New Zealand Livestock Limited v New Zealand Thoroughbred Racing Inc

[2013] NZHC 136

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2013-485-107 [2013] NZHC 136

BETWEEN  NEW ZEALAND LIVESTOCK LIMITED Plaintiff

ANDNEW ZEALAND THOROUGHBRED RACING INC

First Defendant

ANDNEW ZEALAND THOROUGHBRED BREEDERS ASSOCIATION INC Second Defendant

Hearing:         28 January 2013

Counsel:         J O Upton QC and I W Thorpe for Plaintiff

No Appearance for First Defendant
No Appearance for Second Defendant

Judgment:      29 January 2013

ORAL JUDGMENT OF RONALD YOUNG J

[1]      This is an oral application for an interim injunction designed to stop the New Zealand   Thoroughbred   Racing   Incorporated   (NZTRI)   and   New Zealand Thoroughbred Breeders Association Incorporated (NZTBAI) from offering a bonus insurance scheme to the racing industry.

[2]      I heard counsel for the proposed plaintiff orally this morning and further this afternoon.  There are currently no documents filed in Court but that by itself does not prohibit consideration and if appropriate, the granting of an interim injunction.

[3]      I  have  been  provided  with  a  copy  of  a  settlement  agreement  between

New Zealand Livestock Limited (NZLL) and the NZTRI and the NZTBAI from

NEW ZEALAND LIVESTOCK LIMITED V NEW ZEALAND THOROUGHBRED RACING INC HC WN CIV 2013-485-107 [29 January 2013]

2007 relating to previous litigation involving, I am told, similar issues as the current dispute.

[4]      In addition I have been provided with some background material relating to a new bonus insurance scheme set up by NZTRI as well as the existing NZLL’s insurance scheme.

[5]      NZLL  operates  a  bonus  insurance  scheme  for  those  horse  owners  who purchase  an  entry  fee.    If  the  owners’ horse  subsequently  wins  or  places  in  a particular race, the owner is paid a bonus under the scheme.  The purpose of these schemes are generally to encourage the racing industry, to encourage breeders and provide an economic advantage to those who do well.

[6]      On Friday, 25 January, 2013, the proposed defendants announced they were commencing such a bonus insurance scheme.  Their entry fee is significantly lower than NZLL’s and although the individual prizes may vary between the schemes (and the defendant’s scheme covers only fillies) their total prize money is larger than NZLL.

[7]      NZLL  say  that  the  New Zealand  Thoroughbred  Racing  scheme  is  not sustainable financially and is designed to drive NZLL out of the market in this area. They say given the advantageous entry fee offered by NZTRI ($690 as against

$2,000 for NZLL), the NZLL scheme would not be taken up by horse owners and the scheme and company will likely fail.

[8]      The plaintiff’s case is that the actions by NZTRI are in breach of s 27 of the

Commerce Act 1986, unlawfully lessening competition.

[9]      The reason for the urgency relates to the commencement today of the main horse sale for the year at Karaka in South Auckland.   The plaintiff says that the purchase of a horse at the Karaka sales is often accompanied by a purchase of an entry fee in a bonus insurance scheme.

[10]     Thus, if the NZTRI bonus insurance scheme is allowed to be offered to the public, NZLL are concerned that horse purchasers will take up entry in that scheme rather than NZLL.

[11]     Thus, an interim order is required, they say, in the short term to prevent the bonus insurance scheme of NZTRI’s being offered to those who purchase horses at the sales.  The proposed plaintiffs, therefore, seek an order for 72 hours to enable full proceedings to be prepared and served on the proposed defendants.   The orders sought are essentially orders which would prevent the sale or distribution of the scheme in the interim.

[12]     I have indicated to counsel I am not prepared to make an interim order as sought.

[13]     I accept that the essential facts are established by the information provided to me.  It seems clear that the NZTRI are intending to commence today at the Karaka sale a bonus insurance scheme for fillies.  Some of those who have purchased fillies may pay an entry fee for the NZTRI scheme.   However, there is currently little information to establish that the scheme is potentially in breach of the Commerce Act and little information to establish that the effect would be to substantially lessen competition.  And so I assess, currently, the information before me is modest indeed in terms of establishing the fundamental illegality of the scheme.

[14]     Nor  in  my  view  is  there  anything  to  suggest  if  there  is  breach  of  the Commerce Act that damages would not be an adequate remedy in this case.  In some cases it is true that damages by themselves are inadequate in Commerce Act proceedings, because there can be a substantial public interest factor in Commerce Act proceedings.  But I do not see that to be the case here. A relatively small number of people are potentially affected, at the most a few hundred.

[15]     Nor in my view is there sufficient evidence that over the next few days before a properly prepared and argued case can be heard that there will be such substantive damage to the plaintiff’s business that it will be unable to recover.  Indeed the horse racing which can give rise to the bonus payments does not happen until 2014.  With a late fee payment, the filly owners have until July 2013 to enter the bonus insurance scheme run by NZTRI in any event.  And so in those circumstances it seems to me that the best assessment is that at worst, if there is any damage, it will be modest.

[16]     For  those  reasons,  therefore,  I  am  not  prepared  to  grant  an  ex parte application based on the oral application made.

[17]     Should the plaintiff now file proceedings, they should in the circumstances, in my view, serve the defendants.   I am prepared as List Judge to record that any further interim applications should have urgency of hearing so that an early decision can be made as to whether or not an injunction is justified in the circumstances.

[18]     For the reasons given, therefore, the oral application is refused.

[19]     If ultimately the plaintiff in these proceedings decides not to proceed further, then given this has been an application heard in Court, it should at least file a notice of proceeding and statement of claim so that the fact of this hearing and this decision

is permanently recorded.

Ronald Young J

Solicitors:

J O Upton, Wellington, email:  [email protected]

I W Thorpe, Barrister, Wellington, email:  [email protected]