Godfrey Hirst NZ Limited v Commerce Commission
[2015] NZHC 2845
•12 November 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-002676 [2015] NZHC 2845
UNDER The Commerce Act 1986 BETWEEN
GODFREY HIRST NZ LIMITED Applicant
AND
COMMERCE COMMISSION First Respondent
CAVALIER WOOL HOLDINGS LIMITED
Second Respondent
NEW ZEALAND WOOL SERVICES INTERNATIONAL LIMITED
Third Respondent
Hearing: 12 November 2015 Appearances:
JCL Dixon and SDJ Peart for Applicant
MN Dunning QC and N Flanagan for First Respondent
D Cooper and J Wilson for Second and Third RespondentsJudgment:
12 November 2015
Reasons:
16 November 2015
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Monday, 16 November 2015 at 4:15 p.m., pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors: Chapman Tripp, Auckland for Applicant
MN Dunning QC, Auckland for First Respondent
Meredith Connell, Auckland for First Respondent
Belly Gully, Auckland for Second and Third Respondents
GODFREY HIRST NZ LIMITED v COMMERCE COMMISSION & ORS [2015] NZHC 2845 [12 November
2015]
Introduction
[1] On 12 November 2015, I heard an urgent application by Godfrey Hirst New Zealand Limited (Godfrey Hirst) for an order staying the effect of a final determination which the Commerce Commission (Commission) had indicated it would issue between 5 pm on 12 November 2015 and 10 am on 13 November 2015. The final determination was on an application by Cavalier Wool Holdings Limited (Cavalier) for authorisation of the acquisition of the wool scouring assets and business of New Zealand Wool Services International Limited (Wool Services).
[2] After hearing from counsel for Godfrey Hirst, the Commission, Cavalier and Wool Services, I granted the order sought and indicated that my reasons would follow. These are my reasons.
Submissions
[3] Godfrey Hirst sought two alternative orders. The two alternative orders sought were:
(a) An order staying the effect of the final determination, if authorisation was granted (stay order), or
(b)An order that the Commerce Commission release its final determination with delayed effect (delay order).
It also sought costs.
[4] The proposed orders were sought to preserve Godfrey Hirst’s right to appeal from a Commission determination. The order would only be in effect for a short time (a matter of a day or days). Godfrey Hirst submitted that unless the order was granted, it seemed likely that Godfrey Hirst’s appeal rights would be rendered nugatory.
[5] The Commission abided the decision of the Court on the stay order, but opposed the delay order and any award of costs to Godfrey Hirst. The Commission
submitted that, procedurally, an injunction to prevent Cavalier from completing the transaction would be the more appropriate relief in the circumstances but said it would abide any decision of the Court as to appropriate interim relief. The Commission also submitted that the delay order was not within the power of the Court, and that Godfrey Hirst should bear its own costs even if the application was granted.
[6] Cavalier and Wool Services submitted that there was no jurisdiction to make the orders sought whether on an interim basis or otherwise. They submitted that the Commerce Act (the Act) provides that a determination by the Commission to grant an authorisation comes into force when it is given. Once made, an authorisation remains in force until a Court either:
(a) Stays the authorisation order under s 95(1) of the Act pending determination of an appeal; or
(b)Allows an appeal and reverses the determination under ss 91 and 93 of the Act.
[7] Cavalier and Wool Services submitted that there was no jurisdiction to stay the effect of an authorisation except under s 95(1). There was no inherent jurisdiction for the Court to disapply that which Parliament has enacted to apply.
Factual background
[8] On 21 October 2014 Cavalier entered into a sale and purchase agreement to acquire the wool scouring assets and business of Wool Services. The sale and purchase agreement was conditional upon Commission authorisation under s 67 of the Act. On 22 October 2014 Cavalier filed an application with the Commission seeking authorisation under s 67(3)(b) of the Act to acquire the wool scouring assets and business of Wool Services.
[9] Cavalier and Wool Services are the only two scourers of wool in New Zealand. The application for authorisation is therefore effectively an application to create a domestic monopoly. Godfrey Hirst is a manufacturer of woollen and
synthetic carpets in New Zealand and is a major purchaser of scoured wool in New
Zealand. It therefore has a proper interest in the application for authorisation.
[10] On 26 March 2015 the Commission published a draft determination stating
the Commission’s preliminary view that:
(a) the acquisition was likely to result in a substantial lessening of competition in the market for wool scouring in New Zealand; but that
(b)the net benefits to New Zealand from the acquisition were such that it was appropriate for the Commission to authorise the transaction.
[11] Godfrey Hirst made submissions on the draft determination and also attended and participated fully in a conference held on 10 June 2015 by the Commission, pursuant to s 69B of the Act. On 1 September 2015 the Commission held a second confidential conference on particular aspects of the application for authorisation.
[12] On 1 October 2015 the Commission published a second draft determination. Although its reasoning differed somewhat from that contained in the first draft determination, the Commission nevertheless reached the same overall conclusion, that although the acquisition was likely to result in a substantial lessening of competition in the market for wool scouring in New Zealand, the net benefits of the acquisition were such that the Commission should authorise the transaction.
[13] On 15 and 22 October 2015 Godfrey Hirst and Cavalier/Wool Services made submissions and cross submissions to the Commission on aspects of the second draft determination. Godfrey Hirst continues to maintain that the second draft determination contains material errors of law and fact and that the Commission should decline the application for authorisation. The Commission initially advised that it intended to issue its final determination on 13 November 2015, which is the expiry date of the extended review period agreed between the Commission and Cavalier under s 67(3) of the Act.
[14] Because it was a participant in the Commission’s conferences on the application, Godfrey Hirst has a statutory right of appeal to the High Court from the final determination. Godfrey Hirst has instructed its solicitors that in the event that the final determination authorises the acquisition on materially similar grounds to those contained in the second draft determination, Godfrey Hirst will exercise its statutory right of appeal.
[15] On 2 November 2015 Godfrey Hirst’s solicitors wrote to the solicitors for Cavalier and Wool Services seeking an undertaking that, if the Commission granted authorisation, their clients would not usurp Godfrey Hirst’s statutory right of appeal by concluding the transaction before giving Godfrey Hirst a reasonable opportunity to file its notice of appeal and an application that the authorisation be stayed pending determination of the appeal.
[16] On 4 November 2015 the solicitors for Cavalier and Wool Services responded on behalf of their clients declining the request. Later the same day the solicitors for Godfrey Hirst wrote to the Commission asking it to issue its final determination on a restricted basis earlier than 5 pm on 13 November 2015 but with its effective time still at 5 pm, thereby creating an opportunity for Godfrey Hirst to file an appeal and seek a stay of the final determination pending appeal.
[17] In its response, on 5 November 2015, the Commission agreed to bring forward the time on which it would issue its final determination to a time between 5 pm on Thursday 12 November 2015 and 10 am on Friday 13 November 2015, but declined to defer its effective time. The Commission did, however, note that Godfrey Hirst could in the meantime, and in readiness for the decision, file an originating application for a stay of the Commission’s final determination.
The law
[18] The Commerce Act prohibits acquisitions of the assets of a business or shares if the acquisition would have the effect of substantially lessening competition in a market. Section 47(1) of the Act provides:
(1) A person must not acquire assets of a business or shares if the acquisition would have, or would be likely to have, the effect of substantially lessening competition in a market.
[19] However, the Commission may authorise a business acquisition under s 67(3)
of the Act. Section 67(3)(b) provides:
(3) Within 60 working days after the date of registration of the notice, or such longer period as the Commission and the person who gave the notice agree, the Commission shall —
…
(b) if it is satisfied that the acquisition will result, or will be likely to result, in such a benefit to the public that it should be permitted, by notice in writing to the person by or on whose behalf the notice was given, grant an authorisation for the acquisition;
[20] Section 69 then sets out the effect of an authorisation. It effectively immunises the transaction. Section 69 provides:
Nothing in section 27 or section 47 applies to the acquisition of assets of a business or shares if the assets or shares are acquired in accordance with a clearance or an authorisation and while the clearance or authorisation is in force.
[21] Appeals from determinations of the Commission are provided for in ss 91 –
97 of the Act. Section 91(1) provides for a right of appeal, while s 93 provides:
In determining an appeal under section 91(1) the court may do any of the following:
(a) confirm, modify, or reverse the determination or any part of it:
(b) exercise any of the powers that could have been exercised by the
Commission in relation to the matter to which the appeal relates.
[22] Finally, s 95 deals with the situation pending determination of an appeal. It provides that a determination shall remain in full force pending the determination of an appeal unless the Court orders to the contrary. Section 95(1) provides:
(1) Where an appeal is brought under any provision of this Part against any determination of the Commission, the determination to which the appeal relates shall remain in full force pending the determination of the appeal, unless the court orders to the contrary.
Case law
[23] The use of an implied power to preserve a party’s position pending the
hearing of an application for a stay is not unknown.
[24] Section 95(1) was considered in New Zealand Vegetable Growers Federation Inc v Commerce Commission (No 2).1 In that case, the appellants appealed against a final determination of the Commerce Commission in which it declined to grant continuing authorisation for a collective pricing arrangement which had been lawfully in place for a number of years. At the same time, they applied for an order staying the determination. Greig J looked closely at the wording of s 95(1) of the
Act and in particular the power of the Court to make an order “to the contrary” to the
determination of the Commission. Greig J stated:2
Furthermore, it seems to me that to make such an empowering provision effective there must be authority to such make affirmative or positive orders as may be appropriate to give proper effect. One of the considerations that must be borne in mind in an application of s 95 is to ensure that the rights of appeal will not be in vain.
[25] A stay was therefore possible. Greig J granted an authorisation under s 58 for the collective pricing arrangement operated by the appellants to continue pending determination of the appeal or until further order of the Court.
[26] Grieg J did make a comment about the Court’s lack of inherent jurisdiction, in the face of the specific provision made for orders under s 95. However, that does not affect the case here as Godfrey Hirst does not argue that the Court has inherent jurisdiction to order a stay, but rather that the Court has an implied power to enable the exercise by Godfrey Hirst of its statutory right to apply for a stay under s 95 pending determination of its appeal. The question is one of statutory interpretation.
[27] It is not contested that there is jurisdiction to bring an application for a stay pending the determination of an appeal against a determination. The factors for
1 New Zealand Vegetable Growers Federation Inc v Commerce Commission (No 2) [1987] 2
NZLR 5 (HC).
2 New Zealand Vegetable Growers v Commerce Commission, above n 1, at 9, lines 4 – 7.
when that discretion should be exercised are set out in Telecom Corp of New Zealand
Ltd v Clear Communications Ltd.3
[28] In Woolworths Ltd v Commerce Commission, the Commission had filed an application for leave to appeal to the Court of Appeal against, and for a stay of, a judgment of the High Court dated 29 November 2007. The Commission then sought an interim stay before the leave to appeal hearing occurred on 29 January 2008.4
[29] In a judgment on 19 December 2007, Miller J stated:5
Although an appeal has not yet formally been brought … I am prepared to find for today’s purposes that the Court has an implied power to ensure that the Commission’s right to seek leave to appeal is not rendered nugatory before the applications for stay and leave to appeal are argued on their merits.
[30] Miller J granted an interim stay pending the decision of Mallon J on the application for leave to appeal and for a stay pending appeal. His Honour did not make explicit whether he was doing so on the basis of either an interpretation of the High Court Rules or of s 95.
[31] In both of these cases, the Court took an interpretive approach to the relevant sections of the Act and the High Court Rules which would facilitate the appeal rights of the applicants. In neither case was the power an explicit one on the face of the statute.
Discussion
[32] Counsel for Cavalier candidly advised the Court that if the Commission’s final determination authorised Cavalier to acquire Wool Services, then the transaction would be completed within minutes rather than hours. Any appeal filed by Godfrey Hirst would then be futile, as s 69 of the Act provides that the prohibition in s 47 on acquiring assets of a business or shares if the acquisition would, or would
be likely to, have the effect of substantially lessening competition in a market does
3 Telecom Corp of New Zealand Ltd v Clear Communications Ltd (1995) 6 TCLR 682 (CA).
4 Woolworths Ltd v Commerce Commission HC Wellington CIV-2007-485-1255/1379/1731, 19
December 2007.
5 Woolworths Ltd v Commerce Commission, above n 4.
not apply if the assets or shares are acquired in accordance with an authorisation and while the authorisation is in force.
[33] Cavalier made it plain that it would act swiftly to ensure that there was no further delay in its acquisition of Wool Services. It intends, if at all possible, and acting within the law, to render Godfrey Hirst’s right of appeal nugatory. It knows that an application for a stay filed by Godfrey Hirst at the same time as an appeal would not be heard and determined for some hours or days.
[34] Having carefully considered the competing submissions, I am of the view that this Court must have jurisdiction to stay the effect of a final determination by the Commerce Commission, including one yet to be issued, to enable an application for a stay to be heard and determined on its merits for three main reasons. This jurisdiction derives from an implied power, from the interpretation of the Act and the relevant provisions of the High Court Rules.
[35] Firstly, the structure of the Act provides for a right of appeal to certain parties. As noted by Miller J:6
Those who embark on a clearance or authorisation must know that it comes with appeal rights attached.
[36] Those appeal rights could easily be routinely rendered nugatory unless there was such a power. Changing technologies, which enable transactions to be processed faster than court applications can be made, should not have the effect of rendering those appeals provisions useless.
[37] Secondly, the New Zealand courts have long recognised a right to natural justice.7 The content of that right includes the principle of audi alteram partem, or the right to be heard. That right manifests to allow, at a minimum,8 the “opportunity to respond to an allegation” or “where the circumstances of decision making require
that someone affected by it be given an opportunity to be heard, that person must
6 Re Godfrey Hirst NZ Ltd HC Wellington CIV-2011-485-1257, 8 July 2011.
7 See, for example, Ali v Deportation Review Tribunal [1997] NZAR 208 and Andrew Butler and Petra Butler The New Zealand Bill of Rights Act: A Commentary (2nd ed, LexisNexis, Wellington, 2015)at [25.2.13].
8 Butler and Butler, The New Zealand Bill of Rights Act: A Commentary, above n 7, at [25.2.16].
have reasonable opportunity to present his case and reasonable notice of the case he has to meet.”9
[38] In circumstances such as these, where Parliament has granted a statutory right of appeal from decisions of the Commerce Commission, the Court is clearly the mechanism by which Parliament intends an individual to have an ongoing ability to put his or her case. In my view, the right to have a reasonable opportunity to present a case to a decision-maker requires this Court facilitating meaningful access to that decision-maker. This is reinforced by the statutory guarantee, under s 27 of the New Zealand Bill of Rights Act, to the right to natural justice for all legal persons. This Court is bound by ss 3 and 6 of the Bill of Rights Act to prefer giving enactments right consistent meanings where possible.
[39] In essence, the interest in protecting appeal rights was emphasised by the Court of Appeal in Telecom Corporation of New Zealand v Clear Communications Ltd, in making a statement as to when stays will be granted pending appeals following issue of a Commerce Commission determination:10
Stay does not follow automatically from a finding an appeal will be rendered nugatory. The statutory emphasis within s 95, indeed, can be read the other way. It is, however, a very powerful consideration. A statutory right of appeal should not be rendered nugatory unless there are sufficient considerations warranting that course in the overall interests of justice. There must be sufficient good reason before a potential injustice of that character can be countenanced.
(emphasis added)
[40] These considerations must be borne in mind when interpreting r 20.10 of the High Court Rules. Although that rule provides that an appeal does not operate as a stay of enforcement of any order appealed from, it does enable a Court to order a stay or to grant any interim relief pending determination of an appeal.
[41] I am of the view that “pending”, in these particular circumstances, should not
be restricted to an appeal that has been filed. It should extend to an appeal that is clearly about to be filed. In Jowitt’s Dictionary of English Law, the interpretation of
9 Ali v Deportation Review Tribunal [1997] NZAR 208 at 220.
10 Telecom v Clear, above n 3, at 6.
pending adopted explicitly states that legal proceedings will be considered pending if they are clearly about to be instituted.11
[42] In the circumstances, this is a tenable and appropriate interpretation to adopt to fulfil the intentions of Parliament in allowing appeals from Commission determinations, and the rights of all persons to natural justice.
[43] I note the Commission’s submission that an injunction may be preferable to secure Godfrey Hirst’s position. I do not necessarily agree. The utilisation of an implied power is less restrictive, inasmuch as the acquisition can still proceed albeit without immunisation. There may also be some difficulty in Godfrey Hirst formulating a cause of action which applies, given all they seek is exercise of a statutory right. Furthermore, an undertaking as to damages may also be seen as inappropriate for a party merely wishing to exercise a statutory right of appeal.
[44] Having found that there is an implied power to grant an interim stay, I turn now to consider the discretionary factors which bear on the exercise of that implied power. I take into account the following discretionary factors when determining whether I should exercise as a matter of discretion the implied power to order an interim stay:
(a) Godfrey Hirst’s economic interests are directly at issue. I am advised that the Commission’s second draft determination found that if the acquisition proceeds, the prices charged to Godfrey Hirst would increase by between five and 25 per cent.
(b)There is also a wider public interest in competition in the affected market.
(c) Godfrey Hirst’s right to appeal would be rendered nugatory if the implied power to order an interim stay is not exercised.
11 Daniel Greenberg (general ed) Jowitt’s Dictionary of English Law (3rd ed, Thomson Reuters, London, 2010) at 1682.
(d)Cavalier/Wool Services were not able to advise the Court how and to what extent they would be injuriously affected by an interim stay. Counsel did advise the Court that they would file evidence of the economic disadvantage to them of a stay, when the application for a stay pending the determination of the appeal was argued, following the filing of the appeal, if the final determination authorised the acquisition.
(e) An interim stay would only be in force for a matter of days until the Court was able to hear and determine an application for stay pending the determination of the appeal.
(f) An interim stay could be made subject to conditions relating to the prompt filing of an appeal and an application for a stay pending appeal, as well as the provision of security for costs.
(g)At the time of the hearing, the strength of the case on any appeal could not be realistically considered as the final determination had yet to be issued and the exact scope of the grounds of appeal were unable to be formulated. However, it should be recognised that the final determination followed two draft determinations and there were hearings at which interested parties, including Godfrey Hirst, were heard. Nonetheless, Godfrey Hirst has provided the Court with a draft notice of appeal which draws on the second draft determination. It cannot be said at this stage that the draft grounds of appeal are completely without merit.
[45] For these reasons, I consider it is appropriate for the Court to exercise its discretion to order an interim stay. Godfrey Hirst sought two alternative orders. I have my doubts about the ability of the Court to make a delay order.
[46] The Commission itself, although abiding the application for a stay order, submitted that a delay order could not be granted. Its reasoning was as follows. The Commission may only do what the Act authorises. Section 67(3)(b) of the Act is a
mandatory provision that requires the Commission (if satisfied that the statutory test of authorisation is met) to notify the applicant and give authorisation for the transaction. The effect of the alternative order sought would be that, if satisfied the statutory test is met in this case, the Commission would be ordered to not do what the statute requires (namely authorise the transaction and notify the applicant) but something else, namely, suspend the effect of the authorisation. The Commission submitted that the Act does not authorise such a course and indeed it would be contrary to it. In other words the Court cannot order the Commission to exceed its statutory powers.
[47] In the circumstances, there is no need to determine whether the Court has the power to make a delay order, as I have already determined that the Court has the implied power to make a stay order, although I am of the view there is merit in the Commission’s position.
[48] In all the circumstances, there will therefore be an order staying the effect of the Commission’s final determination of the application by Cavalier dated
22 October 2014 to acquire control over the wool scouring assets and business of Wool Services until determination of the stay application referred to in the conditions below.
[49] The order is conditional upon the following:
1. Lodgment of the appeal
Godfrey Hirst must lodge the notice of the appeal with the High Court, together with an application for stay of the determination, within 24 hours of the date and time Godfrey Hirst receives notice of the final determination. Days that are not working days are excluded for the purposes of calculating this 24 hour period. It is not necessary for Godfrey Hirst to file evidence at the time of its stay application.
2. Security for costs
Within 10 working days of filing the appeal, Godfrey Hirst must pay security for costs in accordance with r 20.13 based on an estimated hearing time of seven half days. Either party may apply to vary the security if the expected hearing duration changes.
3. Prosecution of the appeal
Godfrey Hirst must confirm, as it has now done, that it will prosecute the appeal with due speed and diligence.
[50] There will be no costs awarded to Godfrey Hirst as the successful applicant. The Commission abided the decision of the High Court on the application for a stay order while Cavalier/Wool Services have acted at all times in accordance with the
statutory procedures. Costs are to lie where they fall.
Woolford J
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