Nzme Limited v Commerce Commission
[2017] NZHC 1788
•31 July 2017
IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY
CIV 2017-485-445
[2017] NZHC 1788
BETWEEN NZME LIMITED
First Appellant
AND
FAIRFAX MEDIA LIMITED
Second Appellant
AND
FAIRFAX NEW ZEALAND LIMITED
Third Appellant
AND
COMMERCE COMMISSION
Respondent
Hearing: 28 July 2017 Appearances:
D Goddard QC, S Keene and M McMenamin for the Appellants J Farmer QC, J Every-Palmer QC and F Cuncannon for the
Respondent
Judgment:
31 July 2017
JUDGMENT OF DOBSON J
[1] On the afternoon of 28 July 2017 I heard counsel on a number of interlocutory issues that either required the Court’s supervision or where the parties had failed to agree.
Scope of confidentiality orders
[2] The respondent (the Commission) proposed terms for confidentiality orders that are to apply to materials and submissions to be produced in the appeal. Its proposal was in narrower terms than the scope of confidentiality of the appellants’ materials that had been accepted by the Commission throughout its own proceedings.
NZME LTD v COMMERCE COMMISSION [2017] NZHC 1788 [31 July 2017]
[3] The appellants opposed one part of the proposed narrowing of the scope of the materials to be treated as confidential.
[4] Both appellants filed affidavits from their respective executives. The affidavits confirmed continued concern at the high level of commercial sensitivity applying to the documents and information on the topics that the Commission had previously recognised ought to remain confidential.
[5] The Commission argued for the narrower scope of confidentiality orders in reliance on the presumption of open justice that requires any suppression of matters before the Court to be justified. The Commission is also concerned that if the extent of confidentiality respected by the Commission in its determination continued during argument of the appeal, the preparation of submissions and presentation of argument for the Commission would be rendered unduly unwieldy if counsel were unable to freely refer to the full extent of the propositions advanced for the appellants before the Commission. Mr Every-Palmer QC, who presented argument on this application, submitted that the Court should not merely adopt the scope of confidentiality afforded by the Commission, which he suggested applied a low threshold.
[6] On the importance of open justice Mr Every-Palmer quoted the opening observations of the Supreme Court in the Erceg decision:1
[2] The principle of open justice is fundamental to the common law system of civil and criminal justice. It is a principle of constitutional importance, and has been described as “an almost priceless inheritance”. The principle’s underlying rationale is that transparency of court proceedings maintains public confidence in the administration of justice by guarding against arbitrariness or partiality, and suspicion of arbitrariness or partiality, on the part of courts. Open justice “imposes a certain self-discipline on all who are engaged in the adjudicatory process – parties, witnesses, counsel, Court officers and Judges”. The principle means not only that judicial proceedings should be held in open court, accessible by the public, but also that media representatives should be free to provide fair and accurate reports of what occurs in court.
[7] In Erceg the party seeking confidentiality was involved in a family dispute over the operation of trusts that had been established by a prominent businessman. The
1 Erceg v Erceg [2016] NZSC 135, [2017] 1 NZLR 310 at [2] (citations omitted).
concerns were that disclosure would amount to unjustifiable intrusion into privacy interests.
[8] The Courts recognise that in commercial litigation the interests of open justice often have to be balanced against the Court’s preparedness to minimise the risk of ongoing harm to litigants caused by public disclosure of the detail of commercially sensitive information. In commercial litigation, including appeals such as the present one, the Court routinely makes confidentiality orders to suppress commercially sensitive information, and facilitates the presentation of evidence and submissions, and for judgments to issue on terms that avoid unwarranted disclosure.
[9] The Commission accepts that the appellants are entitled to have the confidentiality of certain commercial sensitive matters of detail about their businesses protected by confidentiality orders where that information is not otherwise in the public arena. For their part the appellants accept that they cannot sustain claims for confidentiality of the scope contended for when the appeal was filed. For example the appellants filed the notice of appeal with certain propositions redacted on the ground of confidentiality, but they now concede that confidentiality should not be maintained for any of the matters pleaded in their notice of appeal.
[10] The appropriate scope of confidentiality orders is therefore a question of degree.
[11] The Commission has sought confidentiality orders at this stage of the appeal because uncertainty on this is seen as impeding efficient preparation for the hearing. Mr Every-Palmer was conscious that the Commission’s submissions might need to be divided in a way that would enable counsel to address matters covered by confidentiality orders in separate sessions, contemplating that the Court might agree to hear parts of the argument with the public excluded. He also initially raised the prospect of needing to deal differently in the preparation of the record with documents for which confidentiality was recognised.
[12] I do not understand the appellants to have an expectation that the record would be prepared in a way that distinguished where documents deserving of confidentiality
were located. The record will not be accessible other than to counsel and the Court. Mr Goddard QC suggested that dealing with confidential content in submissions could be dealt with in a way that disrupted their preparation and presentation substantially less than Mr Every-Palmer projected.
[13] The topic that defined the difference between the parties’ approach to the appropriate scope of confidentiality is a contention advanced for the appellants as an important feature of the counterfactual situation that will apply if the merger is not approved. It is a proposition described in the redacted part of the first sentence of
[149] of the Commission’s Determination. It is a contention made by one of the appellants as to how the future of its business would play out if the merger does not proceed (the Contention). Mr Goddard advised that solicitors representing the applicants before the Commission were authorised by one of the applicants to advance the Contention on a confidential basis, including not disclosing the Contention to the other applicant. I was assured by Mr Goddard that care was still being taken to maintain that confidentiality as between the appellants.
[14] The Commission rejected the Contention in its Determination. The Commission treats the fact of its rejection, and reasons for doing so, as permeating the Commission’s defence of its Determination to so substantial an extent that it would be highly disruptive of the preparation of the Commission’s case to have to treat the Contention as confidential.
[15] In addition the Commission perceives the Contention as inconsistent with public pronouncements about the relevant participant’s future in the event that the merger does not proceed. Mr Every-Palmer suggested that there would be a substantial measure of public interest in the appellants’ reliance on the Contention, and the reasons for the Commission’s rejection of it.
[16] Mr Goddard submitted that there was no justification, at least at this stage in the preparation of the appeal, to deviate from the extent of confidentiality granted by the Commission. He argued that the Contention remained highly sensitive commercial information, disclosure of which would likely cause substantial harm to the ongoing interests of that appellant.
[17] In the proceedings before the Commission, applicants retain control over information submitted to the Commission. They have the ability, if a claim for confidentiality is not accepted by the Commission, to withdraw the information so that their application has to be considered without the benefit of that information in order to protect its confidentiality. Mr Goddard submitted that the Commission conducts a robust analysis of the justification for confidentiality. He suggested it was inappropriate for the Court to override the extent of confidentiality that had been perceived by the Commission to be appropriate, at least before being seized of the whole of the appeal and being able to more fully appreciate the relevance of the information for which commercial sensitivity was still claimed.
[18] I raised with counsel my scepticism at the prospects of successfully completing the appeal without the Contention becoming apparent to the other appellant and to interested observers following the proceedings. At this stage I am obliged to accept Mr Goddard’s assurance that confidentiality of the Contention has been preserved so that the appropriate weighting to be given to the confidentiality interest needs to respect that party’s aspirations. I recognise that it has a high confidentiality value. I accept that if the scope of the confidentiality order that pertained thus far has been maintained, that should afford reasonable prospects of that confidentiality being maintained in the future.
[19] On the other hand, I am very mindful of the scale of the tasks required of those representing the Commission, in preparing its case in a complex appeal where the Contention will indeed be relatively pervasive across numerous strands of the defence of the Determination.
[20] In the end I am not persuaded that the interests of open justice need to prevail over the legitimate concern for confidentiality on the part of the relevant appellant. Nor is that balance sufficiently altered by the additional extent of work required for the Commission in preparing for the appeal. Although it will be a matter for the Commission, I envisage that its submissions can be prepared in a form that does not separate content involving the Contention. The direct commentary and defence of the Commission’s rejection of the Contention might, however, warrant treatment as a discreet topic in any event. Its advisers should prepare submissions on its behalf in
the format best presenting its case and the Commission can expect the Court to be as accommodating as possible in dealing with any dislocation to their presentation caused by content requiring confidentiality.
[21] I direct that the submissions will not be available for search and are to be retained as confidential by counsel and solicitors for the appellants. It will be for them to redact references to the Contention in taking instructions from the appellant that is not the party that advanced the Contention. It is to be hoped that counsel for the parties can agree on a process for presentation that does not impede the presentation of the Commission’s defence, whilst respecting the confidentiality of the Contention. I will hear counsel at the time if the Commission perceives any unreasonable additional burdens are imposed on it.
[22] In other respects the scope of confidentiality orders are now agreed. I accordingly make the general confidentiality order sought in the Commission’s 19 July 2017 application. Its proposal that the Contention not be designated as confidential as sought in paragraph 1(b)(i) of that application is dismissed.
Application to adduce further evidence
[23] On 26 July 2017 the appellants applied for leave to adduce further evidence. Leave is required pursuant to r 20.16 of the High Court Rules 2016. The application was opposed.
[24] The evidence is all characterised in the application as updating evidence and drafts of three affidavits were submitted with the application. Leave was sought to file the affidavits on or before 25 August 2017. That date is when the appellants contemplate that audited financial statements will be available, with such financial statements being among the updating information the appellants seek to rely on in their appeal. Once financial results have been announced the appellants treat them as providing updating information in regard to Fairfax NZ’s financial position including the financial position of community newspapers and its Sunday newspapers. Similar relevance is attributed to audited financial statements for NZME, also due on 24 August 2017.
[25] Beyond financial data generated by the appellants themselves, the appellants seek to annex to updating affidavits more recent survey data prepared by third parties. In particular one of the deponents would annex the most recent advertising revenue data as measured in the Standard Media Index (SMI) and statistics on newspaper circulation from the New Zealand Audit Bureau of Circulation (ABC).
[26] The deponents would also produce evidence of recent occurrences that the appellants would rely on to reinforce arguments about the healthy state of competition to the appellants’ businesses. These include the outcome of the 2017 Nokia media awards, examples of other news providers breaking important news stories, and the Government budget announcement for an increase in funding for Radio New Zealand. These further items can be divided into quantitative information such as the results of surveys of a type where earlier versions were provided to the Commission, and qualitative examples where the deponents perceive relevance of occurrences that, as a matter of opinion, are suggested to have some materiality to a reconsideration of the state of competition in the markets in which the appellants operate.
[27] Mr Farmer QC disputed that the proposed evidence was cogent. He drew attention to the prevalent theme that the information the deponents provided was intended to demonstrate the continuation of trends that existed when the Commission undertook its analysis. Mr Farmer submitted that where the purported effect of the evidence was limited to showing a continuation of a trend rather than something new or different, it should not be acknowledged as cogent.
[28] He also criticised the proposed evidence for selectivity. He argued that even the quantitative data from sources such as SMI and ABC did not present what the Commission treats as the whole picture, and would need to be researched and a response considered to provide a balanced set of updating data. On the more recent events that the deponents relied on as demonstrating the continuing or strengthening state of competition in the market, Mr Farmer predicted the need for extensive assessment and research to provide what he saw as likely alternative events that should also be taken into account.
[29] In disputing the cogency of the proposed fresh evidence, Mr Farmer submitted that updated data from SMI and ABC could not be expected to change the information that was available to the Commission, because those statistics are produced relatively frequently. He advised that the data was produced either quarterly or biannually. Where the Determination was only made in May 2017, updated data showing only another three or six months of trends that were apparent on the information and data before the Commission could not claim the requisite importance to justify the disruption to preparation of the appeal.
[30] Mr Farmer also raised a concern that fresh evidence in a context such as the present appeal may be given undue prominence. He cited the decision of Rodney Hansen J in the Air New Zealand Ltd and Commerce Commission appeal from a Commerce Commission determination where that risk was recognised.2
[31] For these reasons, and given the very tight time table for preparation of the Commission’s defence, Mr Farmer argued that the updating evidence should not be admitted. He referred to an assurance Mr Goddard had given when initial timetabling arrangements were made to the effect that updating evidence was then perceived as “unlikely”. The extent of imposition on the Commission was exacerbated by the recent substantial expansion of the appellants’ allegations of process criticisms which need to be accommodated in preparing for the appeal.
[32] The Commission’s concerns are legitimate, but are not of sufficient magnitude to outweigh the appropriateness of granting the appellants leave on limited terms to adduce further evidence. If the scope of new evidence is confined and the Commission is afforded an adequate opportunity to respond to it, then any selectivity amounting to a lack of balance in the further data put to the Court is more than likely able to be countered by evidence in reply.
[33] As to the risk of fresh evidence being given undue prominence, the Court can be confident that the quality of opposing submissions will ensure that the Court is alive
2 Air New Zealand Ltd v Commerce Commission HC Auckland CIV-2003-404-6590, 6 May 2004 at [33]–[34].
to any attempts to give undue prominence to the material that was not before the Commission.
[34] A distinction can be drawn between the quantitative data derived from third party sources and the broader considerations that are likely to arise from evidence of happenings in the market that might apply in a qualitative sense (at least in the view of the deponents) to further demonstrate arguments in the appellants’ case.
[35] In the circumstances of this appeal and particularly the tight timeframe which I acknowledge is a constraint, I will grant leave for the appellants to adduce further evidence on quantitative information. However the deponents cannot cite any qualitative instances such as breaking news stories and the impact of media awards and matters of that type.
[36] So far as financial statements the deponents intend to produce of the appellants’ businesses, it is not acceptable for such data to be conveyed only on 25 August 2017. As I discussed with counsel during the hearing, the entities producing those financial results are to provide the current form of them in draft by Friday 4 August 2017 subject to the terms I propose below. If the draft form is not so supplied, the final form of such financial statements which the appellants would then produce on 25 August 2017 are not to be adduced.
[37] Mr Goddard’s initial response to my inquiry about the provision of draft financial statements was that one of the appellants may be more prepared than the other to comply. That will be over to them. If this opportunity is taken the following conditions will apply:
(a)The information is to be provided on a strictly confidential basis to counsel only, and to any experts retained for the Commission, the identity of whom is to be conveyed to solicitors for the appellants prior to any disclosure to them.
(b)This limited disclosure is to occur strictly in compliance with this Court order so that the confidential disclosure does not comprise a breach of
reporting obligations the appellant entities have to shareholders or regulatory agencies.
(c)No point is to be taken by the Commission on any difference in the figures contained in the drafts supplied in terms of this order, and the final form of the financial statements when they are presented, unless the Commission complains that a difference between draft figures relied on by the Commission in preparing a response are different in the final accounts in respects that prejudice the Commission’s analysis.
(d)If draft figures in compliance with this order are not provided by 5:00 pm on 4 August 2017, then final financial statements for the entity will not be admitted in any evidence that would, in any event, be required to be filed by 5:00 pm on 25 August 2017.
Timetabling orders
[38] The parties have agreed the terms of an amended timetable, as it appeared in Appendix 1 to the memorandum of counsel for the Commission dated 27 July 2017. That is henceforth to apply, by consent, subject to the amendment of the date on which the next teleconference might occur. I leave counsel to liaise on the options of either 9:00 am on 12 September 2017 or, preferably for me, 10:00 am or 2:15 pm on 14 September 2017. In light of my unavailability on 28 August, counsel may agree to defer the date by which any applications for directions are to be filed (presently 23 August 2017).
[39] I also acknowledge that times will have to be inserted into the timetable for the filing of affidavits adducing further evidence and in reply to it on behalf of the Commission. The details for this were not discussed at the hearing and I propose that the following should apply:
·4 August 2017 – the appellants to file and serve affidavits adducing further evidence on quantitative matters as described in the draft affidavits appended to their application. Affidavits to be accompanied by E&OE drafts of any financial statements the appellants elect to rely on.
·25 August 2017 – the appellants to file and serve any supplementary further evidence appending final financial statements for either or both of the appellants. Such affidavits are subject to compliance with the obligation for service of drafts by 4 August 2017.
·4 September 2017 – this is the date for the Commission to file evidence of process complaints. I propose it should also be the day for the Commission to file any affidavits strictly in reply to further evidence adduced for the appellants. I appreciate that more time may be warranted for any part of such evidence that responds to financial data only made available on 25 August 2017.
As discussed with counsel, there may need to be supplementary submissions on the content of further evidence, the totality of which may not be available prior to the appellants’ submissions on the merits of their appeal. I will review with counsel the need for and timing of presentation of such supplementary submissions as the matter develops.
Dobson J
Solicitors:
D Goddard QC, Wellington Russell McVeagh, Auckland J Farmer QC, Auckland
J Every-Palmer QC, Wellington Meredith Connell, Auckland
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