produced a figure of $29,830 for the substantive hearing and $6,555 for the ancillary hearing in the High Court. The issue was whether the Commission should be made to pay costs at all.
High Court costs ruling
[7] In a ruling of 7 June 2001 Williams J traversed a series of authorities relating to costs orders where the Commission had been a party to litigation. It was well established that where the Commission unsuccessfully pursued penalty proceedings, costs would be ordered against it (Commerce Commission v Fletcher Challenge Ltd (1999) 6 NZBLC 102, 752). The same practice was followed in Australia when the Competition and Consumer Commission brought similar proceedings (Hurley v McDonalds Australia Ltd [1999] FCA 466, ACCC v Amcor Printing Papers Group Ltd [1999] FCA 533, and ACCC v Visy Paper Pty Ltd [2000] FCA 1640). In that situation both Commissions were treated like litigants for costs purposes.
[8] Williams J noted, however, that there had been more reluctance to order costs against statutory tribunals which were represented at the hearing of appeals against their own decisions. In Foodstuffs (Wellington) Co-Operative Society Ltd v Commerce Commission (AP 62 and 89/92, High Court Wellington, 18 December 1992) Greig J declined to order costs against the Commission on a successful appeal against its own determination. He noted the public interest in receiving assistance from the Commission in circumstances where the Commission represented the only effective opposition to the appeal. In general the Courts had been reluctant to order costs against the Commission in circumstances where there had been no other party to mount an effective opposition to an appeal against the Commission’s determination: see Goodman Fielder Ltd v Commerce Commission [1987] 2 NZLR 10, 20; Auckland Bulk Gas Users Group v Commerce Commission [1990] 1 NZLR 448, 470-473; Fisher & Paykel Ltd v Commerce Commission [1990] 2 NZLR 731, 768 and Telecom Corporation of New Zealand Ltd v Commerce Commission [1992] 3 NZLR 429.
[9] On the other hand, Williams J noted that in New Zealand Engineering, Coachbuilding, Aircraft Motor and Related Trades Industrial Union of Workers v Court of Arbitration [1976] 2 NZLR 283, 284-285 (CA) this Court pointed to a tribunal’s possible liability for costs where it unsuccessfully opposed an appeal from its own decision. Further, in Power New Zealand Limited v Mercury Energy Limited and Commerce Commission [1996] 1 NZLR 686, 716 (HC), costs were ordered in favour of the Commission and another respondent where an appeal against the Commission’s determination had been unsuccessful.
[10] Against that background three considerations persuaded Williams J to order costs against the Commission in the present case. First, it had recently been decided that the Commissioner of Inland Revenue ought to be treated in the same way as other litigants for costs purposes (Auckland Gas Co Ltd v Commissioner of Inland Revenue [1999] 2 NZLR 409, 417). Secondly, the costs regime introduced in the High Court on 1 January 2000 (High Court Rules RR 46‑48G) strengthened the principle that costs ought to be paid. Thirdly, the Court of Appeal had awarded substantial costs against the Commission in the present case.
[11] Williams J noted that both parties had been partly successful on the ancillary matters and concluded that no order for costs should be made in that regard. However, he noted that Southern Cross had been successful on the substantive hearing. On the basis that costs should follow the event, he directed that the Commission pay the $29,830 plus disbursements already agreed as to quantum.
Approach to the appeal
[12] In this Court the Commission faces two initial challenges. The first is that reasons must be shown for interfering with the exercise of a discretion as to costs. As this Court has repeatedly said, costs decisions are influenced by a myriad of details that are difficult to replicate on appeal. The award of costs is quintessentially discretionary. Review and appeal courts are correspondingly reluctant to interfere: Lewis v Cotton [2001] 2 NZLR 21, 35 (CA). That is not to say that an appellate court should decline to intervene if it can be shown that there was an error of principle or that the award was plainly wrong.
[13] The second is that although costs in the High Court are ultimately discretionary (R 46(1)), there is a presumption that in the absence of particular reasons to the contrary, costs will follow the event (R 47(a)). The rationale for the presumption is that the successful party should not have to bear the cost of having its rights vindicated in circumstances where the litigation stance taken by the opposing party is shown to have been unjustified. As was said in Russell v Russell (CA 13/02, CA 51/02, 23 September 2002 at para 16):
That type of proceeding [a successful challenge to a relationship property agreement] has more in common with a conventional civil dispute in which the plaintiff’s rights are ultimately vindicated notwithstanding unjustified resistance from the defendant. In that situation the rationale for costs is that the unsuccessful defendant ought to have recognised the invalidity of the agreement at the outset. In this way costs are an instrument for encouraging responsibility in the conduct of litigation. Of course these are generalities. In the end costs must be closely tailored to the specifics of each individual case … In the present case the right starting point was the assumption that costs should follow the event unless there were reasons to the contrary.
[14] It is for the Commission to show why, in terms of R 48D(f) of the High Court Rules, costs should be refused on the basis that “some …. reason exists which justifies the Court refusing costs … despite the principle that the determination of costs should be predictable and expeditious.”
[15] For the Commission Mr Fogarty recognised these challenges. He submitted that as a matter of principle there were special reasons for exempting the Commission from a costs burden in cases of this kind. His principal argument was that it was in the public interest that appeals of this nature should not proceed unopposed and that the Commission had a corresponding duty to provide evidence and argument in opposition to the appeal.
Public duty and public interest
[16] Mr Fogarty submitted that it was in the public interest that a tribunal whose decision is under appeal should not ordinarily be responsible for costs. In his submission the true characterisation of the role of the Commission when it undertook an active role on appeal was one of helping the appellate court, not one of opposing the appeal as a party in the normal sense.
[17] We agree that it is in the public interest to have the Commission take an active part to assist an appellate court when reviewing one of its determinations in circumstances where there would otherwise be no opposition to the appeal. It would be a matter of real concern if exposure to costs operated as a disincentive to the Commission’s active assistance in this situation. There would be additional expense to the public if an amicus curiae had to be appointed. The Commission’s current approach would seem to us to be consistent with the encouragement which the courts have given to the Commission to play such a part. As Cooke P said in Goodman Fielder Ltd, supra, at p 20:
In both Courts Mr McGrath has raised the question of the role of the Commission in appeals from it under the Commerce Act. He mentioned observations, said to have an inhibiting effect, in New Zealand Engineering etc Industrial Union of Workers v Court of Arbitration [1976] 2 NZLR 283, 284‑285, about the well-established principle that judicial bodies should strive not to enter the fray in a way which might appear to favour the interests of one of the parties. Those observations do not apply in their terms or spirit to a case where considerations of public interest and the effective administration of an Act arise, especially if there is no other party to put those considerations adequately before the appellate Court. In such a case it is right that the Commission should help the appellate Court to whatever extent the Commission and that Court find consistent with the Commission’s public responsibility.
Other considerations
[18] We agree with Williams J that the new High Court Rules take a more prescriptive approach to costs than previously: L v W & Ors [2003] NZFLR 961 at para 27; Glaister v Amalgamated Dairies Ltd (2003) 16 PRNZ 536 at 541-543; particularly para [21] at 543; Mansfield Drycleaners & Launders Limited v Quinney’s Drycleaning (Dentist Drycleaners Upper Hutt) Limited (CA 296/01, 23 September 2002) at para 27; Body Corporate 97010 v Auckland City Council (CA 234/00 30 August 2001). In the interests of predictability and expedition, Courts will be less inclined to depart from the prescribed approach. The prescribed approach includes the presumption that costs follow the event. However, we do not think that the Court should hesitate to depart from that approach where clear reason for it is shown. The public interest role of the Commission is capable of satisfying that requirement.
[19] Also relevant is the consideration that this Court has taken a firmer line towards costs orders against the Commissioner of Inland Revenue. It is now clear that the general principles relating to the award of costs in the High Court Rules are equally applicable to tax cases, and that for this purpose no distinction is to be drawn between the Commissioner of Inland Revenue and other litigants: Auckland Gas Co Ltd v Commissioner of Inland Revenue [1999] 2 NZLR 409 (CA). However compared with the Commerce Commission, the Commissioner of Inland Revenue has close control over the litigation to which he is a party. Pursuant to ss 6 and 6A of the Tax Administration Act 1994, the Commissioner can enter into compromises for commercial and practical reasons. In cases under the Commerce Act the Commission can, and does, change its stance as the proceedings progress in the High Court and the Court of Appeal. At any point that it thinks it appropriate to do so in the public interest, the Commission can elect to drop all opposition to an appeal and convey this to the Court. Goodman Fielder Ltd v Commerce Commission, supra, was such a case. Nevertheless there is a clear distinction between a governmental agency pursuing a debt and one which assists the court to determine how competition law impacts upon the public interest.
[20] Mr Farmer submitted that those companies which elect to follow the voluntary clearance process provided for in s 66 of the Commerce Act should not be treated less favourably than those others which leave the propriety of their business acquisition to be determined in the context of a subsequent prosecution by the Commission for breach. It was common ground that in the latter case, costs would be awarded against the Commission as a matter of course if the Commission’s prosecution failed. A practice of not awarding costs to successful parties who invoke the statutory regime for appeals under the Commerce Act could produce an anomalous distinction in treatment between those two classes of company. We do not entirely discount this argument but give greater weight to the view that the cost of obtaining prior clearance on appeal to the High Court, as distinct from any further appeal to the Court of Appeal, should be seen as part of the cost of obtaining the clearance itself.
Conclusions
[21] As a general principle we think that the Commerce Commission ought not to be exposed to an adverse costs order for unsuccessfully opposing an appeal against one of its own determinations under Part V of the Commerce Act 1986 if all the Commission has done is to assist the High Court by presenting necessary evidence and argument in opposition to the appeal in the public interest. Although we think that that is the right starting point, it is important not to overlook the inherently broad nature of a Court’s discretion over costs. Some flexibility must therefore be preserved to meet the requirements of each individual case. And we do not think that the starting point we have mentioned has any application to further appeals by the Commission to the Court of Appeal.
Result
[22] It was not suggested that there was anything special about the present case to displace the application of the general principle proposed. The appeal is allowed and the order for costs in the Court below quashed.
[23] The Commission brought this appeal as a test case to establish a principle of benefit to it in future cases. The respondent’s opposition to the appeal assisted in bringing relevant arguments to light. In those circumstances there will be an order for the costs of this appeal in favour of Southern Cross in the sum of $7,500 together with disbursements to be fixed by the Registrar, this to include travelling and accommodation expenses for one counsel only.
Solicitors:
Commerce Commission, Wellington for Appellant
Minter Ellison Rudd Watts, Auckland for Respondent