Red Stag Timber Limited v Juken New Zealand Limited

[2023] NZHC 1979

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-002753

[2023] NZHC 1979

BETWEEN

RED STAG TIMBER LIMITED

Plaintiff

AND

JUKEN NEW ZEALAND LIMITED

Defendant

Hearing:

25 July 2023

Appearances:

N Flanagan and C Fleming for Plaintiff/Applicant

A Galbraith KC, C Bryant and G Luen for Respondent

Judgment:

27 July 2023

JUDGMENT OF VENNING J

Leave to file amended pleadings

This judgment was delivered by me on 27 July 2023 at 2.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Meredith Connell, Auckland

Hesketh Henry, Auckland Counsel:    A R Galbraith KC, Auckland

RED STAG TIMBER LIMITED v JUKEN NEW ZEALAND LIMITED [2023] NZHC 1979 [27 July 2023]

Background

[1]                  Red Stag Timber Limited (Red Stag) and Juken New Zealand Limited (JNL) both carry on the business of producing and supplying timber products. JNL manufactures a product called J-Frame which is a structural framing product made of laminated veneer lumber. J-Frame is marketed and sold to merchant outlets supplying building and timber products and frame and truss manufacturing factories. The product is purchased by trades people, including builders working in commercial and residential building sectors and individual consumers.

[2]                  Red Stag produces and sells a solid wood framing product that competes with JNL in the structural framing market.

[3]                  Red Stag sues JNL claiming that JNL has breached provisions of the Fair Trading Act 1986 (FTA). It seeks declarations that JNL’s conduct contravened the FTA and also seeks orders requiring JNL to pay the losses suffered by it by reason of JNL’s conduct.

[4]                  Red Stag commenced its proceedings on 17 November 2017. It has amended its claim on a number of occasions since then. JNL claimed that aspects of the fourth amended statement of claim (4ASOC) were time-barred as a consequence of the application of s 43A of the FTA. In this Court Gault J declined Red Stag’s application to strike out aspects of the 4ASOC.1 JNL appealed.

[5]                  In a judgment delivered on 16 June 2023 the Court of Appeal allowed JNL’s appeal and at [72] made an order striking out those parts of the (4ASOC):2

[t]hat seek relief in respect of representations and/or conduct by JNL prior to December 2012 and all claims (or any part thereof) based or relying on such allegations”.

The Court noted it would be for Red Stag to amend its pleading to conform with the judgment, leaving it to the supervision of this Court.

1      Red Stag Timber Ltd v Juken New Zealand Ltd [2022] NZHC 2662.

2      Juken New Zealand Ltd v Red Stag Timber Ltd [2023] NZCA 242 at [76].

[6]                  In the meantime, and pending the decision of the Court of Appeal, JNL had filed and served a fifth amended statement of claim (5ASOC) which included an allegation of a further breach of the relevant standards after December 2012 relating to sapwood penetration.

Application for leave

[7]                  Following delivery of the Court of Appeal judgment Red Stag filed a sixth amended statement of claim (6ASOC) purporting to comply with the Court of Appeal ruling. Red Stag also filed an application for leave. Leave was necessary as the close of pleading date had passed.3

[8]                  JNL opposes the application for leave. It says the 6ASOC does not comply with the Court of Appeal ruling. JNL seeks an order declining leave to Red Stag to file the 6ASOC and requiring Red Stag to produce a draft amended claim for the Court to determine compliance with the Court of Appeal judgment.

[9]                  The application for leave is a convenient vehicle to determine whether the 6ASOC complies with the Court of Appeal ruling. A pleading that complies will ensure that the controversy between the parties goes to trial, consistent with the objective of r 7.7.4

The 6ASOC

[10]              The 6ASOC claims relief in respect of representations and conduct in the pre- December 2012 period, particularly at paras 89–100. The allegations can be summarised as follows:

(a)In each of the four causes of action Red Stag claims that JNL made representations which was conduct that breached ss 9, 10, 13(a) and 13(e), FTA. Representations includes promotional representations and identification representations in the period both before and after December 2012;

3      High Court Rules 2016, r 7.7.

4      Oraka Technologies Ltd v Geostel Vision Ltd [2015] NZHC 991.

(b)Red Stag then says as a result of JNL’s representations, Red Stag suffered loss. The loss is the amount Red Stag would have earned from December 2012 to June 2020 if the representations (including those from 2007 to December 2012) had not been made and J-Frame had never entered the market. The loss is made up of:

(i)a reduced share of the framing timber market;

(ii)a reduced market price for the product; and

(iii)reduced revenue and profit from sales.5

(c)Red Stag also seeks declarations the representations contravene the FTA.

The issue

[11]              JNL says the 6ASOC does not comply with the Court of Appeal’s ruling as it continues to claim relief in respect of representations and conduct prior to December 2012 which was ruled out by the Court of Appeal.

[12]              Red Stag says the 6ASOC complies with the ruling. It no longer seeks monetary relief for losses incurred prior to December 2012. The relief it seeks is limited to losses from December 2012 although it accepts it still relies on JNL’s conduct prior to that date.

[13]              The issue is what is meant by [72] of the Court of Appeal’s decision in the context of s 43A of the FTA.

[14]Section 43A provides:

43A     Application for order under section 43

A person may apply to a court  or the  Disputes  Tribunal for  an  order  under section 43 at any time within 3 years after the date on which the loss or

5      At para 91 from 6ASOC.

damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered.

Preliminary points

[15]              There are two preliminary points. The first is that, apart from its argument that the 6ASOC does not comply with the Court of Appeal’s ruling, JNL also seeks to raise a number of other objections to the 6ASOC. It says the pleading contains a number of assertions of fact which are not supported by particulars, nor by the evidence exchanged. It also seeks to take the point that declaratory relief is not available to Red Stag. JNL suggests the Court has jurisdiction under r 7.48 to enforce the Court of Appeal judgment and also make any other order it thinks just to settle the pleadings.

[16]              Red Stag objects to JNL’s attempt to extend the consideration of the application for leave to file the 6ASOC in that way.

[17]              I agree with Mr Flanagan and Red Stag’s point that it was intended this application for leave is to review whether the 6ASOC complies with the ruling of the Court of Appeal. It is not an opportunity to expand the matter to further complaints about particulars or to challenge the fact that declarations are sought. Nor is it an opportunity to make a general complaint as to the form or structure of the pleading. As discussed with counsel, provided the pleading complies with the direction of the Court of Appeal as to what is to be struck out, it is for the plaintiff, Red Stag, and its advisors to plead the claim as they see fit. The issue of the declarations and other challenges can be determined at trial.

[18]              The second point to note is that these proceedings were commenced on 17 November 2017. Although the relevant limitation date is arguably 17 November 2014, JNL’s appeal was limited to the period prior to December 2012 as the Court of Appeal recorded.6

6      Juken New Zealand Ltd v Red Stag Timber Ltd, above n 2, at [31].

Submissions

[19]              Mr Galbraith KC submitted that the loss or damage as referred to in s 43A is merely the trigger. The focus must still be on a cause of action under the FTA which includes the elements of conduct that are alleged to be a breach of the FTA. It is the cause of action which gives rise to the losses as the Court of Appeal acknowledged in the case of Murray v Eliza Jane Holdings Ltd.7

[20]              Mr Galbraith submitted the change in wording following the decision in Murray v Eliza Jane Holdings Ltd8 was not significant for present purposes. In Murray the three years ran from the time when the matter giving rise to the application occurred, whereas under s 43A it runs from when the loss or damage was discovered or ought reasonably to have been discovered. The effect of the amendment was to extend the starting date for when limitation starts running, as do similar provisions in the Limitation Act but it does not affect the underlying principles of limitation.

[21]              Mr Galbraith then referred to Tipping J’s judgment in Commerce Commission v Carter Holt Harvey and particularly his consideration of the equivalent provision:9

[26] … If likelihood had been meant to refer to past loss, there would have been little point in employing the dichotomy of loss or damage or its likelihood. Logically all that would have been necessary, if likelihood had been intended to be a standard against which occurrence was to be measured, was a reference to likelihood alone. Furthermore, if likelihood was backward looking, there would be no limitation period for applications based on future loss, unless one adopted the inherently improbable view that likelihood was intended to be both backward and forward looking.

[22]              Mr Galbraith argued that if a plaintiff such as Red Stag did not bring its claim within three years then future losses from past actions are “out the window” as the limitation provision set the trigger date. The provision is not backward looking. Red Stag could not look back and claim for the consequences of actions or conduct which had occurred or taken place during the period the claim was statute-barred.

7      Juken New Zealand Ltd v Red Stag Timber Ltd, above n 2, at [43]–[47], citing Murray v Eliza Jane Holdings Ltd (1993) 6 PRNZ 252 (CA).

8      Murray v Eliza Jane Holdings Ltd, above n 7.

9      Commerce Commission v Carter Holt Harvey [2009] NZSC 120, [2010] 1 NZLR 379.

[23]              Mr Flanagan accepted that Red Stag’s claim for relief in the 6ASOC relies (in part) on JNL’s conduct prior to December 2012. He argued there were representations and conduct by JNL in that period which relate to and have an ongoing effect on Red Stag’s sales and thus its losses after December 2012. He submitted the Court of Appeal judgment cannot mean Red Stag is prevented from pleading and relying on factual matters arising before December 2012, including alleged contraventions of the FTA, to support its claim for losses after December 2012. While Red Stag cannot claim losses for the 2007 to December 2012 period, JNL’s conduct before December 2012 is material to Red Stag’s claim for losses after December 2012, and cannot be ignored.

[24]              Mr Flanagan submitted that JNL’s approach is contrary to the plain meaning of s 43A of the FTA and settled authority as to how that provision operates. He argued that s 43A only limits Red Stag’s ability to apply for orders under the FTA in relation to the time bar period which, in this case, is its claim for loss. The Court of Appeal could not have ruled more broadly than what s 43A permits.

[25]              Mr Flanagan submitted that, to the extent that there was any ambiguity in the Court of Appeal’s direction at [72] then reference to s 43A resolved the issue. The critical point was the prohibition in s 43A in relation to seeking orders under s 43. It was not on making allegations of breach. He argued that s 43 confirms the time starts to run from discovery of loss, not from the contravention.

[26]              Mr Flanagan then noted the FTA was intended to provide consumer protection and s 43A should be interpreted accordingly. He submitted s 43A does not permit the courts to strike out allegations of contravention. The section is explicitly worded to limit applications for orders. Any order under s 43 for loss or damage is not subject to a limitation bar related to when the underlying contravention occurred.

[27]              Mr Flanagan then made the point that s 43A was enacted following, and in response to, the Court of Appeal decision in Murray v Eliza Jane Holdings Ltd.10 As the Court of Appeal in this case noted, when that case was decided, the limitation period under the FTA ran from when the matter giving rise to the application occurred.

10     Murray v Eliza Jane Holdings Ltd, above n 7.

The focus now is on when the loss or damage or likelihood of such loss or damage was discovered or ought reasonably to have been discovered.

[28]              Mr Flanagan then referred to Telecom Corp of New Zealand v Commerce Commission, and the reasoning of Chambers J where His Honour noted that the limitation provision “is a condition of the remedy rather than an element in the right and a prerequisite to jurisdiction”.11 Mr Flanagan submitted that supported Red Stag’s argument that the fact the limitation period had expired did not mean that there had been no breach, merely that relief could not be granted.

[29]              Mr Flanagan suggested the Court of Appeal conclusion in Telecom was mirrored by the Supreme Court’s decision in Carter Holt Harvey.12 He referred to a passage at [17] from that decision where the Court noted the requirement for loss reinforced that the question is whether such orders can be made. Mr Flanagan noted that in both Telecom and Carter Holt the limitation ran from contravention. Here it runs from loss.13

[30]              Mr Flanagan submitted that if conduct before December 2012 was material to the claim for losses after December 2012 that could not be ignored. As a practical example, he noted that on JNL’s case Red Stag would be entitled to claim losses in relation to January 2013. However, such a claim will necessarily be based on representations made by JNL prior to that date. The losses were driven by JNL’s conduct in marketing and selling its product prior to December 2012. That conduct provided JNL with a foothold in the market. It is a matter of fact to be pleaded and proved.

The Court of Appeal judgment

[31]              Both counsel referred to the decision of the Court of Appeal. For present purposes I consider the following passages of the Court of Appeal decision to be particularly relevant:14

11     Telecom Corp of New Zealand v Commerce Commission [2012] NZCA 278 at [304].

12     Commerce Commission v Carter Holt Harvey, above n 9.

13 At [17].

14     Juken New Zealand Ltd v Red Stag Timber Ltd, above n 2, (footnotes omitted).

[31]      JNL appeals against those parts of the High Court judgment declining to strike out Red Stag’s claim for alleged breaches of the FTA in the period prior to December 2012. Leave to appeal was not sought in respect of the part of the claim which related to conduct after December 2012.

[32]      The appeal is advanced on the basis that Red Stag was purporting to make a claim for losses alleged to have been caused by contraventions in the period prior to December 2012, when it was acknowledged that Red Stag was aware of all of the elements of the claim for those losses before it reintroduced its claim on 19 December 2019. …

…

[38] Section 43A of the FTA required any claim to be brought “within 3 years after the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered”. The key submission of Mr Galbraith KC for JNL was that the alleged contraventions causing loss which were discovered more than three years prior to 19 December 2019 had already ceased to be actionable at that date and could not subsequently be resurrected by dint of a pleading argument.

…

[49] Mr Galbraith argued that by its 19 December 2019 pleading, Red Stag had sought to recover relief for alleged contraventions in the period prior to 2012 which were not the subject of the March 2019 pleading, and which relate to alleged loss discovered more than three years prior to that date. This was an attempt to treat earlier contraventions as part of the same course of conduct that took place after 2012, in effect maintaining that if a claim for later conduct was brought within time, the limitation period would not apply in respect of the earlier conduct.

…

[51]      Mr Flanagan submitted for Red Stag that JNL’s argument rested on the idea that conduct could not be pleaded by amending a statement of claim to make a new allegation barred by s 43A. He claimed that proposition was incorrect. He submitted that the High Court had correctly approached the issues by asking whether what was proposed introduced a fresh cause of action, that is, whether the amended pleading would amount to an essentially different case.

[52]      Mr Flanagan submitted that while it was correct that each time a false or misleading representation was made there was a breach of the FTA, it could also be breached by conduct comprising a number of actions or omissions assessed together and cumulatively. That is now how Red Stag has formulated its claim. Whether the facts were capable of giving rise to a cause of action is a different question than whether an amendment to a pleading amounted to a fresh cause of action. …

…

Analysis

[57] We consider the starting point must be s 43A of the FTA. By its terms, the right to seek relief under FTA is conditional upon the application being made within three years after the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered. As a general proposition, it must be the case that a claim for relief which relates to a period more than three years after the date on which the loss or damage was discovered, or ought to have been discovered, would be contrary to the statute. We consider Mr Galbraith was correct to argue that in such a case the claim cannot be made, because it is not one countenanced by the FTA.

…

[68]      An amendment to a statement of clam which seeks relief in relation to a period earlier than that covered by the existing claim, and in breach of a statutory bar, is not authorised by r 7.77(2)(a). …

[69]      That is essentially what was authorised by the judgment under appeal, and we do not consider it was correct.

…

[70]      JNL’s notice of appeal sought an order striking out those parts of the fourth amended statement of claim that comprised or contained allegations of representations and/or conduct by JNL prior to December 2012, and all claims (or any part thereof) based or relying on such allegations. At the conclusion of the hearing, against the possibility that the appeal might be allowed, we invited the parties to confer and file a memorandum identifying more particular relief that should be ordered if the appeal were allowed.

[72] In the absence of agreement, we consider the appropriate course is to allow the appeal on the basis of the relief claimed, albeit in a slightly modified form. Consistently with the reasoning set out above, we consider the appropriate form of relief is to strike out those parts of the amended statement of claim that seek relief in respect of representations and/or conduct by JNL prior to December 2012 and all claims (or any part thereof) based upon or relying on such allegations

Analysis

[32] The argument for Red Stag is that the 6ASOC complied with the Court of Appeal’s ruling as Red Stag no longer seeks relief in respect of losses incurred prior to December 2012. However, as I read [72] of the Court of Appeal decision, it goes further than that. There are two aspects to the appropriate form of relief referred to in that paragraph and ultimately directed and ordered in [76]. The claim for losses between 2007 and December 2012 is covered and ruled out by the reference to “all claims (or any part thereof) based or relying on such allegations”. The “allegations” referred to concern JNL’s representation and conduct prior to December 2012.

[33]   However, in the 6ASOC Red Stag maintains claims for losses that are, at least in part, “based upon or relying on” allegations of JNL’s conduct prior to December 2012. Those are the very allegations that the first part of the ruling directed were to be struck out. To that extent the current pleading does not comply with the ruling. The first aspect of the Court of Appeal’s ruling directed the strike out of “those parts of the [claim] that seek relief in respect of representations and/or conduct by JNL prior to December 2012”. The pleading in the 6ASOC currently includes pleading that ultimately seeks relief (losses incurred after December 2012) based on, or in respect of, representations prior to December 2012.

[34]   I agree with Mr Flanagan that, with respect, the Court of Appeal could not go further than what s 43A permitted and that s 43A must be read with s 43. But JNL’s conduct is still relevant. Section 43 makes it clear that the basis of the claim for losses is that Red Stag had suffered or likely to suffer losses “by conduct” of JNL that contravened the FTA. Section 43(1)(a) and (3)(f) relevantly provide:

43       Other orders

(1)This section applies if, in proceedings under this Part or on the application of any person, a court or the Disputes Tribunal finds that a person (person A) has suffered, or is likely to suffer, loss or damage by conduct of another person (person B) that does or may constitute any of the following:

(a)a contravention of a provision of Parts 1 to 4A

…

(3)       The orders are as follows:

…

(f)an order directing person B to pay to person A the amount of the loss or damage:

[35]   While s 43A confirms the trigger for applying to the Court for relief is the loss or likelihood of loss, the loss is still based on the conduct of JNL.

[36]   As noted, Mr Flanagan relied on the amendment in s 43A following the earlier Court of Appeal decision in Murray,15 and emphasised the change in wording to loss.

15     Murray v Eliza Jane Holdings Ltd, above n 7.

However, as Mr Galbraith submitted, the effect of the amendment was to essentially extend the period of time within which the claim must be brought, by referring to the trigger as loss rather than “when the matter giving rise to the application occurred”. While in most cases that will have the practical effect of extending the time before the limitation period applies, it does not remove the need for consideration of “the conduct” when considering what is ultimately barred by the limitation provision.

[37]   The Law Commission had recommended change because as the wording then stood, a claim might be barred before an applicant became aware of the existence of facts on which an application might be made.16 The Commission suggested a five- year period or a three-year period running from when loss or damage or its likelihood was discovered. It is clear the intent was to extend the triggering event by the amendment to “loss”. It did not however do away with the need for consideration of conduct.

[38]   The Telecom case relied on by Mr Flanagan does not assist Red Stag. That aspect of the case primarily involved consideration of whether a declaration could be available. In his decision Chambers J made it clear that a declaration could, in some circumstances, be available in the inherent jurisdiction of the Court. But relevantly, at an early stage Chambers J had noted the claim for damages was not available as the Commission acknowledged it could seek penalties only with respect to conduct within the last three years because of the limitation provision in s 80(5) of the Commerce Act 1986.

[39]   Mr Flanagan also sought to rely on the Supreme Court decision in Carter Holt,17 but as Mr Galbraith noted, in that decision, Tipping J confirmed that the reference in the equivalent section to 43A to likelihood was forward looking. In addition to [26] of that decision referred to above, Tipping J went on to say:

[27] In short, time starts running when the applicant discovers or ought to have discovered that loss or damage has already occurred, or is likely to occur in the future. Discovery that loss or damage is likely to occur in the future will be relevant to applications seeking relief on account of that likelihood. If relief is sought for loss or harm already suffered, then time will start running from

16     Law Commission Tidying the Limitation Act (NZLC R61, 2000).

17     Commerce Commission v Carter Holt Harvey, above n 9.

discovery (actual or constructive) of that fact. In the present case we are concerned with discovery of loss or harm which had already occurred.

Further, at [31] Tipping J went on to note:

On this basis, in a case like the present, the question to be answered is when did the Commission become aware that it was more probable than not that a person or persons had suffered loss. As loss is not relevant for present purposes unless it was occasioned by a contravention of the Act, the words ―as a result of a contravention of the Act‖ are necessarily implicit in this question. The same concept of probability should apply, for present purposes, to the applicant’s awareness that loss has been occasioned by a contravention.

[40]   Mr Flanagan’s submissions focused on the issue of losses. He referred to [33] of the Court of Appeal judgment and submitted that the Court accepted JNL had focused on striking out any “claim for losses”. He submitted that is what the 6ASOC does. However, the last sentence of [33] of the Court of Appeal judgment records the submission made was that Red Stag’s claim for losses “caused by contraventions in the period prior to December 2012” was time-barred. JNL’s focus throughout has been on conduct. The Court ultimately accepted that submission in the course of its judgment and in its final ruling.

[41]   Mr Flanagan also submitted Red Stag’s approach to s 43A was consistent with the general rules under the Limitation Act 2010. Limitation defences do not prevent allegations or mean the law has not been breached. They simply prevent the Court from ordering  relief.   However the point is that the relevant relief sought  under       s 43(3)(f), FTA is monetary relief which is subject to the limitation provision in s 43A. As noted, the monetary relief claimed after 2012 is, in part, based on the allegations prior to 2012 which is time-barred.

[42]   As for Mr Flanagan’s point regarding a claim for loss in January 2013, Red Stag can claim for losses sustained that month, but it will have to prove that the losses were caused by JNL’s representations and/or conduct after December 2012. That is the natural and logical effect of the application of the limitation provision. If it applies, as it does in this case, it draws a bright line. Representations and conduct before that bright line cannot be relied on to support a claim for losses after that date.

[43]   The above analysis is, in my judgment, consistent with [70] and [72] of the Court of Appeal judgment and explains the amendment the Court made to the order sought by JNL. The way JNL had framed the relief it sought as it was referred to in

[70] would have prevented Red Stag from referring to conduct in the period prior to December 2012 even as background. The Court of Appeal did not accept that but instead in [72] confirmed that Red Stag could not rely on representations or conduct prior to December 2012 to support any claim for loss based in whole (or in part) on that conduct. The effect of the Court of Appeal ruling is that Red Stag can plead JNL’s representations and conduct between 2007 and December 2012 as background but it cannot claim to recover losses from December 2012 based on those representations and conduct.

[44]   For present purposes and absent further detailed argument on the point I leave open the issue of whether Red Stag can pursue the declarations sought. What Red Stag cannot do however, is claim for losses occurring after December 2012 that are based on representations and conduct that occurred before December 2012.

Result/orders

[45]   Red Stag’s application for leave to file an amended statement of claim in the form of the 6ASOC is dismissed.

[46]   Leave is granted to Red Stag to file an amended statement of claim on condition that amended statement of claim is not to refer to and/or rely on the pre- December 2012 conduct of JNL to support any claim for loss, including any loss claimed to have arisen after December 2012. Any losses claimed after December 2012 are to be based solely on conduct after December 2012. Red Stag may, however plead JNL’s conduct prior to December 2012 as background.

Costs

[47]   Costs to JNL on a 2B basis (for one counsel) would seem appropriate. Order accordingly.

Review

[48]   Counsel are to file a joint memorandum by 4 August 2023 for a timetable to address the outstanding interlocutory matters.

Venning J