R v Kumar
[2024] NZHC 3955
•18 December 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CRI-2023-004-9819
[2024] NZHC 3955
THE KING v
MANESH KUMAR MAXBUILD LIMITED
Hearing: 18 December 2024 Appearances:
J Dixon KC and J Barry for Crown
G Hughes and E McGill for Defendants
Sentenced:
18 December 2024
SENTENCING NOTES OF WILKINSON-SMITH J
Solicitors:
Solicitors:
Meredith Connell, Auckland J Dixon, Auckland
G Hughes, Auckland E McGill, Auckland
R v KUMAR & ANOR [2024] NZHC 3955 [18 December 2024]
Introduction
[1] MaxBuild Ltd (MaxBuild), having pleaded guilty, I formally enter convictions for the charges to which MaxBuild Ltd has pleaded guilty.
[2] Mr Kumar, you appear for sentence today alongside MaxBuild for charges relating to entering into and giving effect to a cartel agreement intended to fix prices for bridge jointing services.
[3] You pleaded guilty to two charges of entering into a contract of arrangement, or arriving at an understanding that contains a cartel provision,1 and two representative charges of giving effect to a cartel provision.2
[4] Your company MaxBuild also entered guilty pleas for those same four charges.3 Those guilty pleas relate to the same conduct as the charges faced by you personally.
[5] This sentencing is the first of its kind. Prior to 8 April 2021 such anti‑competitive conduct was punished by civil penalty, rather than criminal prosecution. That is not to say that this is the first time this sort of behaviour has happened in New Zealand. It has happened relatively frequently, and it has been subject to civil sanctions. The significance of this matter is that it is the first criminal case, but your matter should not be seen as significantly unusual or extraordinary. Unfortunately, it is not, but the penalty has changed.
The offending
[6] You established MaxBuild, Mr Kumar, in 2009 and are the sole director and majority shareholder. MaxBuild offers a variety of services but has a particular focus on bridge maintenance and specialist contracts, including concrete repairs. MaxBuild
1 Commerce Act 1986, ss 30(1)(a) and 82B(1)(a). Maximum penalty: seven years’ imprisonment and/or $500,000.
2 Sections 30(1)(b) and 82(1)(b). Maximum penalty: Maximum penalty: seven years’ imprisonment and/or $500,000.
3 As a person other than an individual the maximum penalty is a fine of $10,000,000.
is one of the few industry participants who undertake all aspects of bridge jointing work — a highly specialised part of the contract remediation industry.4
[7] The other parties involved in the cartel conduct are a competitor company in the supply of bridge jointing services (the Competitor Company); and its director (the Competitor Director).
[8] Between January and May 2022, Mr Kumar and MaxBuild engaged in cartel conduct known as “cover pricing”, a form of bid-rigging, with respect to two construction projects, being the Northern Corridor Improvement Project (NCI Project) and the Middlemore Railway Bridge Repair Project (Middlemore Bridge Project).
[9] On two separate occasions the defendants and the Competitor Company and Director, met and agreed that the Competitor Company would bid higher than MaxBuild in the tenders for both the NCI Project and the Middlemore Bridge Project. All four defendants in this matter were known to each other prior to the offending and the companies had previously been engaged in bidding for the same projects.
NCI Project
[10] The NCI Project is a $700 million transport infrastructure project designed to provide transport links for Auckland’s North Shore; and an alternative to travelling on State Highway 1 through Central Auckland. It has comprised of several sub-projects including 13 concrete remediation projects which in turn have comprised of projects for the reinstallation of expansion joints for seven bridges.
[11] Fulton Hogan and HEB Construction Ltd formed a joint venture (Joint Venture) to complete the NCI Project in conjunction with Waka Kotahi NZ Transport Agency, Opus and Jacobs. The Joint Venture ran the tendering process for the concrete remediation projects.
[12] On 17 January 2022, the Joint Venture opened a competitive tender process by Invitation to Tender (ITT), seeking tenders from three contractors and suppliers for the
4 Bridge jointing services include the installation and remediation of bridge joints, which allow bridge joints to adapt to changing temperatures and atmospheric conditions.
installation and remediation of bridge joints on the seven bridges. Mr Kumar had provided advice to the NCI Project in the lead up to the tender process, and against that background MaxBuild was invited as one of three tenderers. The Competitor Company was also invited to tender.
[13]The Joint Venture sought two prices in the tender:
(a)a “conforming” price, which was for the work to be done using specified products and in a specified way; and
(b)an “alternative” price, which allowed for the work to be done using cheaper substitute products and methods.
[14] The third company invited to tender was not interested in bidding and only MaxBuild and the Competitor Company were prospective tender winners. It appears though that you were not aware the third company was not tendering.
[15] At some point or between 25 January and 10 February 2022, you phoned and arranged to meet with the Competitor Director. The meeting occurred at the Competitor Company’s offices. During the course of that meeting/phone call, you, Mr Kumar, advised that it was important MaxBuild secure the NCI Project work due to the adverse financial position you and MaxBuild were in. You and the Competitor Director agreed that the Competitor Company would place a higher bid than MaxBuild so that MaxBuild would be more likely to win the tender. As a result of these discussions, Mr Kumar, MaxBuild, the Competitor Director and the Competitor Company reached an arrangement or arrived at an understanding to that effect (First Unlawful Agreement).
[16] The First Unlawful Agreement contained a cartel provision because it had the purpose, effect and/or likely effect of fixing, controlling or maintaining both MaxBuild’s and the Competitor Company’s price for the NCI Project works and the companies were in competition with each for that work.
[17] Mr Kumar, to give effect to the First Unlawful Agreement you provided the Competitor Company with a schedule of MaxBuild’s proposed “alternative” pricing it intended to submit to the Joint Venture. After the meeting which gave rise to the First Unlawful Agreement, the Competitor Company took steps to revise its prices in its draft tender submission in accordance with the First Unlawful Agreement — so that on average its offer was, at least initially, five per cent higher than MaxBuild’s alternative price tender offer.
[18] On 10 February 2022, MaxBuild submitted a conforming price and an alternative price tender offer, and the Competitor Company only submitted an alternative price tender.
[19] Shortly after receipt of the tenders the Joint Venture determined that two bridges needed urgent remediation work. Based on the prices in the tender documents, the contracts for the two bridges were awarded to MaxBuild on 25 February 2022. Those two bridges were then subsequently removed from the remaining scope of works being tendered for. MaxBuild undertook the work on those bridges, required under urgency, for $433,039.76 (excluding GST). The profit component from that work is said to be in the region of $160,000.
[20] In March 2022, acting on concerns that the submitted prices would exceed a budget estimate of $800,000 to $900,000, the Joint Venture told MaxBuild to “sharpen its pencil” on the prices it had bid and called for the Competitor Company to re-submit its bid with firm pricing for the remaining five bridges.
[21] Later that month, you, Mr Kumar, meet with the Competitor Director and the Competitor Company’s estimator and confirmed that the First Unlawful Agreement would apply to the remaining NCI Project works. It was agreed that the Competitor Company would submit a materially higher alternative bid than MaxBuild’s bid for the remaining works. To give effect to this MaxBuild provided its pricing information for the remaining bridges to the Competitor Company and in return the Competitor Company provided MaxBuild with the prices it had earlier submitted for the NCI Project.
[22] You and the Competitor Company continued to discuss the revision of bids following this meeting. Ultimately, MaxBuild held firm on its original tender price, and the Competitor Company resubmitted a tender that was, on average, eight per cent higher than MaxBuild’s alternative price tender. The effect of this, had the tender proceeded, would potentially have been an inflated profit for MaxBuild because it can be inferred that you did not feel that you needed to “sharpen” your price in order to gain the tender.
[23] The arrangement did not proceed because on 4 April 2022, when resubmitting its tender, the Competitor Company’s estimator inadvertently attached to an email a spreadsheet containing MaxBuild’s prices which demonstrated how the Competitor Company had calculated its prices from MaxBuild’s. The estimator unsuccessfully attempted to recall that email. Joint Venture staff who received the email alerted the Commerce Commission.
Middlemore Bridge Project
[24] The Middlemore Bridge Project involved the replacement of bridge joints for the refurbishment of the Middlemore Railway Bridge in Māngere, Auckland. The project was run by Auckland Transport and assisted by the consultancy Resolve Group.
[25] In or about November 2021, Resolve Group asked MaxBuild to provide an indicative quote for the Middlemore Bridge Project. Auckland Transport received the quote but decided not to accept the “high level” quote and instead opted to proceed with a tender process.
[26] On 4 April 2022, Auckland Transport issued a request for quotation (RFQ) seeking tenders for the replacement of two expansion joints on the Middlemore Bridge. Four companies including MaxBuild and the Competitor Company were invited to participate in the tender process. Only MaxBuild and the Competitor Company placed bids. Again, it seems that you were not aware that the other companies had not placed bids.
[27] Mr Kumar, after the issue of the RFQ, you called the Competitor Director to discuss the tender. Again, you sought assistance in winning the tender by asking the Competitor Company to submit a higher bid than MaxBuild. The Competitor Director agreed to do so and as a result of the discussion the defendants reached an arrangement or arrived at an understanding to that effect (Second Unlawful Agreement).
[28] The Second Unlawful Agreement contained a cartel provision because it had the purpose, effect and/or likely effect of fixing, controlling or maintaining both MaxBuild’s and the Competitor Company’s price for the Middlemore Bridge works and the companies were in competition with each other for those works.
[29] There does not seem to have been any financial advantage to the Competitor Company. It does not seem that you offered to pay the Competitor Company for doing this, it seems to have been simply a favour.
[30] On 13 April 2022, you provided the Competitor Company with MaxBuild’s draft pricing for the tender. That pricing was incorporated into the Competitor Company’s quote. Notes on a spreadsheet used to calculate the Competitor Company’s tender indicated that prior to your intervention the Competitor Company was going to price lower than MaxBuild, but I note the difference was a matter of a few thousand dollars and so is unlikely to have been particularly material.
[31] Between 14 April and 3 May 2022, MaxBuild received Notices to Specific Participant (NTSP) queries from Auckland Transport about its tender. Mr Kumar, you consulted the Competitor Company’s estimator about MaxBuild’s responses to these queries. As a result of these queries MaxBuild provided an updated quote that was still materially below the Competitor Company’s price.
[32] On 25 May 2022, the Commerce Commission executed search warrants on premises and addresses related to its investigation, including MaxBuild’s premises and Mr Kumar’s address.
[33] Shortly after this, Mr Kumar, you applied for leniency under the Commerce Commission’s formal leniency program and disclosed details about both of the unlawful agreements.
[34] On 31 May 2022, you contacted Auckland Transport and admitted to price‑fixing the Middlemore Bridge Project. You then withdrew from the project. On 1 June 2022, you emailed Auckland Transport requesting the MaxBuild’s contract for the Middlemore Bridge Project be cancelled. The contract was cancelled on 8 June 2022.
The principles and purpose of sentencing
[35] In sentencing you, Mr Kumar, and MaxBuild I must have regard to the purposes and principles in the Sentencing Act 2002. Those I consider particularly relevant in your case are:5
(a)Accountability for harm done to the community. Bridge jointing work is a highly specialised part of the concrete remediation industry, it is an area where work is publicly funded. The disregard for competitive processes in the market and the artificial pricing of publicly funded work are aggravating features of this offending. There is also harm done to the commercial community and business confidence when anti‑competitive behaviour occurs.
(b)Promoting a sense of responsibility for, and an acknowledgement of the harm caused. In your case, I accept that you do feel a strong sense of responsibility and you have already expressed that to the report writers.
(c)Denouncing the conduct in which you and your company were involved. The criminalisation of cartel conduct conveys a clear message from Parliament about the importance of denouncing such conduct.
5 Sentencing Act 2002, s 7(1).
(d)I must deter not only you, but others from behaving this way in the future.
(e)To assist with your own rehabilitation and reintegration.
[36] I must take into account your personal, family, whānau, community and cultural background; the gravity of your offending; and the general desirability of consistency with appropriate sentencing levels.6 That has some challenges in this case which I will come back to later. I must also impose the least restrictive sentence that is appropriate in the circumstances and consider any personal circumstances that would render the means of dealing with your offending disproportionately severe.7
[37] In addition to considering the aggravating and mitigating factors provided in s 9 of the Sentencing Act, it is contended, and I agree, that the Court can look to aggravating and mitigating factors adopted under the previous civil pecuniary penalty regime when assessing the defendants’ overall culpability.
[38] This is consistent with the approach taken in Australia, when Australia transitioned from punishing cartel conduct via civil sanction to criminal sanction. As was said in Director of Public Prosecutions (Cth) v Nippon Yusen Kabushiki Kaisha:8
[220] There is no reason to suppose that the factors identified in the civil penalty context would not be equally applicable in the criminal sentencing context. While there can be no doubt that there are differences between civil penalty and criminal proceedings (cf. Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 ; 326 ALR 476 at [51]–[61]), the task of appraising the nature and seriousness of particular contravening conduct in a civil penalty proceeding is relevantly the same as appraising the seriousness of an offence for the purpose of imposing a criminal sentence.
…
The point to emphasise is that the list of factors that has been developed in the civil penalty context should not be treated as a rigid catalogue or checklist of matters to be applied in each case. The overriding principle is that the Court should weigh all relevant circumstances.
6 Section 8(a), (e) and (i).
7 Section 8(h).
8 Director of Public Prosecutions (Cth) v Nippon Yusen Kabushiki Kaisha [2017] 254 FCR 235, [2017] FCA 876.
[39] Matters considered relevant when assessing the conduct under the civil penalty regime included:9
(a)impact on the market;
(b)the nature and seriousness of the contravening conduct;
(c)whether the conduct was deliberate;
(d)the duration of the contravening conduct;
(e)the seniority of the employees or officers involved in the contravention;
(f)the extent of any benefit derived from the contravening conduct;
(g)the extent of any loss or damage suffered by any person as a result of the contravening conduct;
(h)the market share/degree of market power held by the defendant;
(i)the role of the defendant in the impugned conduct; and
(j)the size and resources of the defendant.
[40] Determining the appropriate sentence in a criminal context involves identifying the appropriate “starting point”. That requires assessment of first the offending itself and where the offending sits in terms of seriousness. Factors relating to the offender are considered after the starting point is identified and that starting point is then adjusted accordingly.
[41] There is considerable overlap between the company and you, Mr Kumar, which is not always the case. You are the sole director of the company and any financial
9 Commerce Commission v Specialised Container Services (Christchurch) Ltd [2021] NZHC 2279 at [23].
penalty imposed on MaxBuild will inevitably impact you, which means that totality must be considered.
The previous civil regime
[42] Because this is the first sentencing of this kind it is useful to consider the level of financial penalty previously imposed under the civil penalty regime. Counsel for Mr Kumar has helpfully provided a table of previous cases and I intend to, after discussion with counsel, attach that to my sentencing notes.
[43] The table sets out a wide variety of cases and a wide variety of penalties. It is clear that the resources of the particular company or individuals involved affected the penalties imposed under the civil regime. There is a need for proportionality.
[44]I set out the following cases as examples most relevant to the current offending:
(a)Commerce Commission v Christchurch Transport Ltd:10 an agreed penalty of $380,000 was imposed for an attempt to price fix a bus service. The Judge considered the company’s dominant position during the relevant period and that there was sustained and determined attempts to persuade its competitor to be involved in anti-competitive conduct. The Crown submits that had a starting point been imposed it would have been in the vicinity of $570,000, which accounting for inflation would today be approximately $1,065,000.
(b)Commerce Commission v Enviro Waste Services Ltd:11 a starting point of $600,000 as a fine against the company for attempting to engage in conduct contrary to ss 27 and 30 of the Commerce Act 1986.12 The Judge considered that the attempt to put an anti-competitive mechanism in place was driven by stress from the manager’s employment and difficult family life. The end point was a fine of $425,000 against the company. The Crown says that accounting for inflation the starting
10 Commerce Commission v Christchurch Transport Ltd HC Christchurch CP72/98, 21 August 1998.
11 Commerce Commission v Enviro Waste Services Ltd [2015] NZHC 2936.
12 At [43].
point would be approximately $785,000. The manager who instigated the offending was fined $5000.
(c)Commerce Commission v Ronovation Ltd:13 A starting range of
$550,000 to $650,000 was considered appropriate for anti-competitive conduct in breach of the Commerce Act.14 The Judge considered the moderately serious conduct involved, that actual resulting harm was at the lower end of the spectrum, that the number of parties was a small fraction of the market, and the conduct was not a deliberate flouting of the law. The Court said that because the company was small the penalty would have a large impact on shareholders. A 35 per cent discount was applied for full cooperation and willingness to settle early. The end point was a $400,000 fine against the company.
(d)Commerce Commission v Hutt and City Taxis Ltd:15 A global starting point of $500,000 to $600,000 was considered appropriate for a breach of s 30 of the Commerce Act.16 The Judge considered the revenue obtained, that the harm done occurred over an eight-day period and only ceased once the Commission raised its concern, and the relative importance of the affected market. The Court found the financial means and resources of the company relevant. The conduct was not egregious enough to justify a response that would put the company out of business. The end point was a fine of $150,000 against the company to be paid in three instalments over 24 months.
(e)Commerce Commission v Prices Pharmacy 2011 Ltd:17 A starting point between $400,000 to $480,000 was considered adequate.18 The Court considered the seriousness of the breaches and the need for stern deterrent signals, before noting that the COVID-19 pandemic was a
13 Commerce Commission v Ronovation Ltd [2019] NZHC 2303.
14 At [61].
15 Commerce Commission v Hutt and City Taxis Ltd [2021] NZHC 2543.
16 At [27].
17 Commerce Commission v Prices Pharmacy 2011 Ltd [2020] NZHC 1176.
18 At [48] of the annexed interim judgment Commerce Commission v Prices Pharmacy 2011 Ltd HC Nelson CIV-2018-442-26, 8 April 2020.
material intervening circumstance. The end result was $344,000 fine against the company and a $50,000 penalty against the director.
[45] In each of the above cases the Court affirmed penalties agreed by the Commission and the offending party. As this is a criminal proceeding no such agreement is in place. But even in the civil context the Court had to be satisfied that the proposed penalty was within range.
Factors of offending
[46] The agreements reached by you and MaxBuild meant that it was more likely that MaxBuild would be the successful bidder for the two projects and that MaxBuild’s price, even if overinflated, was more likely to be accepted. I accept that there was not a desire to overinflate the prices to a significant degree and you were attempting to provide a tender that was a fair price for the work that you intended to do. But the reality is that the anti-competitive behaviour made it more likely that your bid would be accepted.
[47] Two contracts were involved. The offending was not a single isolated event and it only stopped because it was discovered.
[48] Your conduct, Mr Kumar, was clearly deliberate. You, and through you MaxBuild, engaged in a concerted strategy to rig the bids for the NCI Project and the Middlemore Bridge Project for financial gain. Cumulatively, the agreements were in place for several months. As the Commission was only alerted to the cartel conduct after a spreadsheet was inadvertently sent to the Joint Venture it is unknown how long the conduct could have carried on for.
[49] Mr Kumar, your seniority in the company makes this conduct more serious as “[t]hose who initiate anti-competitive behaviour will ordinarily be treated more harshly than those lower in the managerial hierarchy who carry out express instructions to implement an arrangement.”19
19 Commerce Commission v PGG Wrightson Ltd [2016] NZHC 2921 at [31(a)].
[50] Both actual and potential monetary gains arose from your conduct. The behaviour lessened the competitive pressure of the tender process, which enabled MaxBuild to feel comfortable maintaining its tender pricing for the NCI Project.
[51] MaxBuild’s tender offer was considerable higher than the Joint Ventures’ internal estimate and it was higher than the Competitor Company’s estimates. The pricing encouraged the Joint Venture to award MaxBuild the contract ultimately generating MaxBuild a profit of $161,775.24.
[52] In the scheme of these sorts of cases, the profit is not at the highest end, and the gain is consistent with your position that the offending was driven not by a desire for substantial personal profit but in order to ensure that the company could continue to trade and provide employment.
[53] There was no actual gain for the Middlemore Bridge Project but there was clear potential for gain. The Crown says that you and MaxBuild also stood to make non‑monetary indirect gains through allowing MaxBuild to continue employing staff and enhancing MaxBuild’s reputation and the possibility that it would be invited to future tenders.
[54] The Crown submits, with respect to the extent of loss or damage suffered by any person, that harm was suffered in the form of wasted work by the project managers reviewing the bids, the additional work required to obtain alternative bids, and the damage to the construction industry’s confidence in the tendering process.
[55] The affected projects were publicly funded and at least some of the loss would have been borne by the New Zealand public. It is submitted that the purposes of denunciation and deterrence are of greater importance in cartel cases involving public funds.20 As was said in Australian Competition and Consumer Commission v Delta Building Automation Pty Ltd such conduct risks public money, the functions and
20 Australian Competition and Consumer Commission v Delta Building Automation Pty Ltd (No 2) [2024] FCA 580 at [42] citing Australian Securities and Investments Commission v Vizard [2005] FCA 1037, (2005) 145 FCR 57 at [48].
service provided by public institutions, and undermines public confidence in the “integrity of the government.”21
[56] As was the case when awarding civil penalties, the defendant’s respective role is relevant to determining an appropriate starting point.22
[57] Mr Kumar, with respect to your role, you were a key player in this offending and instigated both agreements. You provided the Competitor Company with MaxBuild’s tender information, and you were MaxBuild’s point of contact for the cartel conduct.
[58] A company’s size and resources were considered relevant when determining a civil penalty starting point.23 Such factors inform the assessment of market power and the effect of the cartel conduct. In this case, I need to take the company’s size and resources into account when assessing the gravity of the offending.
[59] The size and resources of the company are also relevant at a later stage because it goes to the ability of the company or defendant to meet a financial penalty. It is important though to ensure that there is no double counting of these factors.
[60] It is a relevant consideration when determining the starting point for the offending that MaxBuild is not a particularly large company. It employs 29 people, but it is a significant player in a highly specialised market.
[61] The Crown submits that this factor is neutral when assessing MaxBuild’s culpability. I do not quite agree that the size of the company is neutral. This sort of behaviour by a large company with a national profile is more damaging both to business confidence and New Zealand’s commercial reputation. I see this case as mid‑range. I would put small local companies, such as taxi companies for example with a small market share, engaging in price fixing at the lowest end; and large companies with hundreds of employees, a large market share and a turnover in the many millions at the highest end.
21 At [41].
22 Commerce Commission v Rural Livestock Ltd [2015] NZHC 3361.
23 Commerce Commission v Lodge Real Estate Ltd [2016] NZHC 1494 at [10].
[62] As to the motivation for the offending, Mr Kumar, I have read your affidavit, and it makes sad reading. You say that the COVID-19 lockdown in 2020 and 2021 was a disaster for MaxBuild which caused financial strain not just for MaxBuild but also you personally. You were determined to ensure that no MaxBuild staff lost their jobs as a result of this pressure. The Crown considers that your conduct, and through you MaxBuild’s conduct, is a relatively neutral factor rather than an aggravating or mitigating one.
[63] This offending, Mr Kumar, strikes at the heart of business confidence. It is cheating the system. You were under pressure because of COVID-19 but so were your competitors. You were essentially concerned that you would be undercut by a company that you did not consider would be able to deliver and would price the job unrealistically. The option you chose to deal with that was wrong. You would know very well that there are options to justify the level of a tender that do not involve fraud. The price of your bid was higher that the client company thought the job was worth.
[64] Stepping back, I consider the most aggravating factor of this offending to be the serious and deliberate nature of your conduct; the level of control you personally exercised; and the fact that public funds were involved.
[65] As against that, the extent of commercial gain was moderate and the motivation, I accept, was partly concern for your employees and to ensure they retained their employment.
Mr Kumar
Starting point
[66] The Crown submits that a fine is not an appropriate sentence for your offending. The criminalisation of cartel conduct, and the introduction of a legislative provision for a custodial sentence, is a clear indication from Parliament that a fine will generally be an insufficient penalty for this offending. I agree with that submission.
[67] The Crown says that a starting point of two years and six months’ imprisonment is appropriate. Your counsel submits that a starting point of 18 months’
imprisonment would be within the available range. Both Crown and your counsel acknowledge that the end sentence is likely to be an electronically monitored sentence and I can tell you now, Mr Kumar, that the result will be an electronically monitored sentence.
[68] Because the previous regime was civil, the precedent cases are very limited in their utility because they only involve pecuniary penalty. I have considered cases where criminal sanctions have been imposed for fraud based offending which is what this is:24
(a)Rose v R:25 a starting point of three years and eight months’ imprisonment was upheld on appeal for nine representative charges of obtaining by deception.26 The offending involved using the defendant’s employment with Mighty River power to funnel work to companies he was associated with. The premediated and sophisticated nature of the offending was taken into account when setting the starting point. Aggravating features were considered to be that the offending had occurred over a continuous three-year period and the abuse of trust as Mr Rose had used his specialist skills and knowledge to direct business to companies from which he ultimately benefited. The level of benefit to Mr Rose and his partner was about $4 million.
(b)R v Grant:27 a starting point of three and a half years’ imprisonment was imposed for four charges of obtaining by deception and one charge of attempting to obtain by deception.28 The Judge said that this was a classic case of mortgage fraud and not a particularly sophisticated scheme. The Judge considered the seriousness of the offending, the number of applications made over a 20-month period, and the gain actually obtained. The amount of the fraudulent gains in that case was over $2 million.
24 The Crown has referred me to cases with similar aggravating factors and comparable maximum penalties that have been charged as obtaining by deception, secret commissions, and bribery.
25 Rose v R [2017] NZCA 335.
26 At [41].
27 R v Grant [2023] NZDC 5253, [2023] DCR 523.
28 At [46].
(c)R v Scutts:29 a starting point of 18 months’ imprisonment was imposed for one charge of receiving a secret reward for procuring a contract and 16 charges of dishonesty using a document to obtain a pecuniary advantage.30 The Judge considered the circumstances of the offending, Mr Scutts’ seniority, and the relatively lesser sum involved than in other cases. The amount involved was $64,000. The case contains a useful comparison of cases with offending involving amounts between
$63,000 and $755,000 with starting points between 15 months and two and a half years’ imprisonment with home detention being the usual result.
(d)Serious Fraud Office v Sanele:31 a starting point of three years and six months’ imprisonment for two representative charges of dishonesty using a document and one representative charge of failing to disclose a pecuniary interest in a contract.32 The Judge considered the aggravating factors to be the extent of the loss, $261,030, ($160,000 of which was repaid), the abuse of trust, the premeditation, and relevantly that the secret commission offending occurred for four months, whilst the dishonesty offending occurred for four years.
(e)Serious Fraud Office v Hall:33 a starting point of two and a half years’ imprisonment was imposed for obtaining by deception offending.34 The Judge considered the aggravating features to be the amount of loss, the amount of pecuniary gain, premeditation, abuse of trust, and the duration of the offending which occurred over six years.
(f)R v Rasila:35 a starting point of 18 months’ imprisonment for one charge of corruptly accepting a bribe.36 The Judge considered the aggravating
29 R v Scutts [2015] NZHC 1617.
30 At [38].
31 Serious Fraud Office v Sanele [2015] NZDC 25499.
32 At [16].
33 Serious Fraud Office v Hall [2017] NZDC 12349, [2017] DCR 827.
34 At [21].
35 R v Rasila [2020] NZHC 964.
36 At [19].
factors to include: that the offending involved deliberate dishonesty that occurred several ways and over several months; the offending was premeditated; the personal benefit received was low, but Mr Rasila was a public official who made decisions about public funds. The level of deliberate corruption was high.
[69] Australia has also criminalised anti-competitive behaviour in a similar way, but Australian authorities are of limited assistance due to the difference in Australian sentencing methodology.37
[70] Mr Kumar, I accept that it was not personal greed which drove this offending. You wanted to ensure that the company could continue to operate not only for your own benefit but to ensure that your staff did not lose their jobs. This was a huge error of judgment on your part.
[71] Weighing all of the factors together and considering the various cases, I consider a starting point of two years’ imprisonment is appropriate.
Personal mitigating factors
[72]You have no previous convictions.
[73] You made prompt admissions and cooperated with authorities although I agree that this must be considered in light of the overwhelming available evidence and the fact that it was inevitable that the offending was going to be discovered after the document was provided to the Joint Venture.
[74] As I have said, I have read your affidavit and the medical information provided. You faced a personally difficult situation. You have a child with medical needs which caused you huge anxiety if you could not provide for him. You felt pressure that was partly cultural to continue your business. You felt an obligation to your employees.
37 Nevertheless, the Crown has referred me to two relevant cases being Director of Public Prosecutions (Cth) v Bingo Industries Pty Ltd [2024] FCA 121; and Director of Public Prosecutions (Cth) v Aussie Skips Bin Services Pty Ltd [2024] FCA 122.
The underlying motivations, Mr Kumar, come from a good place but the way you chose to deal with this was very wrong and I think that you now know that.
[75] The offending is out of character. In the past you have behaved with integrity and honesty. I have read the letters of support provided. You have other personal difficulties which I will not detail but they include ADHD and dyslexia which made education challenging as well as arriving in New Zealand as a child who did not speak English. Given those difficulties, it is to your credit that you have managed to build up a business with such specialisation. You were under pressure and on medication in 2020. You were very anxious and described as having few outlets for stress. You are assessed as pro-social and at low risk of further offending. You are in a stable relationship and providing for your family is very important for you.
[76] The pre-sentence report describes you as remorseful and taking full responsibility. As I commented to your counsel, I have seldom seen such a positive pre-sentence report in terms of remorse. You did not shift blame but were at pains to say that it was your fault and not the fault of the other company or the director of the other company. This offending represents a considerable fall from grace, and I accept that the conviction and publicity is a penalty, a strong one, and one that you feel keenly. You will suffer the loss of reputation as well but that is an inevitable consequence of this sort of offending. It is not unjustified. It does not mitigate the sentence because it must be assumed to apply to all who engage in this offending and the maximum sentence is set by Parliament in the knowledge that other natural consequences also follow conviction. That loss of reputation is because you engaged in behaviour that was not honest and so you cannot enjoy a reputation for being honest.
[77] You have offered to make reparation of $500,000 which includes not only the profit of $160,000 on the NCI contract but the entire value of the contract. That offer has not been accepted but I accept that it is a genuine offer; and I accept that you are entitled to mitigation for your willingness to make reparation. The recommendation is for a sentence of home detention.
[78] Your counsel submits that home detention would be inappropriate because it would create difficulties for you in carrying on your business which requires you to be out of the office for site visits and meetings — sometimes with very little notice.
[79] Your counsel seeks credit for previous good character and suggests 10 per cent. Also, credit for remorse and efforts to make amends including by offering reparation. A guilty plea credit of 25 per cent is sought. The Crown says that the guilty plea credit should be 15 to 20 per cent. Although admissions were made very early the pleas were not entered for over nine months and the Crown had to prepare the case in that time.
[80] Your counsel seeks further credit for the exceptional cooperation offered and suggests 10 per cent, and also credit for prospect of rehabilitation. Your counsel also says that a totality adjustment is required to recognise that you and the company are very closely aligned.
[81] The total credit sought by your counsel is in the region of 45 per cent. The Crown says the credit should not exceed 35 per cent. Your counsel submits that community work would be the least restrictive available outcome possibly combined with a short sentence of community detention. That would enable you to continue to work in the business.
[82] Having considered all of the matters raised and the submissions from the Crown, I have decided to apply the following credits:
(a)I apply 20 per cent globally for good character, remorse and offer to make amends.
(b)I apply 20 per cent credit for guilty plea. It was not at the first opportunity and the delay did create unnecessary work.
[83] That would take the end sentence to a sentence of one year, two months and two weeks’ imprisonment.
[84] You have an available home detention address, however, I consider that additional credit is available for your cooperation and prospects of rehabilitation. As
I have said, the way in which you have shown insight and taken accountability for your actions is extremely positive and one of the most positive expressions of remorse I have seen. I entirely accept that you are completely genuine and that you have good prospects for rehabilitation. I consider that should be reflected in a sentence that permits you to continue your business. I accept that home detention would make that extremely difficult if not impossible.
[85] I also consider that the medical issues you have provided evidence of means that a sentence of home detention would be personally detrimental. It is important for you and your employees that you can continue to work, and it is important for you personally that you have some purpose and hope.
[86] I have decided to impose an end sentence of six months’ community detention coupled with 200 hours community work.
[87] I do not impose any financial penalty for reasons of totality related to the sentence I must impose on MaxBuild. If you were not so closely connected to your company to the extent that you will in fact pay any penalty imposed on the company, I would have imposed a separate financial penalty on you personally to reflect that the offending was financially motivated.
End sentence
[88]Mr Kumar would you please stand.
[89] You are sentenced to six months’ community detention to be served at 92 Flanshaw Road, Te Atatu, Auckland. The curfew hours are 8 pm to 6 am, seven days a week. First curfew tonight.
[90]You are sentenced to 200 hours community work.
MaxBuild
[91] Counsel for MaxBuild submits that it should be convicted and discharged.38 This is on the basis of the duplication between Mr Kumar and MaxBuild’s charges and the potential hardship the company, and subsequently, its staff may face. Those potential hardships are discussed in Mr Kumar’s affidavit. It is contended that if MaxBuild is unable to bid for work in the future that the company will face cashflow and trading risks and may be, due to the nature of online procurement portals, ineligible for work.
[92] There is certainly an overlap between the company and Mr Kumar, but I do not agree that the company should be dealt with by conviction and discharge. I think that would be a poor precedent. Companies engaged in this sort of behaviour can expect a financial penalty and it is an important part of deterring such behaviour. Had this been dealt with under the previous civil regime there would inevitably have been a financial penalty. A conviction and discharge in this case would result in a penalty less than this behaviour would have attracted under the previous regime. I also think that it is not appropriate that the company can essentially present this offending in a better light than it actually is, for the purpose of future engagement with other potential clients.
[93] It is submitted by the Crown that the fine for the company should be greater than the equivalent pecuniary penalty given the higher standard of proof, the intentional conduct, and the purposes of criminal sentencing. I find that the cases set out earlier traversing the civil penalty regime are relevant.
[94] As I have said, I do not regard a conviction and discharge as appropriate. In my view, companies convicted of such offending can expect a fine. The offending is financially motivated and part of the deterrent effect of sentencing is to nullify any financial advantage and provide a disincentive to others who might consider engaging in such conduct.
38 In accordance with s 108 of the Sentencing Act.
[95] I do not think that the offending, however, is so egregious that the penalty should be one that would drive MaxBuild out of business. The company has specialist skills, and this offending was an out of character aberration.
[96] The starting point of $2 million suggested by the Crown is, in my view, too high when the comparative cases under the civil penalties’ regime are considered. The additional penalty of a conviction now operates and that is a considerable penalty which must be factored in. The amount of actual gain was under $200,000, although I accept the amount of potential gain was much higher because only one small part of one contract proceeded.
[97] The maximum penalty is a fine of $10 million. That level of maximum penalty reflects the diversity of resources that different companies enjoy. For some companies a fine of $1 million would be affordable. For some it would mean liquidation. One purpose of sentencing is deterrence. Small or mid-level companies will be deterred by a lower level fine than large corporations. For that reason, the conventional approach of comparing the seriousness of the offending to the available maximum is less apt for offending such as this.
[98] Under the civil penalties’ regime, I tend to agree with Mr Hughes that the likely fine would have been in the region of $500,000 to $600,000.
[99] The Sentencing Act imposes different considerations but includes an obligation to impose the least restrictive penalty available. This company will face a real financial penalty from conviction and publication. That is a natural consequence but affects the ability of the company to pay a fine.
[100] The company has offered reparation of $500,000. That is an amount that it can pay and continue to operate. It is not an amount that is out of step with the case law. Taking into account the guilty plea and other aspects of mitigation as an end point,
$500,000 reflects a starting point of about $1 million dollars. Although the company would like to pay reparation, the victim has not entered into discussions about reparation, and I can understand why. It is a government agency. Emotional harm
reparation cannot be paid to such a body. The actual loss is not exactly quantified but is nowhere near $500,000. In my view, a fine is the appropriate outcome.
[101]Approaching this in a conventional way, the starting point would be around
$1 million. With discounts available for the various factors that have already applied to Mr Kumar personally, the discounts arrived at were in the region of 45 per cent. Some of those, however, were very personal to Mr Kumar and will not apply equally to the company. Applying totality principle, however, I regard reducing the fine from the amount of around $1 million to the amount of the reparation offered being
$500,000 is appropriate.
Result
[102]The result for MaxBuild is that MaxBuild is convicted on the charges it faces.
[103]I impose a fine of $500,000 on MaxBuild concurrent on all charges.
Wilkinson-Smith J
| Date | Case | Background/Industry | Main Factors | Penalty |
| 26/3/14 | Commerce Commission v Carter Holt Harvey Ltd [2014] NZHC 531 2nd Defendant: Mr Dodds (Sales Manager of CHHL ‘Wood Products’ subsidiary) | Low merchant margins in the Auckland market for structural timber; discussed concept of Recommended Retail Pricing (RRP) price list at meeting, did not eventuate. Mr Dodds made non-binding recommendations to customers about fixing price at cost + eight per cent for a wood product. This understanding between Placemakers and Carters retailers continued from September 2012– March 2013 and amounted to a price-fixing agreement | While CHH was ultimately responsible, it was Mr Dodds’ actions that led to CHH breaching Act. CHH is a large participant within important market. Any price-fixing is at serious end of spectrum of prohibited conduct, however this was not the most egregious example of such conduct. CHH & Dodds were integral in developing and implementing the RRP concept. Dodds (and CHH) had no intention to breach the Act; evidenced by him encouraging a Carters person to speak to a senior manager about implementing RRP. CHH has substantial resources. Mr Dodds does not. Conduct took place without direction or knowledge of CHH board. Managers senior to Dodds ought to be aware RRP amounted to price-fixing. Dodds Mitigating: Dodds did not set out to contravene the Act; did not stand to gain personally from understanding; has suffered significantly in personal/financial life from investigation; full co‑operation; full admission of liability; 50–55 per cent discount. · Culpability of individuals in comparable cases (Commerce Commission v Visy Board (NZ) Ltd [2013] NZHC 2097; and Commerce Comission v Koppers Arch Wood Protection (NZ) Ltd HC Auckland CIV-2005-404-2080, 4 October 2006) were significantly higher than Dodds. CHH Mitigating: No previous contraventions; willing co- operation and assistance; acknowledgement of responsibility reduces time and cost of Commission’s inquiry; 35–40 per cent discount. | $1.85 million penalty against CHH. $5,000 penalty against Mr Dodds. |
| 2/4/14 | Commerce Commission v Hodgson [2014] NZHC 649 | Hodgson is former GM of Amcor Fibre Packaging. Held responsibility over both Australian and NZ operations too. Alleged to have been involved in a price-fixing agreement in the corrugated fibre packaging (CFP) market in Australia between Amcor and Visy, in addition to attempting to manipulate the process on a tender for Fonterra. | Directed and facilitated the cooperation between Visy and Amcor in relation to the Fonterra tenders. Given Fonterra’s size and significance in NZ dairy industry & high use of CFP, Mr Hodgson’s conduct was serious. No direct financial gain for Mr Hodgson. Commercial gain (and resultant harm) was large: in range of $1.5 million–$3 million per year. Mitigating factors: No mitigating factors, while he co‑operated in an interview, Mr Hodgson still denied any involvement with Fonterra understanding and took no steps in resolving the matter. | $60,000 penalty against Mr Hodgson. Plus costs of $38,352. Plus disbursements of $3,071. |
| 8/4/14 | Commerce Commission v Kuehne + Nagel International AG [2014] NZHC 705 | KNI with other international freight forwarders entered into agreement to impose a fee (UK NES fee) to cover new costs from the increased security measures in UK. Overseas cartel; used subsidiary to implement in NZ. | Penalty must achieve the objective of deterrence, with a key consideration being the significant size of the worldwide company. Conduct is serious; this was not one-off but ongoing conduct over large period of time (5 years); survived this time due to active concealment through covert meetings, and use of code words and names. Market is of significant importance to NZ; KNI has significant presence in this market. Deliberate by KN International overseas but KN NZ was unaware of arrangement. Mitigating factors : No previous contraventions; slight degree of cooperation and assistance; 20 per cent discount. | $3.1 million penalty against KNI. KNI to pay $100,000 towards Commission’s costs. |
| 24/11/15 | Commerce Commission v Enviro Waste Services Ltd [2015] NZHC 2936 2nd Defendant: Mr Askew (Manager) | Anti-competitive behaviour in the market for collecting used deep‑frying fat in the top of South Island. After TIGL, a competitor, had | Both defendants: Admission; full cooperation; no previous warnings/contraventions. Conduct occurred without knowledge or approval of directors/senior management; significant mitigating factor. Mr Askew instigated the attempt to engage in | $425,000 penalty against Enviro Waste. $5000 penalty against Mr Askew. |
| approached EWSL’s customers directly, Mr Askew met with a representative from TIGL and made an agreement they would not compete aggressively for each other’s customers. | anti-competitive behaviour; effect of price-fixing is serious. Mitigating factors: Prompt admission of wrongful conduct (25 per cent) did not know his discussions could amount to breach of the Act; limited financial circumstances: · Importance placed on personal circumstances; at the time, he faced difficulties that would have impacted on ability of any person carrying out duties in occupation such as his. · Court was satisfied that his desire to manage stress was primary reason he decided to act as he did. Enviro Waste admitted conduct, but is a large player | |||
| 22/12/15 | Commerce Commission v PGG Wrightson Ltd [2015] NZHC 3360 | Following the enactment of new government regulations, PGG and several other livestock companies entered into three separate agreements that had the purpose of fixing or controlling prices for the supply of yard services, and stock & station agent services. | PGG was a ‘key driver’ of the agreement; Significant market share involved. PGG promptly admitted infringement, ceased price‑fixing and implemented measures to ensure future compliance. | $2,700,000 penalty against PCG Wrightson. Plus 50,000 costs. |
| 22/12/15 | Commerce Commission v Rural Livestock Ltd [2015] NZHC 3361 | Same factual scenario as PGG Wrightson above. | Deliberateness of the conduct is assessed with regard to the seniority of staff involved in implementing the agreements. There is an element of deliberateness but no conscious planning to infringe from outset. Ringleader of infringing behaviour can expect a heavier penalty; Rural was not a leader, merely attended meetings and implemented the fees. Harm to market less than $100,000; three-year duration. Mitigating factors: No previous penalties; early | $475,000 penalty against Rural Livestock in three instalments (with no interest payable on penalty). |
| acceptance of conduct; 25 per cent discount Did not provide active cooperation that would entitle it to a significant separate cooperation discount. Single penalty should be assessed rather than multiple penalties for various acts. Penalty reduced to reflect Rural Livestock’s financial circumstances, as conduct not egregious enough to put it out of business. | ||||
| 20/5/16 | Commerce Commission v Unique Realty Ltd [2016] NZHC 1064 | URL entered into price-fixing agreement with other eleven other real estate agencies in Manawatu; agreed to respond to increased fees for listing properties on TradeMe by passing cost onto customer. Whether or not to impose this fee onto customers would have been a point of competition for the agencies that is no longer present. | Market is important to Manawatu economy as all residential property listings were affected; buying/selling a home is a significant financial decision. URL has 19 per cent market share; involvement in agreement was important. Agreement entered into by high level URL staff; Mr Vertonghen (principal and founder) attended meetings. URL was not initiator; conduct involved attending and participating in meetings and implementing the agreement. No suggestion of being unable to pay fine, thus no need to adjust. Conduct was deliberate as URL knowingly entered into the agreement but did not knowingly breach the Act. | $1,250,000 penalty against URL. |
| 1/7/16 | Commerce Commission v Lodge Real Estate Ltd [2016] NZHC 1494 5th Defendant: Success Realty Ltd | Multiple Hamilton real estate agencies entered into a competitive agreement to shift Trade Me advertising costs onto vendors and collectively withdrew listings from Trade Me. | Active role but not the ringleader. Similar company size and comparable conduct to Unique. However, unlike Unique, agreement here included a provision to withdraw existing listings from TradeMe; Success Realty chose not to implement this; thus starting point lower than Unique. 45% discount due to cooperation and acceptance of responsibility. | $900,000 penalty against Success Realty. |
| 1/7/16 | Commerce Commission v Bayley Corporation Ltd [2016] NZHC 1493 | In light of TradeMe moving from a subscription-based model to per‑listing pricing model, real estate companies made an agreement not to absorb the cost of the per-listing fee, nor would they enter into new agreements for preferential listing rates with TradeMe. Parties to this agreement were BCL, Harcourts, Barfoot & Thompson, L J Hooker and Ray White. BCL is tried separately because it is the only real estate company out of the five that accepted this conduct was unlawful. | Serious conduct for below reasons: · The five parties to this agreement were five largest and most influential real estate companies in NZ. · They control substantial share of the overall market for real estate services. · Agreement was entered into by staff of highest level; in BCL’s case it was the managing director. · Agreement affected thousands of New Zealanders buying/selling houses; for many this is a financial decision of huge gravity. Parties sought legal advice for agreement and were told there are no clear legal obstacles; the Court stated the inquiry is on the nature of the conduct, not whether legal advice was sought (that is a matter between party and counsel). Did not recover any greater amount from vendors than TradeMe charged it; yet accepted that there was potential for commercial gain as BCL was relieved of need to compete on this aspect of the service (advertising costs). BCL knowingly & intentionally entered into the agreement to pass on fee (ie. deliberate conduct). Mitigating factors: Admissions, no prior contravening conduct, good cooperation (45 per cent discount). | $2.2 million penalty against BCL. Penalty deferred on the basis that interest is payable. Grounds for deferral because committed to upcoming transactions which require substantial capital. |
| 28/11/16 | Commerce Commission v Property Brokers Ltd [2016] NZHC 2851 2nd Defendant: Manawatu (1994) Ltd. | Same factual scenario as Unique — Manawatu real estate companies passing costs to vendor clients. | No basis for distinguishing between the positions of the present case and the case in Unique. | $1.25 million penalty against Manawatu (1994) Ltd. Pay $1,030,000 within 20 working days; remaining $245,000 by 31 March 2017. |
| 5/12/16 | Commerce Commission v PGG Wrightson Ltd [2016] NZHC 2921 3rd Defendant: Mr Thorpe (General Manager, Livestock). 4th Defendant: Mr Baines (NI Livestock Manager). 5th Defendant: Mr Cartridge (NI Property Manager). 6th Defendant: Mr Clark (Livestock Property Manager). 7th Defendant: Mr Chapman (Managing Director of Elders Rural Holdings Ltd). | The individuals listed, all participated in the decision- making process, or authorized implementation of the Agreement with other livestock companies to impose minimum tagging fees on cattle and calves. | Related to PGG Wrightson 2015 decision. Emphasis on managers and level of responsibility within the management hierarchies. Assessed on average salary received in the period, and length of time period when each individual was involved with implementation and execution. · Mr Thorpe: Had ultimate responsibility for ensuring Wrightson’s tagging fees were in accordance with the Agreement. · Mr Baines: Responsible for implementing agreement in North Island. · Mr Cartridge: Attended meetings, prepared & circulated reports/minutes, involved in implementation. · Mr Clark: Most junior, joined after agreement had been raised but before it was agreed. Despite receiving legal advice not to enter, continued implementation of Agreement. · Mr Chapman: Aware of Agreement, did not act to prevent Elders from entering. Each individual co-operated, had no prior warnings or contraventions and had financial ability to meet proposed penalties. | Mr Thorp: $25,000. Mr Baines: $20,000. Mr Cartridge: $20,000. Mr Clark: $15,000. Mr Chapman: $25,000. |
| 16/12/16 | Commerce Commission v Lodge Real Estate Ltd [2016] NZHC 3115 2nd Defendant: Lugton’s Ltd | Entered into a price-fixing arrangement with four other agencies in Hamilton region in regard to TradeMe fees. | Seriousness of conduct: · Affected many listings in Hamilton. · Involved agencies that collectively controlled over 90 per cent of sales in Hamilton. · Active participant, not ringleader. · Deliberately entered into agreement but not with intent to breach Act. · Duration of nine months was not significant. | $1 million penalty against Lugton’s. |
| · Active endorsement by managing director. Mitigating factors: · No previous contraventions. · Promptly accepted responsibility. · Agreed scale of penalty is appropriate. · Mr Lugton agreed to give evidence for Commission in other claims involved in the agreement; significant. 45–50 per cent discount. | ||||
| 10/4/17 | Commerce Commission v Property Brokers Ltd [2017] NZHC 681 2nd Defendant: Mr Morduant. | Part of the price-fixing agreement with 10 other real estate agencies in the Manawatu region. Mr Mordaunt is the sole director. His family trust owns all the shares of it. | Whether PB gained a significant benefit or not from conduct is irrelevant, the penalty must reflect the nature/seriousness of the type of misconduct (namely price-fixing). Higher starting point than imposed in Unique and Manawatu (1994) Ltd because PB was a ringleader. | $1.45 million penalty against Property Brokers Ltd. $50,000 penalty against Mr Mordaunt. |
| Mr Morduant: Sole director of largest company in the market, thus in strong position to influence others. Mr Morduant was the instigator, he organized initial meeting, directed follow-up correspondence and monitored implementation. | ||||
| He stood to benefit from the conduct because his family trust owned all the shares in the company. · However, this is partially offset because his interests will have to bear burden of meeting | ||||
| · the substantial monetary penalty on his company. · Court held the penalty imposed must not be a disproportionate response taking into account the totality of unlawful conduct. Mitigating factors: · Cooperation: provided documents, attended voluntary interviews. · Admitted conduct at early stage. · Did not knowingly breach the Act. · Awarded a 25–30 per cent discount. |
| Despite Mr Mouduant’s interests having to meet both penalties, this was not regarded as a disproportionate response overall. | ||||
| 8/8/17 | Commerce Commission v Lodge Real Estate Ltd [2017] NZHC 1875 4th Defendant: Online Realty Ltd. | Part of an agreement in Hamilton where real estate agencies in the area agreed to fix prices for TradeMe listings. | Not a ringleader but still an active participant. Held 8.5 per cent of the market share in Hamilton (second smallest out of the five other parties to the agreement); thus starting range sits above Success but below Lugton, Property Brokers, Bayley cases. · This would indicate the relevance of each’s market share when dealing with a ring of cases in the same factual matrix. Mitigating factors: Acknowledged responsibility before Commission’s briefs were filed; entered into a settlement agreement to provide ongoing cooperation. 40 per cent discount awarded; slightly lower than awarded in Lugton and Success to reflect cooperation occurring at a later point. Allowed for staged payment over three years due to the current uncertainty of trading conditions and the current financial situation. | $1,050,000 penalty against Online Realty Ltd. To be paid in four instalments over three years. |
| 24/10/17 | Commerce Commission v PGG Wrightson Ltd [2017] NZHC 2584 2nd Defendant: Elders Rural Holdings Ltd. | Elders was part of an agreement between livestock companies to impose tagging fees on cattle and calves, which amounted to a price‑fixing agreement. | Because Elders has no significant assets and is no longer trading, a pecuniary penalty was not sought. A declaration would be public interest, in that it helps educate the public on which conduct is likely to breach the provisions of the Act. | Declaration that Elders breached s 27, via s 30 of the Act. No pecuniary penalty. |
| 19/3/19 | Lodge Real Estate Ltd v Commerce Commission [2019] NZSC 28 | Upheld Court of Appeal decision. | Facts as Court of Appeal case. Appeal dismissed | Penalties assessed in the High Court. |
| 20/6/19 | Commerce Commission v GEA Milfos International Ltd [2019] NZHC 1426 | Milfos is a designer, manufacturer and installer of milking sheds to be used on dairy farms. The two markets were milk testing services and herd management services. GEA entered into an agreement with Dairy Automation to not quote against one another. Each would use the same ‘quote calculator’ to generate prices to provide to retail customers. | Both markets are small but nevertheless important due to close connection with NZ wider dairy industry. The fact this conduct was in anticipation of a legitimate excusive supply agreement provides no defence. Conduct between at least October 2012 and September 2014. Carried out by senior employees in both companies, where Milfos was key player in the market holding 20– 25 per cent of market share. Mitigating factors: No previous contraventions; provided cooperation; early admission (25 per cent discount). | Penalty of $825,000 on GEA Milfos. Agreed to pay the Commission $100,000 in costs. |
| 13/9/19 | Commerce Commission v Ronovation Ltd [2019] NZHC 2303 | Provided advisory services to clients who wanted to acquire real estate. A buyer-side cartel formed when Ronovation implemented ‘Priority Rules’ to avoid members competing against each other to buy property. The first member to notify group of interest in property had the priority and no one else could negotiate or bid. | This buyer-side cartel conduct is moderately serious. Harm was at low-end of spectrum because number of properties involved was tiny fraction of overall market. Ronovation did not realize this type of conduct is unlawful. Potential commercial gain to Ronovation was minimal because they are not a participant in the marketplace (but its members were active). Mitigating factors: Small company, penalty will have large impact on shareholders; no previous warnings or contraventions; full cooperation; willingness to settle with Commission early (35 per cent discount). | $400,000 penalty against Ronovation. |
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