Gateway Solutions Limited v Commerce Commission - [2018] NZHC 3049

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CRI-2018-412-000032

CRI-2018-412-000033 [2018] NZHC 3049

BETWEEN
GATEWAY SOLUTIONS LIMITED

First Appellant

AND

IAN CARLINE

Second Appellant

AND

COMMERCE COMMISSION

Respondent

Hearing: 19 November 2018

Appearances:

C S Withnall QC and B J Nettleton for the Appellants J C L Dixon QC and I M Brookie for the Respondent

Judgment:

23 November 2018

JUDGMENT OF NATION J

[1] This application for leave to appeal and intended appeal arises out of a disclosure application made during the course of a disputed facts hearing, after entry of guilty pleas but before sentence.

[2] The first appellant, Gateway Solutions Ltd (Gateway), produces deer velvet supplements sold under the brand name “Silberhorn”. The company was taken over by the second appellant, Mr Carline, in 2002.

[3] After drying, the velvet is ground into a powder and either packed in bulk or put in capsules ready for use by the consumer. Mr Carline and members of his family have been involved in producing the powdered product.

GATEWAY SOLUTIONS v COMMERCE COMMISSION [2018] NZHC 3049 [23 November 2018]

[4] The Commerce Commission began investigating activities of Gateway in 2014 in response to allegations that it had been mislabelling its products by overstating the amount of deer velvet contained in capsules. Mr Carline failed or refused to comply with notices to produce documents. This led to the Commission filing charges in October 2015 against Gateway and Mr Carline under s 47J Fair Trading Act 1986 (FTA) for failing to comply with statutory notices. In May 2016, charges were filed against Gateway and Mr Carline under ss 10 and 13 of the FTA in relation to 22 batches of Silberhorn branded deer velvet dietary supplement capsules that bore labels overstating the amount of deer velvet contained within them (and understating the amount of carob, inserted as a filler to make up the weight of the capsules). There were also other charges relating to claims that capsules contained 100 per cent deer velvet when they did not and that Gateway’s website contained similar misleading statements.

[5] An eight week defended hearing was scheduled to begin on 30 October 2017. On 1 November 2017, the appellants entered guilty pleas as follows:

(a) Gateway – 27 charges in total, 26 charges under s 10 and 1 charge under s 47J FTA;

(b) Mr Carline – 1 charge of being a party to the above breach by the company under s 47J FTA.

[6] Pleas were entered on the basis of agreed summaries of facts, which had been discussed and revised between counsel and ultimately signed by Mr Carline on behalf of himself and Gateway.

[7] At the scheduled sentencing hearing on 27 February 2018, it became apparent the appellants disputed several facts contained in the summaries of facts (or inferences that the Commission submitted should be drawn from them). In particular, the appellants claimed:

(a) Mr Carline did not know about the mislabelling; and

(b)…

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.

Continue reading Gateway Solutions Limited v Commerce Commission

Details

AGLC: Gateway Solutions Limited v Commerce Commission [2018] NZHC 3049
Case: [2018] NZHC 3049
Decision Date: 23 November 2018

CaseChat Overview and Summary

Gateway Solutions Limited, a producer of deer velvet supplements, and Ian Carline, the company's owner, were charged with offences under the Fair Trading Act 1986 (FTA) for mislabelling their products. They pleaded guilty to 27 charges, including failing to comply with statutory notices and mislabelling deer velvet capsules. A disputed facts hearing was held to determine specific facts relevant to sentencing. Gateway and Mr Carline sought disclosure of expert reports prepared by Dr James Suttie, which were withheld by the Commerce Commission on the grounds of privilege. The appellants argued that the reports should be disclosed as they contained information that supported their defence that the mislabelling was not harmful due to the enhanced effectiveness of their product. The High Court considered whether the reports were necessary for the appellants to present an effective defence and whether disclosure was required in the public interest.

The Court held that the reports did not need to be disclosed because they were not necessary for the appellants to present their defence. The Court found that the evidence of Dr Stephen Haines, an expert called by the appellants, was not challenged by the Commission and therefore stood unchallenged. The Court noted that Dr Suttie's reports, if they contained information supporting Dr Haines' conclusions, would not have assisted the appellants' case as they related to a different process than the one used by Gateway for most of the period in question. The Court concluded that there was no public interest in requiring the Commission to disclose the reports as they were not necessary for the appellants to present an effective defence. The Court granted leave to appeal but dismissed the appeal, holding that the Judge's decision was not in error. The case was remitted to the District Court for sentencing.

Orders