T & S Construction 2015 Limited v Toyota New Zealand Limited
[2024] NZHC 2483
•30 August 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-454-83
[2024] NZHC 2483
BETWEEN T & S CONSTRUCTION 2015 LIMITED
First Plaintiff
HARMAN IMPEX (NZ) LIMITED
Second PlaintiffAND
TOYOTA NEW ZEALAND LIMITED
Defendant
CIV-2024-404-467 BETWEEN
T & S CONSTRUCTION 2015 LIMITED
First Plaintiff
AND
HARMAN IMPEX (NZ) LIMITED
Second Plaintiff
Cont’d
Hearing: 8 August 2024 Appearances:
J S Cooper KC, H Davies, B McKinlay for Plaintiffs
T C Weston KC, L C Sizer and C R Tataru for Defendant J K Goodall KC, I Rosic and B White for Defendants in CIV-2024-404-467
Judgment:
30 August 2024
Reissued:
2 September 2024
JUDGMENT OF MUIR J
Application for Consolidation
This judgment was delivered by me on 30 August 2024 at 3 pm, Pursuant to Rule 11.5 of the High Court rules.
Registrar/Deputy Registrar
T & S CONSTRUCTION 2015 LTD v TOYOTA NEW ZEALAND LTD [2024] NZHC 2483
YU CAO, 3 Javelin Place, West Harbour, Auckland, Scientist
Third Plaintiff
ROSS DAVID BENNETT, 420A
Ellesmere Junction Road, Springston, Canterbury Allocation and Replenishment Analyst
Fourth Plaintiff
SHAUN GARTH COUGHLAN, 28
Clipper Street, Titahi Bay, Porirua, Self EmployedFifth Plaintiff
ADAM GERALD D’OYLEY STODART,
32 Hinau Grove, Wainuiomata, Lower Hutt, Team Leader
Sixth Plaintiff
ALISON ELIZABETH STODART, 32
Hinau Grove, Wainuiomata, Lower Hutt, Transaction Solution Specialist
Seventh Plaintiff
AND ARMSTRONGS AUCKLAND
LIMITED, an incorporated company having its registered office at 61 Mountain Road, Mount Wellington, Auckland
First Defendant
ASHBURTON AUTOMOTIVE
LIMITED, an incorporated company having its registered office at 684 East Street, Ashburton
Second Defendant
BOWATER MOTORS LIMITED, an
incorporated company having its registered office at 106 Rutherford Street, Nelson
Third Defendant
CENTREPOINT MOTORS LIMITED, an
incorporated company having its registered office at 1 Puke Road, Paeroa
Fourth Defendant
COAST CARS AND COMMERCIAL
LIMITED, an incorporated company having its registered office at 12 Herbert Street, Greymouth
Fifth Defendant
COOKE HOWLISON LIMITED, an
incorporated company having its registered office at 484-500 Andersons Bay Road, Dunedin
Sixth Defendant
CROWOOD LIMITED, an incorporated company having its registered office at Russell Turner, Chartered Accountants, 58 Otaika Road, Whangarei
Seventh Defendant
G W D RUSSELLS LIMITED, an
incorporated company having its registered office at 24 Yarrow Street, Invercargill
Eighth Defendant
HOWARD TRADING LIMITED, an
incorporated company having its registered office at MGI Plus More (Auckland) Limited, Level 5, 32-34 Mahuhu Crescent, Auckland Central
Ninth Defendant
MARLBOROUGH AUTOMOTIVE
LIMITED, an incorporated company having its registered office at 21 Main Street, Blenheim
Tenth Defendant
MILES LIMITED, an incorporated company having its registered office at 18 Manchester Street, Christchurch
Eleventh Defendant
MUIR & RICHARDS LIMITED, an
incorporated company having its registered office at 401 Pollen Street, Thames
Twelfth Defendant
NORTH ALBANY MOTORS LIMITED,
an incorporated company having its registered office at Cnr Gills Road, Dairy Flat Highway Albany, Auckland
Thirteenth Defendant
NORTH OTAGO MOTOR GROUP
LIMITED, an incorporated company having its registered office at 24-30 Severn Street, Oamaru
Fourteenth Defendant
NORTHERN BAYS MOTORS
LIMITED, an incorporated company having its registered office at 2 Link Drive, Glenfield, Auckland
Fifteenth Defendant
PAT PRESCOTT LIMITED, an
incorporated company having its registered office at Bailey Ingham Limited, Chartered Accountants, 18 Maniapoto Street, Otorohanga
Sixteenth Defendant
RANGIORA AUTOMOTIVE LIMITED,
an incorporated company having its registered office at 21 Main Street, Blenheim
Seventeenth Defendant
RUTHERFORD & BOND LIMITED, an
incorporated company having its registered office at 54 Kent Terrace, Mount Victoria, Wellington
Eighteenth Defendant
SCOTT ADAMS LIMITED, an
incorporated company having its registered office at 18 Manchester Street, Christchurch
Nineteenth Defendant
SINCLAIR PRYOR MOTORS
LIMITED, an incorporated company having its registered office at 75 Carlyle Street, Napier South
Twentieth Defendant
SOUTH CANTERBURY AUTOMOTIVE LIMITED, an
incorporated company having its registered office at 21 Main Street, Blenheim
Twenty First Defendant
TASMAN AUTOS LIMITED, an
incorporated company having its registered office at 585-595 Devon Street East, New Plymouth
Twenty Second Defendant
[Twenty Third Defendant Removed] WAIKATO MOTORS LIMITED, an
incorporated company having its registered office at 5 Kahu Crescent, Te Rapa Park, Hamilton
Twenty Fourth Defendant
Introduction
[1] In the context of intended class actions against Toyota New Zealand Ltd (TNZ) and its New Zealand Dealers (the Dealers), the plaintiffs in both the proceedings against TNZ (CIV-2023-454-83—the TNZ proceedings) and against the Dealers (CIV-2024-404-467—the Dealer proceedings) apply for orders:
(a)adding to the plaintiffs in the respective proceedings the additional plaintiffs identified in Schedule A to this judgment;
(b)substituting for the existing twenty third defendant TRC Enterprises Ltd (TRC), in the proceedings against the Dealers, the company Debren Enterprises Ltd (Debren);
(c)consolidating the two sets of proceedings on such terms as the Court thinks just.
[2] These orders were originally identified as alternatives to preferred orders adding the plaintiffs to the TNZ proceedings and adding the existing defendants in the Dealer proceedings as defendants in the TNZ proceedings (with the plaintiffs in the Dealer proceedings being permitted to withdraw those proceedings with no order as to costs). That application was not pursued at the hearing.
[3] In relation to the three orders sought, order (a) can be made on the basis that TNZ and the Dealers do not oppose and therefore abide (with certain reservations, acknowledged by all parties, to be recorded in this judgment).
[4] Likewise, in respect of order (b), the Dealers do not oppose and therefore abide on the basis that I record a reservation in relation to limitation, which such reservation is acknowledged by the plaintiffs.
[5] The substantive argument occurred in relation to proposed order (c). Neither TNZ nor the Dealers oppose consolidation as such. They say however, that, either as a term of the consolidation order, or independently under the power in r 4.56 of the High Court Rules 2016 (the Rules) to strike out any defendant improperly or
mistakenly joined, only those Dealers who face a claim1 by at least one plaintiff to whom they have supplied a vehicle should be identified as defendants in the consolidated Dealer proceedings. There are seven Dealers named as existing defendants in the Dealer proceedings who do not face such a claim. I will refer to these as the “No Claim Dealers”.2
[6] The plaintiffs say that I should simply make the order consolidating the proceedings with all the existing defendants in the Dealer proceedings carried forward to the consolidated claims, leaving it open to the No Claim Dealers to bring a strike out application in due course. The plaintiffs say that any such application should logically be considered at the same time as the application for representative orders. They say that there is an available and reasonable argument, that one or more plaintiffs who did not have a contractual relationship with a relevant Dealer, could nevertheless be made representative plaintiffs in terms of claims against such a Dealer by those customers to whom it has in fact supplied a vehicle.
[7] TNZ and the Dealers say that there is no basis upon which such a representative order could be made and that accordingly, I should strike out the seven No Claim Dealers from the newly consolidated claims, leaving the plaintiffs to apply for their re-joinder at a later time, assuming they can identify at least one willing plaintiff to whom the relevant dealer(s) have sold a vehicle.
Order (a) — addition of plaintiffs
[8] I make an order adding the additional plaintiffs identified in Schedule A to the respective proceedings. By agreement of the parties, the effective date of the addition is to be the date of the hearing (8 August 2024).
[9] I record reservation of the plaintiffs’ right to argue, in the context of their application for representative orders, that the addition should apply from an earlier date. That reservation is acknowledged by TNZ and the Dealers.
1 The sole cause of action against the Dealers is an alleged failure to comply with the statutory guarantee that goods are of acceptable quality contained in s 7 of the Consumer Guarantees Act 1993 (CGA). This cause of action is directed to the Dealers as “suppliers” and is thus governed by s 18 of the CGA.
2 Acknowledging that the plaintiffs’ preferred description is the “No-Rep-Plf Dealers”.
[10] I further record TNZ’s position that the extent to which this reservation applies will need to be considered in the context of TNZ’s foreshadowed argument that “the class has broadened subsequent to issue of proceedings and that this issue will be raised by TNZ as relevant to the question of potential backdating for plaintiffs when the representative orders are considered”. That qualification to the reservation is acknowledged by the plaintiffs.
Order (b) — substitution of Debren for TRC
[11] Debren and TRC are related companies, both trading in Palmerston North. TRC sells agricultural equipment including tractors. Debren sells Toyota motor vehicles. The statement of claim against the Dealers was filed on 1 March 2024. It identified TRC as the twenty third defendant. It is accepted that this was a mistake.
[12] The agreed position is that I make an order substituting Debren for TRC but with the following reservation:
For the avoidance of doubt, it is recorded that such order is on a basis which expressly reserves to the Dealers the right to argue that the relevant date for limitation purposes in respect of the claim against any one of them, was not 1 March 2024 (the date of filing of the statement of claim) but the date on which a plaintiff was first identified with claims against the Dealer, or the date such plaintiff was joined (8 August 2024) or such other date subsequent to 1 March 2024, as the Court sees fit.
[13]That reservation is acknowledged and accepted by the plaintiffs.
Order (c) — consolidation
Overview of plaintiffs’ claims
[14] Both sets of proceedings relate to Toyota Hilux, Fortuner and Prado vehicles manufactured between 2015 and 2018 which TNZ imported into New Zealand and sold through its network of dealerships during the period of April 2015 to July 2021.
[15] These vehicles were fitted with a diesel particulate filter (DPF) which is an emissions reduction device. In or about July 2016, TNZ received reports that some of the vehicles imported by it were emitting more white smoke than expected, showing
illuminated DPF malfunction warnings, and in some cases going into “limp home” mode.
[16] The rate of occurrence varied and TNZ says that most of the vehicles which it or its dealers supplied had no issues at all. Nevertheless, between 2016 and 2020 it proactively implemented manufacturing and field fixes (the latter free of charge) to resolve the DPF issues. A final production change, which it states to have been a “complete fix”, was implemented from June 2020, with fixes to previously supplied vehicles implemented in the field from July 2020 under a Special Policy Adjustment (which granted a specific warranty for free DPF replacements for 10 years). The plaintiffs admit that this fix has been effective.
[17] To date, TNZ has repaired approximately 90 per cent of the vehicles with defective DPFs. While the repair process is ongoing, the bulk of the unrepaired vehicles now consist of those that have either been written off or whose owners are uncontactable or have passed away.
Procedural history
[18] In mid 2023, following a successful class action proceeding in Australia, Shine Lawyers New Zealand began soliciting for plaintiffs to sue TNZ in a similar class action proceeding. It is supported in that respect by the same litigation funder which supported the Australian proceedings.
[19] On 27 September 2023, T & S Construction 2015 Ltd and Harman Impex (NZ) Ltd (the first and second plaintiffs in both proceedings) commenced the TNZ proceedings alleging that Hilux, Fortuner and Prado vehicles manufactured from 1 October 2015 to (at the latest) 31 December 2018 were defective because of the DPF issues. The plaintiffs identified these as the “Relevant Vehicles”. TNZ says that the relevant manufacture dates are 1 April 2015 to 31 May 2018. It calls these the “Affected Vehicles”.
[20] The claim sought damages for (among other things) the alleged reduction in value of the vehicles at the time of supply (reinstatement or “RIV” damages). Three causes of action were pleaded, being:
(a)breach of the guarantee of acceptable quality (under ss 6 and 7 of the Consumer Guarantees Act 1993 (CGA));
(b)misleading and deceptive conduct (under ss 9 and 10 of the Fair Trading Act 1986 (FTA));
(c)unconscionable conduct (under s 7 of the FTA).3
[21] The CGA claims identified TNZ as both manufacturer and supplier of the vehicles. Remedies against the former are governed by s 28 of the CGA and against the latter by s 18 of the CGA.
[22] In its statement of defence dated 24 November 2023, TNZ did not deny the existence of certain issues with the Affected Vehicles but did raise several affirmative defences including limitation and the manufacturer’s defence under s 27 of the CGA. It also applied to stay the claim for RIV damages (under s 27 of the CGA) relying on its “complete fix”, and to strike out the unconscionability claim. Significantly for present purposes, it admitted that it was a manufacturer of the Affected Vehicles for the purposes of the CGA but denied that it was the supplier.
[23] Further enquiries by the plaintiffs identified that the denial of supplier status was a function of TNZ’s New Zealand business model whereby dealers, who had formerly been dealer principals, only became TNZ agents as at 1 April 2018.
[24] On 23 February 2024 the plaintiffs applied to join five more plaintiffs to the TNZ proceedings and to join the Dealers as defendants. In the appended draft statement of claim they abandoned the cause of action based on alleged unconscionable conduct while also extending the scope of the alleged Relevant Vehicles to a manufacture date of 1 January 2015 onwards.
[25] On 1 March 2024 the plaintiffs filed the Dealer proceedings—the catalyst no doubt being the risk of limitation implications arising from any delay in hearing their joinder application.
3 A draft amended statement of claim appended to the plaintiffs’ application for joinder/consolidation abandon this claim.
[26] TNZ opposed the application for joinder on the grounds that the plaintiffs needed to elect in which proceedings they would pursue the Dealers, that the application should be determined on notice to the Dealers and that there was no basis to join the 18 Dealers who were, at that stage, in the “No Claim” category.
[27] The plaintiffs then twice amended the joinder application adding, by way of an alternative proposed order, that the two sets of proceedings be consolidated. It is that alternative application which is now pursued. Over the intervening period the plaintiffs also identified additional plaintiffs to whom vehicles had been supplied by various of the named Dealers. As indicated, there are now only seven Dealers for whom there are not corresponding plaintiffs.
The plaintiffs’ argument
[28] As indicated, the plaintiffs say that I should make the order for consolidation of the TNZ and Dealer proceedings, leaving the No Claim Dealers to bring a separate strike out application at a later time. They say that although in their notice of opposition to the application, the Dealers seek “a corresponding order under r 4.56 that the No Claim Dealers be struck out as defendants in the Dealer proceeding…”. The Court should not treat an opposition to a party’s application to consolidate as a de facto strike out application.
[29] However, in their comprehensive written submissions4 the plaintiffs engage fully with the underlying argument—namely whether, for the purposes of the r 4.24 representative proceeding against the Dealers, it is necessary to identify, in respect of each Dealer sued, at least one plaintiff to whom that Dealer has supplied a vehicle. They say that the issue of whether it is necessary “to have a plaintiff for each defendant” has not yet been decided by any New Zealand court, but that r 4.24, has consistently been recognised by New Zealand appellate courts as having three general objectives, 5 being:
4 I allowed all parties to file submissions of up to 30 pages in length, despite the usual limitations in respect of interlocutory applications.
5 Southern Response Earthquake Services Ltd v Ross [2020] NZSC 126, [2021] 1 NZLR 117 at [40]; and Southern Response Earthquake Services Ltd v Southern Response Unresolved Claims Group [2017] NZCA 489, [2018] 2 NZLR 312 at [14].
(a)improving access to justice;
(b)facilitating efficient use of judicial resources; and
(c)strengthening incentives for compliance with the law.
[30] They submit that, consistent with the general objectives of r 4.24, allowing a plaintiff who does not have a direct claim against each defendant to act as a representative:
(a)improves access to justice by removing additional barriers and costs on plaintiffs and encouraging the pursuit of legitimate claims without undermining the objectives of class actions;
(b)facilitates efficient use of judicial resources by reducing the need for multiple duplicative proceedings—this being especially so where the claims against each defendant are identical and the legal issues to be resolved are common across all parties; and
(c)strengthens incentives to comply with the law by ensuring consistency in legal outcomes and avoiding the risk of divergent decisions in separate proceedings that could lead to inconsistencies and potential injustice.
[31] They say that the ability, under r 4.24, for one or more persons to sue on behalf of those with the “same interest” in the subject matter of a proceeding extends to a significant common interest in the resolution of any question of law or fact arising in a proceeding, and that the Court should take a liberal and flexible approach in determining whether there is a common interest.6 They say that the requisite commonality of interest is not a high threshold and that the Court should be wary of looking for impediments to representative actions rather than being facilitative of them.7
6 Citing Cridge v Studorp Ltd [2017] NZCA 376 at [11], recently endorsed in Simons v ANZ Bank New Zealand Ltd [2024] NZCA 330.
7 Citing Cridge v Studorp Ltd at [11].
[32] To that end, they say that the “same interest” could be broadly described as having purchased a Relevant Vehicle from TNZ or one of its Dealers. They say that the allegations against each of the Dealers are identical, that they entered into the same transaction (supply of a Relevant Vehicle) on the same standard form terms and supplied a vehicle with the same defect (the defective DPF) which failed the statutory guarantee of quality. They say that all purchasers suffered loss from the reduction in the value of the vehicle below the purchase price at the time of the transaction.
[33] They rely in particular on a decision of the Supreme Court of Canada in Bank of Montreal v Marcotte.8
Discussion
[34] I address first the argument that I should simply make the order for consolidation leaving the No Claim Dealers to bring an application (contemporaneously with the application for representation orders) striking out the claims against them.
[35] I am not persuaded to approach the issue on this basis. The lodestar with respect to any application of the Rules is the r 1.2 requirement to “ensure the just, speedy and inexpensive determination of any proceeding or interlocutory application”. Rule 10.12 in turn provides that the court may consolidate two or more proceedings “on terms it thinks just” and r 4.56 provides that a judge may, at any stage of a proceeding, and with or without an application, make an order that a party named as a defendant be struck out because they were “improperly or mistakenly joined”. Accordingly, there is a proper jurisdictional basis for me to consolidate the proceedings on terms that the No Claim Dealers are removed as defendants.
[36] Whether I should do so at this stage involves a discretionary assessment. I must be satisfied that the underlying argument (whether a representative claim can be permitted by a plaintiff with no personal claim against the relevant Dealer) has been properly “flagged”, appropriately argued and whether there is any reasonable
8 Bank of Montreal v Marcotte 2014 SCC 55.
argument that the outcome might differ if heard in the context of the plaintiffs’ claims for representative orders.
[37] I am satisfied that the issue has been fairly before the Court, at least since 31 May 2024, when the Dealers filed their notice of opposition recording that they did “not oppose an order consolidating the Dealer Proceeding with the TNZ Proceeding, provided that the No Claim Dealers are struck out as defendants in the Dealer Proceeding and no order for joinder of the Dealers as defendants in the TNZ proceeding is made…”. As indicated, the notice of opposition also recorded, in respect of the now abandoned application for joinder, that the Dealers sought “a corresponding order under r 4.56 that the No Claim Dealers be struck out as defendants…”.
[38] As also indicated, I received extensive written submissions in respect of the underlying issue and all parties were ably represented by senior counsel over the course of a full day argument.9 No judge could, in my view, be more adequately appraised of the respective arguments than I am at the moment. Moreover, having heard and reflected on those arguments, I am not persuaded that any different outcome is likely if the argument is deferred for consideration in the context of the application for representative orders. The “landscape” is in that sense already adequately settled.
[39] If satisfied therefore that it would be inappropriate to make an order permitting any one plaintiff (with no personal claim against the relevant Dealer) to sue on behalf of that Dealer’s customers, then I intend to make an order consolidating the proceedings on terms which simultaneously strike out the No Claim Dealers on the basis that they were improperly joined. I consider such an approach conforms with the “just, speedy, and inexpensive” mandate in r 1.2 of the Rules on the basis that no party against whom a representative claim is not possible, should, in my view, be required to engage further in interlocutory processes. I acknowledge that to the extent that a stay order is currently in place in respect of the Dealer proceedings, it is appropriately lifted for the purposes of the consolidation order and any associated strike out of defendants under r 4.56.
9 Substantially devoted to the underlying issues given that all other aspects of the application were resolved on a no opposition basis.
[40] Turning then to the substantive issue—as I have already indicated, the question of whether the No Claim Dealers should be struck out from the consolidated proceedings as improperly joined, must in this case, be addressed in the context of whether any one or more of the now joined plaintiffs could be identified as representative plaintiffs for the purposes of claims against the No Claim Dealers.
[41]Rule 4.24 provides the relevant framework. It states:
4.24Persons having same interest
One or more persons may sue or be sued on behalf of, or for the benefit of, all persons with the same interest in the subject matter of a proceeding—
(a)with the consent of the other persons who have the same interest; or
(b)as directed by the court on an application made by a party or intending party to the proceeding.
[42] In turn, r 4.24 must be considered in the context of rr 4.1 and 4.3 which respectively provide:
4.1Limit on parties
The number of persons named or joined as parties to a proceeding must be limited, as far as practicable, to—
(a)persons whose presence before the court is necessary to justly determine the issues arising; and
(b)persons who ought to be bound by any judgment given.
4.3 Defendants
(1)Persons may be joined jointly, individually, or in the alternative as defendants against whom it is alleged there is a right to relief in respect of, or arising out of, the same transaction, matter, event, instrument, document, series of documents, enactment, or bylaw.
(2)It is not necessary for every defendant to be interested in all relief claimed or every cause of action.
(3)The court may make an order preventing a defendant from being embarrassed or put to expense by being required to attend part of a proceeding in which the defendant has no interest.
…
[43] The essential requirement of r 4.3 is that “there is some right to relief against the persons named as defendants”.10
[44] Although this Court has not previously been required to consider whether the absence of a cause of action by a proposed representative plaintiff against an identified defendant is fatal to their ability to sue on behalf of persons with such a cause of action, I conclude that it is. I do so having regard to three primary considerations and mindful also of overseas experience and the conclusions reached by the Law Commission in its Class Actions and Litigation Funding: Supplementary Issues Paper.11
[45] First, I identify the fundamental point that r 4.24 is simply a procedural device which does not confer substantive rights or liabilities.12 Ordinary rules of standing are unaffected by the rule and therefore apply. As Elias CJ pointed out in Proprietors of Wakatū v Attorney General:13
There is generally no distinction in private law between questions of standing and the elements of a cause of action.14 The availability of relief turns on whether the plaintiff has a cause of action against the defendant.
[46] Although in rare circumstances the court has, on applications under r 4.56, permitted the addition of defendants against whom there is no cause of action,15 that has always been on the basis that it is either impossible to do justice between the existing parties without joinder or the rights or liabilities of the proposed party might be directly affected by any order made in the proceeding.16 Neither consideration applies here.17 There is no difficulty in doing justice between the plaintiffs (including representative plaintiffs) and the dealers from whom they purchased, by exclusion of
10 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR4.3.01].
11 Te Aka Matua o te Ture | Law Commission Class Actions and Litigation Funding: Supplementary Issues Paper (NZLC IP48, 2021) at [1.24].
12 R J Flowers Ltd v Burns [1987] 1 NZLR 260 (HC) at 271 per McGechan J; Saunders v Houghton [2010] 3 NZLR 331 at [12]–[14]; and Proprietors of Wakatū v Attorney General [2017] NZSC 17, [2017] 1 NZLR 423 at [662] per Glazebrook J.
13 At [489].
14 Bateman's Bay Local Aboriginal Land Council v The Aboriginal Community Benefit Fund Pty Ltd
[1998] HCA 49, (1998) 194 CLR 247 at [43].
15 See for example, Pacific Dunlop Ltd v Ferryway Mattress Co Ltd HC Christchurch CP9/88, 27 April 1989.
16 See Mainland Products Ltd v BIL (New Zealand Holdings) Ltd HC Wellington CP192/01, 9 April 2002.
17 The relevant application is of course to strike out the No Claim Dealers and/or remove them as a term of the consolidation order, not to add them. But I do not regard that as a material distinction for present purposes.
the No Claim Dealers. Nor is there any realistic prospect of the No Claim Dealers being caught up, effectively as “collateral damage”, in proceedings where there is, by virtue of a contract of supply, the necessary correlation between plaintiff and defendant. Absent a judgment against them and with the inability of any future plaintiff to invoke the doctrine of res judicata, they will in all practical senses be immune to the findings in any claim against dealers who have supplied vehicles to plaintiffs.18
[47] Secondly, the authorities are clear that a representative plaintiff is not permitted to “advance claims” other than those which its own claim “represents”,19 nor may a representative plaintiff sue in respect of “entirely hypothetical issues and scenarios” which are “not raised on his or her own claim and may not be raised by any eventual claimant”.20
[48] In Southern Response Earthquake Services Ltd v Southern Response Unresolved Claims Group, the Court of Appeal refused to permit a single plaintiff to represent a class alleging breach of insurance contracts on common terms with the same defendant. It required particularised pleadings of breach of contract to be made by particular representative plaintiffs and particular subgroups within the class.21
[49] I accept Mr Goodall KC’s submission for the Dealers that, as a corollary of the proposition established in that case, any representative plaintiff needs to be a member of the class he or she is purportedly representing. None of the existing plaintiffs fall into that category, vis-à-vis the No Claim Dealers.
[50] To similar effect Associate Judge Paulsen held in Freer v Earthquake Commission:22
18 Noting that in most cases where joinder of defendants is sought on the basis that their rights of liabilities might be directly affected, the application is made by the defendants. Here the No Claim Dealers have no wish to be a party to the proceedings.
19 Southern Response Earthquake Services v Southern Response Unresolved Claims Group, above n 5, at [32]; Freer v Earthquake Commission [2023] NZHC 3662 at [42]; and Ideal Investments Ltd v Earthquake Commission [2022] NZHC 400 at [32].
20 Body Corporate Number DPS 91535 v 3A Composites GmbH [2023] NZCA 648, at [5] and [78]– [79].
21 Southern Response Earthquake Services v Southern Response Unresolved Claims Group, above n 5, at [32] and [41].
22 Freer v Earthquake Commission, above n 19, at [42].
A representative plaintiff must be able to advance a common issue on behalf of the represented class and have experienced the conduct they allege forms the common issue. They cannot advance claims other than those that their own claim represents. …
[51] Most recently in Simons v ANZ Bank New Zealand Ltd the Court of Appeal observed:23
[39] In Saunders v Houghton this Court said that to bring a representative action, it was a fundamental requirement that the representative order not confer a right of action on a member of the class represented who could have not asserted their claim in a separate action. The rationale is self-evident. A representative proceeding cannot confer a right of action to which a represented person is not entitled.
[52] Stating the obvious, none of the existing plaintiffs have a separate claim against the No Claim Dealers. None were supplied vehicles by them. As a result, no order under r 4.24 can confer a right of action on any such plaintiff.
[53] These requirements are not matters of pedantry, nor advanced with the intention to frustrating representative actions which should otherwise be facilitated. They go to the fundamental point that people should not be made parties to proceedings by strangers. That is why it is necessary to establish standing. New Zealand courts do not allow people to run claims that they do not have. They do not allow litigation funders to bring claims in their own name. The reason is to stop people intermeddling with claims that no party otherwise has an interest in bringing (even on a basis fully supported by a litigation funder). Absent at least one person who has a legal relationship with and arguable cause of action against the defendant, the alleged liability is speculative. Nor, as is suggested, does this unduly burden plaintiffs, limiting access to justice and complicating proceedings without clear benefit. It can hardly be described as a “burden” to require a plaintiff to have a claim against a defendant. Access to justice cannot be undermined in circumstances where, despite extensive advertising, not even a single person has identified themselves as wanting to sue the No Claim Dealers.
23 Simons v ANZ Bank New Zealand Ltd, above n 6, at [39] (footnotes omitted).
[54] Thirdly, “the point of a representative action is to create a res judicata in relation to a common issue of fact or law”.24 As TNZ submits, common issues are “factual or legal issues common to the claims of the representative plaintiff and all class members represented”.25 An issue is only common if determination of that issue on the plaintiffs claim can establish a res judicata for the class.26 For this purpose “group members are privies in interest to the lead claimant, but only for common questions of fact or law and not for individual or unpleaded claims”.27 New Zealand authority does not support application of the doctrine of res judicata between the class and a defendant in relation to an unpleaded claim which the representative plaintiff does not personally have.
[55]So, in:
(a)Saunders v Houghton,28 Mr Houghton had personally bought shares on an initial public offering and alleged direct claims against each of the defendants. He was permitted to act for all current and former shareholders of Feltex. Conventionally, the Court held that res judicata could therefore arise between the defendants and the representative class on the determination of his claims.
(b)Cridge v Studorp Ltd,29 the plaintiffs were each owners (and a body corporate) who had leaks in their respective properties which they alleged to be attributed to defective cladding systems manufactured by the defendants. They were permitted to act for all current and previous owners of properties using the relevant cladding system. Again,
24 Ressels v Southern Response Earthquake Services Ltd [2023] NZHC 3344 at [15]. See also
Ideal Investments Ltd v Earthquake Commission [2022] NZCA 641 at [4].
25 Ressels, at [12].
26 Ressels, at [12].
27 K R Handley Spencer Bower and Handley: Res Judicata (5th ed, LexisNexis, London, 2019) at [9.19]. Timbercorp Finance Pty Ltd (in liq) v Collins [2016] HCA 44 at [53]–[61] and McGougan v DePuy International Ltd [2018] NZCA 91, [2018] 2 NZLR 916 at [86]–[92]. See also Shiels v Blakely [1986] 2 NZLR 262 (CA) at 269 (doubting that res judicata could arise on the basis that an earlier proceeding was “truly a class or representative action” because, inter alia, there was “no claim by the individual plaintiffs, the union did not purport to sue for the benefit of all members” and the “union itself had no direct interest” in the fund at issue).
28 Saunders v Houghton [2012] NZCA 545, [2013] 2 NZLR 652.
29 Cridge v Studorp Ltd, above n 6.
unsurprisingly, the Court held that the determination of the common issues would bind the defendants and all members of the class.
[56] If a representative plaintiff has no pleaded cause of action against the defendant then no common issue arises on the plaintiff’s claim which can bind the proposed class or defendant. It follows that a representative plaintiff cannot sue a defendant unless that plaintiff has a claim against the defendant personally. As a corollary under r 4.56, the defendant has no right or liability which could be affected in such action, nor could it be said that the defendant ought to be joined in such action. And such, in turn, informs any application to strike out on the basis of improper joinder.
[57] I note that the conclusions reached on the basis of this three pronged analysis are consistent with those of the Law Commission which postulated five different potential approaches to standing in cases where a class action was brought against multiple defendants:30
(a)Each representative plaintiff and each class member must have a claim against each defendant. Described by the Commission as the “strictest approach”.
(b)Each representative plaintiff must have a claim against each defendant. However, it is not necessary for each class member to have a claim against each defendant.
(c)At least one representative plaintiff must have a claim against all defendants. It is not necessary for each class member to have a claim against each defendant.
(d)For every defendant, there must be a representative plaintiff with a claim against it. However, it is not necessary to have a representative plaintiff with a claim against all defendants.
30 Class Actions and Litigation Funding: Supplementary Issues Paper, above n 11, at [1.22].
(e)It is not necessary for each defendant to have a representative plaintiff with a claim against it. For each defendant, there must be at least one class member with a claim against them. This the Commission described as “the most liberal approach”.
[58] In this case TNZ and the Dealers contend for option (d)—the penultimately liberal option—and the plaintiffs for “the most liberal approach”, option (e).
[59]The Commission considered that option (d) was appropriate and stated:31
1.23 … We do not think it should be necessary for class members or representative plaintiffs to have a claim against every defendant. We think that could be too restrictive and could prevent a class action in situations where it might be an efficient way of dealing with multiple claims. There may be scenarios where it would be very unlikely for a claimant to have a claim against more than one defendant, such as a case against multiple councils or associated businesses that operate in different parts of the country.
1.24 However, we think that for each defendant, there should be a representative plaintiff with a claim against them. When an opt-out class action is brought, a defendant faces significant uncertainty about the claim against them due to the unknown size of the class. We think having at least one named plaintiff will help to provide some clarity to a defendant about the claim brought against them and will also enable a defendant to obtain discovery from a named party. In addition, the interest of all class members are likely to be better represented when there is at least one representative plaintiff with a claim against each defendant.
[60] I adopt the Commission’s reasoning for maintenance of a requirement that for every defendant there must be a representative plaintiff with a claim against it. I consider it applies irrespective of whether the ultimate representative order is made on an opt-in or opt-out basis.
[61] I note also that such a position accords with that adopted in Australia and generally in the United States.
31 Class Actions and Litigation Funding: Supplementary Issues Paper, above n 11, at [1.23]–[1.24].
[62] In the former, a plaintiff wishing to utilise the procedure under the Federal Court of Australia Act 1976 (Cth) Pt IVA against a given respondent must have a personal claim against that respondent that is shared by at least six other persons.32
[63] In the United States there must generally be at least one representative plaintiff with a claim against each defendant in multi-defendant class actions. This arises under:
(a)Rule 23 of the Federal Rules of Civil Procedure, whereby a plaintiff who has no cause of action against the defendant cannot meet the relevant “typicality” requirements because it cannot “fairly and adequately protect the interest” of those who do have such causes of action.33 This is the case even though the plaintiff may have suffered an identical injury at the hands of a party other than the defendant.34 While there are potential exceptions for joint tort claims (such as conspiracies) and “juridically linked” defendants, the latter are uncertain in scope and “many courts have struggled to define the application and limits of the [juridically linked] doctrine”. 35 Decisions such as Clark v McDonald's Corp36 indicate however that the juridically linked doctrine would not be satisfied in this case (finding no typicality when the plaintiffs sought to certify a class of all McDonald’s franchisees who failed to make certain accommodations for wheelchair users, because the plaintiff had no direct contact with most of the franchisees in the putative defendant class—even though some members of the class would have had such contact).
32 Ryan v Great Lakes Council (1997) 78 FCR 309; Cash Converters International Limited v Gray (2014) 223 FCR 139; and Damian Grave, Kenneth Adams and Jason Betts Class Actions in Australia (3rd ed, Thomson Reuters, Sydney, 2022) at [4.430].
33 La Mar v H & B Novelty & Loan Company 489 F 2d 461 (9th Cir 1973) at 466.
34 La Mar v H & B Novelty & Loan Company at 466. See William Rubenstein, Alba Conte and Herbert B Newberg Newberg and Rubenstein on Class Actions (6th ed, Thomson Reuters, 2023) at [2:5].
35 See Newberg and Rubenstein on Class Actions at [2:5] and [3:49].
36 Clark v McDonald's Corp 213 FRD 198 (NJ 2003).
(b)Article III of the United States Constitution whereby such a plaintiff also lacks standing to sue the defendant in Federal Court. As the United States Supreme Court said in Allee v Medrano:37
… it bears repeating that a person cannot predicate standing on injury which he does not share. Standing cannot be acquired through the back door of a class action.
Standing is in that context a threshold jurisdictional requirement derived from the “case or controversy” language of Article III in the Constitution.38
[64] In Canada the position varies province by province. The plaintiffs rely on the Supreme Court of Canada’s decision in Bank of Montreal v Marcotte where the Court considered whether the law of Québec “permits a collective action where the representative does not have a direct cause of action against, or legal relationship with, each defendant”.39 This was an appeal from three related judgments of the Québec Court of Appeal arising from a class action against (initially) 10 banks. The plaintiffs alleged that the banks had acted contrary to the Consumer Protection Act in Québec. The representative plaintiffs (Marcotte and Laparé) were customers of two of the banks only. The other banks claimed that Marcotte and Laparé did not have standing to sue as they did not have any direct connection to the entities concerned. The Supreme Court upheld the Superior Court of Québec and Court of Appeal of Québec in holding that the absence of a direct cause of action did not preclude identification of Marcotte and Laparé as adequate class representatives.
[65] Significantly however, the relevant rules of court provided for representative orders in favour of plaintiffs with “sufficient interest” in the action. The Court held that actions involving identical, similar or related questions of law or fact satisfied this criterion, ensured economy of judicial resource, increased access to justice and averted the possibility of conflicting judgments on the same questions of fact.
37 Allee v Medrano 416 US 802 (1974) at 829.
38 See Lujan v Defenders of Wildlife 504 US 555 (1992) at 560.
39 Bank of Montreal v Marcotte, above n 8, at [31].
[66] The “sufficient interest” test under the Québec Code of Civil Procedure can be compared with the “same interest” test under the New Zealand High Court Rules.40
[67] Likewise in British Colombia, Alberta, Saskatchewan and Manitoba, there are legislative provisions supportive of representative orders without a direct cause of action or legal relationship with each defendant. As the Ontario Superior Court of Justice observed in Vecchio Longo Consulting Services Limited Inc v Aphria Inc:41
[146] The above analysis also reveals and explains why the availability of a representative plaintiff is different in other provinces where the class action legislation contains a provision like s. 4(4) of Saskatchewan’s Class Actions Act, which states:
4(4) Where it is necessary to do so in order to avoid a substantial injustice to the class, the court may appoint a person who is not a member of the class as the representative plaintiff for the class action.
[147] Such a provision makes it easy to interpret the class action legislation to not require a representative plaintiff with a cause of action against each defendant. Thus Alberta, British Columbia, Manitoba, and Saskatchewan have declined to follow the Ragoonanan principle.
[68] The reference to the Ragoonanan principle invokes the Ontario Supreme Court of Justice decision in Ragoonanan Estate v Imperial Tobacco Canada Ltd in which it was held that:42
… it is not sufficient in a class proceeding … if the pleading simply discloses a reasonable cause of action by the representative plaintiff against only one defendant and then puts forward a similar claim by a speculative group of putative class members against the other defendants.
[69] Application of this principle has again been confirmed in the 2024 Ontario Supreme Court of Justice decision Pugliese v Chartwell43 in which the Court adopted the succinct exposition of Justice Laskin in Hughes v Sunbeam Corporation (Canada) Ltd, namely “in a proposed class action, there must be a representative plaintiff with a claim against each defendant”.44
40 Acknowledging that “same interest” does not require an identical claim and can be a “significant common interest”. See Cridge v Studorp Ltd, above n 6, at [11].
41 Vecchio Longo Consulting Services Inc v Aphria Inc 2021 ONSC 5405, 157 OR (3d) 92 at [146]– [147].
42 Ragoonanan v Imperial Tobacco Canada Ltd (2000) 51 OR (3d) 603 (ONSC) at [54].
43 Pugliese v Chartwell 2024 ONSC 1135 at [84], [86], and [87].
44 Hughes v Sunbeam Corporation (Canada) Ltd (2002) 61 OR (3d) 433 at [18].
[70] Generally, therefore, the overseas position favours the approach contended for by TNZ and the Dealers, at least in the absence of specific legislative or rule provisions to the contrary. It is clear also that after comprehensive review, the Law Commission was not persuaded to recommend the “most liberal approach” which retention of the No Claim Dealers as parties requires.
Conclusion on application for order (c) — consolidation
[71] For the reasons indicated I am not satisfied that any one or more of the existing plaintiffs would be appropriate representatives in proceedings alleging breach of the CGA by the No Claim Dealers. On that basis, I consider it appropriate to make it a term of the order consolidating the two claims that the No Claim Dealers be removed as defendants in the Dealer proceedings. Alternatively, I consider it appropriate to strike out their names as defendants in terms of r 4.56.
Result
[72] I make orders consolidating proceedings CIV-2023-454-83 and CIV-2024- 404-467.
[73] I do so on terms that the following defendants currently identified in the Dealer proceedings are struck out/removed from the consolidated Dealer claim:
(a)Ashburton Automotive Ltd;
(b)Centrepoint Motors Ltd;
(c)G W D Russells Ltd;
(d)Marlborough Automotive Ltd;
(e)Muir & Richards Ltd;45
(f)Pat Prescott Ltd;
45 I record the obvious that I have no known familial relationship with this company.
(g)Rangiora Automotive Ltd.
[74] I reserve leave to any party to apply for any supplementary terms of consolidation.
[75] To the extent that the existing stay in respect of the Dealer proceedings is necessarily lifted to facilitate consolidation on the terms indicated, I do so.
[76]I make, without opposition, the further orders appearing in [8] and [12].
Costs
[77] In the event these cannot be agreed (which is my expectation), memoranda (maximum five pages plus any schedule) may be filed on the following timetable:
(a)TNZ/Dealers — 19 September 2024;
(b)plaintiffs — 3 October 2024;
(c)any reply by TNZ/Dealers — 10 October 2024.
[78] It is obvious, taking into account the matters resolved without opposition and the results of this judgment, that the plaintiffs have had both successes and failures on the alternative relief sought in their amended application. It may, in that context, be appropriate that either costs lie where they fall or that any costs liability on the plaintiffs be at least mitigated. I recognise however that the issues covered in the substantive part of this judgment occupied the bulk of the oral argument.
Muir J
Solicitors:
Shine Lawyers, Auckland Buddle Findlay, Auckland Gilbert Walker, Auckland
Schedule A – Additional Plaintiffs
To CIV-2023-454-83:
1.YU CAO, 3 Javelin Place, West Harbour, Auckland, Scientist.
2.ROSS DAVID BENNETT, 420A Ellesmere Junction Road, Springston, Canterbury Allocation and Replenishment Analyst.
3.SHAUN GARTH COUGHLAN, 28 Clipper Street, Titahi Bay, Porirua, Self Employed.
4.ADAM GERALD D’OYLEY STODART, 32 Hinau Grove, Wainuiomata, Lower Hutt, Team Leader.
5.ALISON ELIZABETH STODART, 32 Hinau Grove, Wainuiomata, Lower Hutt, Transaction Solution Specialist.
6.ALICIA MAY STYLES, 6 Rinaha Place, Koutu, Rotorua, Property Manager.
7.LESLIE DAVID THORN, 723 Tarawera Road, Lake Okareka, Rotorua, Park Manager.
To both CIV-2023-454-83 and CIV-2024-404-467:
8.ASTRID MARY SIMS, 16 Middle Yards Road, Maungati, Canterbury, Company Director.
9.ALLAN GERALD SIMS, 16 Middle Yards Road, Maungati, Canterbury, Company Director.
10.KIERAN THOMAS WELSBY, 18 Airlie Road, Plimmerton, Porirua, Financial Adviser.
11.DALTON ROBERT REED, 55C Landscape Road, Papatoetoe, Auckland, Product Manager.
12.NICHOLAS ALEXANDER EYRE, 3 Johnson Place, Queenstown, Real Estate Agent.
13.STEVEN MARK HEARD, 2/661 Beach Rd Rothesay Bay, Auckland, Teacher.
14.DUNSTAN ANNESLEY FERNANDO, 58 Halswell Road, Hillmorton, Christchurch, Company Director.
15.REHANA FERNANDO, 58 Halswell Road, Hillmorton, Christchurch, Company Director.
16.DUNBLANE FARMS LIMITED, an incorporated company having its registered office at 16 Wear Street, Oamaru.
17.RICHARD FREDERICK PEET HOWELL, 96 Gear Road, Te Horo, Adjudication Officer.
18.ROBOTECH CONTRACTORS LIMITED, an incorporated company having its registered office at 70 Shepherd Road, Kerikeri.
19.JAMES RICHARD WILLIAMS, 19 Sea View Road, Leigh, Fisheries Scientist.
20.ALICIA MAY STYLES, 6 Rinaha Place, Koutu, Rotorua, Property Manager.
21. LESLIE DAVID THORN, 723 Tarawera Road, Lake Okareka, Rotorua, Park Manager.
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