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Court of Appeal of New Zealand |
Last Updated: 25 January 2018
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IN THE COURT OF APPEAL OF NEW
ZEALAND
BETWEEN WOOL BOARD DISESTABLISHMENT COMPANY
LIMITED
Appellant
AND SAXMERE COMPANY LIMITED
First Respondent
AND THE ESCORIAL COMPANY LIMITED
Second Respondent
AND RICHARD KING
Third
Respondent
AND RUSSELL STEWART EMMERSON AND FOREST RANGE LIMITED
Fourth Respondents
Hearing: 30 June - 1 July 2010
Court: Hammond, Chambers and Ellen France JJ
Counsel: J S Kos QC, D H McLellan and J L Bates for
Appellant
S J Grey and L M Ritchie for
Respondents
Judgment: 17 November 2010 at
10 am
|
JUDGMENT OF THE COURT
|
A The appeal is
allowed.
B The cross-appeal is dismissed.
C The
declarations made in the High Court are quashed.
REASONS
Hammond J (dissenting in part) [1]
Ellen France J [214]
Chambers J [242]
HAMMOND J
Table of Contents
Para No
Introduction [1]
A fresh appeal is
ordered [4]
The status of
the prior judgment of this Court [9]
Factual
background
Introduction [15]
The wool industry in New
Zealand [16]
Wool marketing
in New Zealand [19]
Saxon
sheep and the promotion of Saxon wool [22]
The central complaint [29]
The relevant
legislation
Prior to the Wool Board Act 1997 [30]
The Wool Board Act
1997 [49]
Saxmere’s
administrative law claims, in broad terms [60]
The first challenged
decision: the Merino New Zealand decision [62]
The second challenged
decision: the May 1998 decision [65]
The third challenged
decision: the capitalisation decision [69]
A fourth challenged
decision: retrospective funding [72]
An obliquely challenged
decision: November 1998 [73]
The Merino New Zealand
decision [74]
Factual
context [75]
The impugned
decision [80]
Was the
decision lawful?
(i) Introduction [84]
(ii) The plaintiffs’
submissions in the High Court [86]
(iii) The defendant’s
submissions in the High Court [93]
(iv) The High Court
Judge’s treatment of the construction of s 6(6) [97]
(v) The first appeal [101]
(vi) The Supreme
Court [105]
(vii) Summarising the
competing arguments [106]
Evaluation of the
construction arguments
(i) Who is to decide? [113]
(ii) The proper construction
and its application [119]
(iii) Relief [138]
The May 1998
decision
The factual context [146]
A lawful decision? [152]
Relief [161]
The capitalisation
decision [162]
The
lawfulness of the decision [166]
A summary on the public law
claims [170]
Restitution of
levies [174]
Breach of
statutory duty [182]
Negligence [194]
Some points in
response [200]
The proper
approach to s 6 [201]
The
Merino New Zealand decision [205]
The May 1998 decision [206]
The capitalisation
decision [208]
Conclusion [209]
Introduction
[1] Saxmere Company Ltd, and the other respondents, produce and market super-fine wool.[1] They claimed that the appellant, the Wool Board Disestablishment Company Ltd as statutory successor to the Wool Board,[2] acted unlawfully when declining certain applications of theirs to the Board in the late 1990s and early 2000s for assistance in promoting and marketing their wool.
[2] Their proceeding, commenced on 17 December 2003, came to trial in the High Court in August and November of 2005. In the result, Miller J substantially agreed with the respondents’ claims.[3] The Judge held that the Board failed to comply with certain provisions of the Wool Board Act 1997 (the 1997 Act), in two respects. The Judge did not agree that certain other alleged breaches of the 1997 Act had been made out. He declined an application by the respondents for restitution of levies paid by them to the Board. The Judge further held that the Board was liable in damages for breach of statutory duty and in negligence to the respondents. That liability was limited to certain periods of time; to certain growers; and the question of what damages were payable was to be ascertained at a subsequent hearing of the Court.[4]
[3] Neither party was satisfied with the decision of the High Court. The Board appealed on 22 December 2005. By its notice of appeal it contends that the Judge was wrong to have found any liability on its part. The Saxmere interests cross-appealed on 26 January 2006, broadly on the footing that the High Court findings as to liability had not gone far enough.
A fresh appeal is ordered
[4] The appeal to this Court (to which we will refer, to the extent we need to refer to it, as “the first appeal”) was heard in April 2007. In August 2007 this Court delivered a judgment allowing that appeal, dismissing the cross-appeal, and setting aside all the orders made by the High Court.[5]
[5] On 12 November 2007 the Supreme Court of New Zealand dismissed an application for leave to appeal to that Court from the decision of this Court on the first appeal.[6]
[6] Subsequently the Supreme Court, after certain recusal proceedings which we need not detail here, directed that “[the appeal be] remitted for [re]hearing in the Court of Appeal by a new panel of Judges”.[7]
[7] None of the Judges on this panel has had any prior involvement in any aspect of this litigation. This panel was formed by selecting in order of seniority from those Judges of this Court who were available to sit.
[8] It is convenient to record here that counsel accepted that the hearing before us was by way of rehearing. That is, the rehearing was on the record of evidence taken in the High Court; and the pleadings on which the case went to trial. Counsel further accepted that the law to be applied on the rehearing is as it stands at the date of the hearing before us.[8] Although in the run up to the rehearing certain applications were made for the Saxmere interests for the admission of further evidence, those applications were subsequently abandoned.
The status of the prior judgment of this Court
[9] There is an issue as to how far, if at all, this panel can look at what has previously fallen from this Court on the first appeal, or for that matter from the Supreme Court in proceedings subsequent to that.
[10] When the panel was first assigned to this appeal and began to case-manage it, we did not read the prior judgment of this Court as part of our preparation. We did not then find it necessary. We advised counsel that we did not propose to read that judgment without first hearing from them on this issue. We later indicated to counsel that we wished to hear from them on this issue and we did so, at the outset of the oral hearing.
[11] We accept that we are charged with reaching a fully independent view of the matters which fall for our determination. That may suggest that as a prudential measure we should not look at the judgment of this Court on the first appeal. It might be argued that to do so could lead to the first appeal unduly influencing this panel in some way. And perhaps equally important, in the context of this appeal in particular, to do so might be said to give rise to the impression (even if wrongly founded) that the panel was so influenced.
[12] On the other hand, the crux of the case involves questions of statutory construction. The essential questions are, “what were the statutory obligations of the Board?” And, “were they observed?” For the panel not to know why the previous panel took the view of the legislation it did would be to deprive the panel of one source of insight into the problems it has to confront. Professional judges routinely have to look at the work of other judges and ask themselves whether that is the view they take of the relevant legislation. There is nothing unusual about such an enterprise. Then too an appropriate measure of judicial humility is required. If there is something in the prior judgment which strikes the panel as being compelling then it would be thoroughly unfortunate for this panel not to know about that argument, or even to overlook it. And finally, if there were arguments that commended themselves to the panel on the first appeal, it seems inconceivable that those arguments would not have been picked up and advanced by counsel before us. The precise terms in which those arguments have been put might turn out to be important. Recourse to the prior judgment may assist this panel in better understanding the subtleties of the arguments advanced.
[13] As to any prior authority on this issue, in R v Bow Street Metropolitan Stipendiary Magistrate, Ex parte Pinochet Ugarte (No 3)[9] (another case of a rehearing after a recusal problem) the House of Lords thought it to be the proper practice for the new panel to consider and refer to the earlier decision. Several of their Lordships, none of whom had sat in the earlier (No 1) decision,[10] referred to
that decision in giving their reasons in the subsequent case.[11]
[14] We therefore indicated to counsel that to the extent that we might find it appropriate, we propose to look at the prior judgment, though whatever weight we give to the particular point at issue is entirely a matter for this panel.
Factual background
Introduction
[15] To understand how this proceeding came about it is necessary to first say something of the wool industry in New Zealand and the challenges it has faced. These triggered the events which came to trial. It is also necessary to say something about the Saxon sheep which the Saxmere interests promote.
The wool industry in New Zealand
[16] For much of its history New Zealand has, not inappropriately, been described as living on the sheep’s back. Timber, whaling and sealing were the earliest export industries in this country. But from the 1850s sheep drove the New Zealand economy. First it was wool, on its own. But then after the refrigerated cargo revolution of the 1880s meat joined wool to form an industry that produced well over half of the country’s export earnings until late in the twentieth century. And wool was the senior partner. According to one standard reference work, it produced almost 90 per cent of the country’s total export income in 1860 and as late as the 1950s it was still producing two thirds of New Zealand’s export earnings.[12]
[17] The last quarter century has been a turbulent period for the wool industry. Sheep numbers have declined dramatically. In 1948 soldiers on rehabilitation blocks could earn a living with 600 breeding ewes. Sheep farms today have upwards of
3,000 sheep and concentration of landholdings has gone on apace. Whereas in the 1880s there were about 31,000 farms with sheep, by the mid-1970s that number had declined to under 20,000.[13]
[18] Not only have farm numbers and numbers of sheep declined, but wool as a product has come under fierce competition from alternative fibres and fashions, although it remains widely regarded as a standard to aspire to, particularly in the apparel and luxury wool carpet markets.
Wool marketing in New Zealand
[19] Historically, New Zealand agricultural products faced unique marketing challenges. For a start, the country is at a considerable distance from its export markets. A collective response and a collaborative effort in the various agricultural sectors was adopted to help overcome this and other challenges. This approach became fundamental to the producer board model developed to market New Zealand’s primary produce. In the case of wool, shearers’ unions and shippers brought the 19th century run-holders together. Then there were the problems of war time stock piles and the market collapse after the First World War. But a collective response had led naturally to a collaborative effort in funding research and publicity. Indeed, centralised marketing and regulation of the industry grew largely from the days of orderly disposal of the commandeer stocks from the two World Wars. A minimum floor price of last resort evolved into full market intervention with a levy being paid by woolgrowers to the Wool Board for wool promotion.
[20] These responses reflected the broad social and economic conditions of their time. But social conditions and institutional and personal responses began to change. As to the latter, it came to be seen across the various agri-businesses of New Zealand that more personal decision-making, individual choice and individual responsibility was required.
[21] There was however an ongoing conundrum which was not always readily apparent to highly individualistic farmers. There was the need collectively and collaboratively to respond to matters of industry-wide significance, but individual or groups of farmers were highly reluctant to pay for such activities. The economic problem was that it would either cost too much or the benefits would be shared with farmers who had not contributed. Statutory and institutional change was inevitable. We detail the statutory changes underlying this litigation in a subsequent section of this judgment.[14]
Saxon sheep and the promotion of Saxon wool[15]
[22] Saxon sheep have a royal lineage. The breed originated in North Africa. It was taken by Berbers to Spain in the 11th century. It became part of the Royal Escurial flock. These animals were carefully bred for their very fine wool.
[23] Some of these royal sheep were exported to Australia in the 1830s and cross-bred with Merino sheep. There remained only a relatively few pure bred Saxon sheep in the world, including some in Tasmania.
[24] Mr Radford, the prime mover in this litigation, established his own Saxon flock in New Zealand in 1984 as a daughter flock of the Winton Stud in Tasmania.
[25] The High Court Judge found that Saxon wool possesses a distinctive combination of curvature, crimp and fineness.[16] This differentiates it from other wool. The fibre is classed as super-fine and its diameter is 12–18 microns. Merino wool on the other hand covers a wider range from 12–24 microns. More than 95 per cent of the Merino clip in 1996 was around 18–23 microns.
[26] By comparison, a medium crossbred sheep is around 30–35 microns; carpet wool 35–45 microns.
[27] Fibre diameter is regarded as the single most important wool characteristic determining quality and price. The claimed advantages of the Saxon fleece are that it possesses superior mechanical and aesthetic properties arising out of its super-fineness. The Judge found that “It is light yet bulky, soft, and has high lustre. Fabrics woven from it are soft yet have a high spring and elasticity.”[17]
[28] Mr Radford developed his pure Saxon wool into a distinctive luxury fabric called “Escorial”. He promoted this wool first in New Zealand and then to English and Italian weavers, spinners and fashion houses. It came to be recognised as an exclusive product that could allow clothing producers to meet the increased competition from mass-produced natural fabrics and the newer and more sophisticated man-made fibres. The Judge found that Mr Radford’s:[18]
... remarkable efforts ... resulted in Escorial being used as a branded fabric in suits by Brioni and other leading fashion houses and in the formation of a guild comprising six English weavers, one leading French topmaker (Chargeur) and one Italian spinner (Drago).
The central complaint
[29] In a nutshell, Mr Radford’s complaint in this litigation is that the Board, which had the statutory function, among others, to increase demand for New Zealand wool, unlawfully refused to differentiate and assist with some of the substantial promotion and development costs of Saxon wool. Indeed, for him and the other respondents there was a double whammy: grower levies imposed by the Board on Saxon wool in New Zealand were used to fund generic Merino marketing efforts by Merino New Zealand Ltd (Merino New Zealand), a joint venture between the Board and Merino New Zealand Incorporated (MNZI), a society of Merino growers. Mr Radford and his colleagues viewed Merino New Zealand as a competitor. In the respondents’ view it was seeking to control marketing of all New Zealand Merino wool, including Saxon wool. But what the respondents regarded as inept marketing efforts gave them at best no assistance; and at worst actually damaged their business by passing off, as it were, other Merino wool as Saxon wool.
The relevant legislation
Prior to the Wool Board Act 1997[19]
[30] In 1937 four grower nations including Australia and New Zealand formed the International Wool Secretariat (IWS). From about 1964 IWS promoted wool products under the “Woolmark” brand.
[31] The New Zealand Wool Board has a long history. It was responsible for promotion and research. It is unnecessary to go into the early legislative history, except to say that the then Board and a Wool Marketing Commission were amalgamated under the Wool Industry Act 1977.
[32] That statute provided that “[t]he general object for which the Board is established is to obtain, in the interests of growers, the best possible long-term returns for New Zealand wool.”[20] The functions of the Board under that Act were to give sheep farmers a united organisation responsible for promoting, marketing, and research with respect to their wool.
[33] So the Board, through its international marketing division, had the responsibility for marketing all New Zealand wool. It should be added that overseas marketing of New Zealand wool is of the greatest importance because New Zealand has itself no major weaving facilities for apparel fabrics: the wool has to be exported.
[34] Under the model then in force, growers controlled only a fraction of the value chain. An auction system was employed. Under that scheme quality could not be assured and it was difficult to establish a customer-orientated marketing programme. This in the context of increasing competition from other apparel fibres including man-made fibres.
[35] These factors all contributed to New Zealand withdrawing from the IWS in 1996. The Board was looking for more specific and targeted marketing with an emphasis on New Zealand origins. Its international marketing division was accordingly renamed Wools of New Zealand. It adopted the “Fernmark” brand. Whilst this changed the brand, it did not depart from the traditional model of wool being sold at auction to traders who on-sold it to other parties for processing.
[36] By now however growers were becoming increasingly dissatisfied with the traditional marketing approach. And Merino growers were concerned to control the marketing of fine wools.
[37] The relationship between the Board and the Merino growers appears to have been distinctly fractious at times. In March 1996 the Board and MNZI entered into an agreement under which the Board sought MNZI’s assistance with the marketing and industry development of Merino wool. This agreement acknowledged that the Board had a statutory responsibility for the promotion and marketing of New Zealand wool, but provided that MNZI would carry out the marketing and industry development of Merino wool for three years from 1 July 1996.
[38] The agreement provided that MNZI had a goal of breaking free of Australian and other Merino prices. More specific objectives were also set out in the agreement, covering the volume of wool to be produced, price and New Zealand processing.
[39] The agreement contained no provision for the appointment of other agents to promote Merino wool, although there was provision for termination in the event of breach. The grounds for termination included MNZI failing to achieve any one or more of its specified objectives by more than 10 per cent. MNZI was required to report quarterly and annually against its objectives. It was also to provide the Board with an annual marketing plan with quite detailed information.
[40] Part of the levy paid to the Board in respect of “all Merino breed wool” was to be channelled to MNZI. The amount paid to MNZI was to be the total levy in respect of Merino wool less the cost of services provided by the Board to MNZI (as determined by the Board). This arrangement led to the Board altering its levy collection practices, because it was necessary that levy collection agents thereafter identified Merino wool in their returns.
[41] The practical consequence of this arrangement was that Wools of New Zealand continued, under the 1996 agreement, to market Merino wool alongside MNZI. The Judge appears to have accepted the evidence of the Board Chairman that “having been given an inch MNZI was hell-bent on taking a mile”.[21]
[42] In 1997 the Board entered into mediation with MNZI in an endeavour to address the difficulties over control of Merino marketing.
[43] Alongside all of this, the government of the day had become concerned about the role and intrinsic effectiveness of producer boards generally. It introduced the Producer Board Acts Reform Bill. The Primary Production Select Committee held hearings in 1997 at which a number of grievances were aired.
[44] In relation to wool, one of the problems was that super-fine woolgrowers (such as Mr Radford and Mr Emmerson, who represented 44 growers in the original proceeding and as fourth respondent here) thought that their wools should be differentiated in a way that MNZI would not recognise. There was too an economic aspect to their concerns. All wool was levied at a rate of 5 per cent of its value, but super-fine wool was more valuable, so that the Saxon growers saw themselves as subsidising, to some extent, the Merino growers.
[45] Where things should go for the future plainly gave the Select Committee some real difficulties. What the Judge described as “the overwhelming majority”[22] of those making submissions wanted the Board to carry on. One alternative was to allow minorities, such as Saxmere, an “opt-out” mechanism. Another alternative – with the Board continuing in its role – was a statutory consideration mechanism under which minorities’ position would have to be taken into account. I use the term “statutory consideration mechanism” advisedly; the provision actually adopted is at the heart of this litigation, and will be recited in full shortly.
[46] The Select Committee said:[23]
We looked at a range of options on levels of involvement and, by majority, reject those involving a radically new role for the Wool Board. The overwhelming majority of submissions supported the board’s continuation. We decided on a composite model to optimize the flexibility of the Wool Board to take advantage of opportunities and challenges, as well as to foster flexibility and innovation for industry services and activities. We also want to encourage greater producer involvement with the marketplace. The opportunities for producer input in the development of strategic directions by the Wool Board and to make the board more accountable also need to be increased.
We are also recommending that each Board should be required to satisfy itself that the mechanism employed for giving effect to each of the functions it undertakes is likely to be the most efficient and effective means of doing so. This will ensure that, for example, consideration of such options as contracting out within the overall programme of services to its producers. While difficult to anticipate the precise requirements of particular situations, we believe strongly that the boards must be flexible and take special care with regard to the commercial sensitivities of parties with whom they are contracting.
[47] The Minister said:[24]
The legislation now requires the boards, when there is a function to be carried out, to address first whether any other organisations could more effectively or more efficiently carry out that function. The legislation requires that if they make a decision that does not properly reflect which organisation can best carry out any given function, then that decision is challengeable.
I think the Committee of the whole House was persuaded that the way the select committee has organised that part of the legislation was a more robust and satisfactory way of dealing with sub-group interests than providing for an opt-out provision. Certainly, the opt-out provision had a superficial attraction. I think all of us have thought very long and hard about it, but the select committee was not persuaded. The Committee of the whole House was not persuaded either, so that proposed amendment did not go ahead.
(Emphasis added.)
[48] It was in this context that the Wool Board Act 1997, to which I now turn, was enacted.
The Wool Board Act 1997
[49] The Wool Board Act 1997 came into force on 17 December 1997. It was repealed, as from 15 September 2003, by the Wool Industry Restructuring Act 2003. This had the effect of converting the Board into a company. It is only the 1997 Act that we are concerned with in this litigation. The Wool Industry Restructuring Act received Royal assent on 7 July 2003. The Board was disestablished on 15 September 2003 and residual winding up activities were transferred to the Wool Board Disestablishment Company Ltd (the appellant in this proceeding). It was at that point that 67 years of statutory funding of promotion and research for New Zealand wool ended, after the passage of the original Wool Promotion Act 1936.
[50] It is worth noting here, in passing, that by 2003 woolgrowers had contributed approximately $1.3 billion of levies to the Board and its predecessor organisations. Of that $830 million had been paid to the IWS (of which $785 million came from grower levies).[25]
[51] Section 5 of the 1997 Act sets out the Board’s objects:
(1) The object of the Board is to help in the attainment, in the interests of growers, of the best possible net ongoing returns for New Zealand wool.
(2) In pursuing its object, the Board must have regard to the desirability of the wool industry's making the best possible net ongoing contribution to the New Zealand economy.
[52] Section 6 prescribed the Board’s functions:
(1) The functions of the Board are,—
(a) With a view both to increasing the volumes sold and to obtaining higher returns for each unit sold, to increase the demand for New Zealand wool and wool products (in existing and new markets); and
(b) To maintain the confidence of buyers and users of wool and wool products in the New Zealand wool industry; and
(c) To help obtain improved access to overseas markets for New Zealand wool and wool products; and
(d) To conduct (whether alone or jointly with other bodies) research and development into sheep and wool, including research and development into—
(i) The rearing of sheep; and
(ii) Increasing the quantity or quality of the wool produced by sheep in New Zealand; and
(iii) The harvesting, handling, preparation, and processing of wool; and
(iv) The manufacture of wool products; and
(v) The handling, marketing, packaging, product development, and transport, of New Zealand wool and wool products; and
(e) To encourage the adoption of more efficient processes and practices for—
(i) The rearing of sheep in New Zealand; and
(ii) Increasing the quantity or quality of the wool produced by sheep in New Zealand; and
(iii) The harvesting, handling, preparation, and processing of New Zealand wool; and
(iv) The manufacture of New Zealand wool into products; and
(v) The handling, marketing, packaging, product development, and transport, of New Zealand wool and wool products; and
(f) To collect, process, maintain, and make available, information for the purposes of assisting production, investment, processing, product development, and marketing decisions in respect of—
(i) Market requirements for wool and wool products; and
(ii) Other matters relevant to the New Zealand sheep and wool industries; and
(g) To account to growers on the Board's activities and its use of levy money and other resources; and
(h) To discuss the Board's activities with any persons and organisations in the New Zealand wool industry the Board thinks fit; and
(i) To perform such other functions as are conferred on the Board by this Act or any other enactment.
(2) The Board may perform any of the functions specified in paragraphs (a) to (f) of subsection (1) (or any element of any of those functions) alone, or—
(a) In a partnership or joint venture with; or
(b) By arranging for its performance by—
any other person or persons (including a company or companies in which the Board holds shares).
(3) The Board may perform any of the Board's functions, or arrange for its performance, to the extent only that its performance is consistent with the Board's object.
(4) It is also a function of the Board to report regularly to the Minister on—
(a) The performance and present state of the New Zealand wool industry; and
(b) The Board's achievement of its object; and
(c) The Board's performance of its functions; and
(d) Any other matters the Board thinks fit or the Minister requests.
(5) In the exercise of its functions, the Board must have regard to the need for it to have adequate financial reserves.
(6) The Board must not determine that a function or element of a function is to be performed by a particular mechanism and entity (that is to say the Board, a partnership or joint venture, or some person other than the Board) unless it has—
(a) Considered other mechanisms and kinds of entity that might reasonably be expected to be able to perform the function or element efficiently and effectively; and
(b) Satisfied itself that the mechanism and entity are likely to be the most efficient and effective means of performing the function or element.
As shall be seen, s 6(6) in particular is at the heart of this case.
[53] The Board had extensive consultation obligations. Section 7(1)(b) of the Act provided:
(1) The Board must prepare, from time to time reconsider and (if appropriate) amend, and maintain a written statement of—
...
(b) How and to what extent the Board intends to consult growers on the Board's activities, and (to the extent, if any, that it intends to arrange for people to consult growers on its behalf) how grower concerns should be reported back to it by people consulting growers on its behalf.
...
[54] Further to those obligations, s 8 required consultation with growers “about the Board’s activities”; s 9 required the Board to consult representative organisations, and s 10 required the Board “in performing its functions, or preparing, reconsidering, or amending its statement of strategic and consultative intent, [to] take account of grower concerns”.
[55] As to the constitution of the Board, it had ten directors: six elected by growers and four appointed by the Minister on the Board’s recommendation.[26] The Board was required to hold an annual general meeting[27] at which its statement of strategic and consultative intent had to be discussed and an opportunity afforded to growers to participate in the discussion. Directors were expressly required to participate responsibly in the discussion, and respond to all reasonable questions and concerns raised by growers about the statement of strategic and consultative intent.[28] Each annual general meeting was also required to consider whether growers should be elected to represent other growers in their regions.[29]
[56] The Board’s powers to levy wool are important in this litigation. Under ss 39 to 51 of the Act the Board was empowered to collect a levy from all woolgrowers, using collection agents appointed for that purpose. A levy became payable on any wool when it was sold to or through a collection agent or was subjected to a specified activity by collection agents or exported from New Zealand.[30] The specified activities generally concerned the processing of wool.[31]
[57] The levy money was paid to the Board and formed part of its funds.[32] Of note is that the Board’s assets were expressed to be held and administered for the benefit of wool growers.[33] The levy was to be calculated at a rate and on a basis to be prescribed by the Board and Gazetted, and it could be set in relation to wool of a particular kind.[34]
[58] Until June 2001 the Board levied all wool at a uniform rate of 5 per cent of its value. At that time it ceased to levy for marketing purposes. The levy was reduced to 2 per cent and thereafter those monies were used for industry good purposes only.
[59] Section 39(7) of the Act appeared to give the Board a power to omit to levy wool of a “particular kind”. It was suggested to us, when this was drawn to the attention of counsel in argument, that this power was used with respect to such things as “crutchings” (wool off-cuts from the rear area of the sheep). However the provision is expressed in general terms, and might conceivably have been applied to any kind of wool.
Saxmere’s administrative law claims, in broad terms
[60] Saxmere advanced its administrative law claims on the footing that the Board had breached the 1997 Act on four occasions. I will now set out the first three of these claims in short form, and the outcome in the High Court with respect thereto, in order to give an appreciation of the overall picture, before examining in detail each of these claims and the construction of the legislation. The fourth claim has fallen away, and is not before us.
[61] There is however a unifying thread through these claims, which should be remarked at the outset. The Saxmere interests saw, and still see, s 6(6) of the 1997 Act as being what they termed “the Saxon clause”. Their proposition is that this provision was enacted by Parliament as a concession, in favour of persons in their kind of position, for Parliament not enacting an opt-out clause. They maintain that the Board did not lawfully apply the legislation in relation to the three discrete decisions. Their essential complaint is that the Board breached its obligations under s 6(6) by favouring a joint marketing venture with Merino New Zealand for all Merino wool, over Saxmere’s separate proposals for niche marketing of Saxon wool. They consider they were unlawfully discriminated against in that the Board put them entirely to one side, and never considered, or properly considered, their position, as the 1997 Act required.
The first challenged decision: the Merino New Zealand decision
[62] On 20 February 1998 the Board entered into a heads of agreement with MNZI. This gave MNZI, through the joint venture company, Merino New Zealand Ltd, responsibility for the marketing of all wool up to 24 microns. This meant that Merino New Zealand would be responsible for marketing Saxon wool. It also gave Merino New Zealand the share of the levy stream generated by Saxon wool after deducting the Board’s other funding requirements. The complaint here is that before deciding to enter into this agreement the Board did not engage in the sort of exercise contemplated and required by s 6(6) of the Act.
[63] The High Court Judge found that, at least in respect of this decision, the Board did comply with the Act. Saxmere cross-appeals against that holding.
[64] I will term this claim the Merino New Zealand decision.
The second challenged decision: the May 1998 decision
[65] From the outset Mr Radford was interested in securing funding assistance from the Board. Indeed on the very day the new Act came into force (17 December 1997) he had a meeting with Mr Jackson, who was the Chief Executive Officer of the Board. Mr Jackson agreed to at least fund the preparation of a business and marketing plan for Saxon wool. Mr Radford developed a plan. It went before the Board at a meeting on 5 and 6 May 1998. The Board declined to provide funding assistance to Saxmere in relation to the implementation of this plan.
[66] The High Court Judge found the statute was not here complied with. The central appeal point for the Board is that:
... the Saxmere business plan, confined as it was to an almost infinitesimally tiny proportion of total wool production, and with doubtful differentiation from other Merino fine wool, was not an “element of a function” of the Board which engaged s 6(6) at all.
[67] In effect, the appeal point is that the Board was not required by s 6(6) to consider Saxmere as an alternative to Merino New Zealand for promoting and marketing Saxon wool.
[68] I will term this the May 1998 decision.
The third challenged decision: the capitalisation decision
[69] Difficulties between the Board and the Saxmere interests continued. By September 1999 Saxmere had begun to withhold levies payable on the wool that it acquired. They were held in a trust account. Negotiations continued through 2000 into 2001 in an attempt to settle the dispute. A consultancy report by a respected international consultancy (McKinsey & Company) was prepared for the Board. At a meeting on 1 August 2001 the Board resolved to carry out a restructuring of Merino New Zealand. A new grower-oriented company, New Zealand Merino Company Ltd (NZMCL), was to be formed to give effect to the recommendations in that report. NZMCL was to perform certain of the Board’s functions. And the Board was to pay NZMCL an initial sum of $1 million and two further payments of $500,000 each. In economic terms this was a capitalisation of NZMCL. That decision is the third matter challenged by Saxmere.
[70] The Judge found this decision was unlawful, but that, in respect of the negligence claim, Saxmere suffered no loss, because the Judge found the Board would have made the same decision in any event.[35] Saxmere cross-appeals on this point
[71] I will call this the capitalisation decision.
A fourth challenged decision: retrospective funding
[72] A further claim relating to retrospective funding was advanced at trial relating to events in June 2002. It was rejected by the Judge. It was dealt with by the panel on the first appeal, but it was not the subject of a cross-appeal, and counsel did not address us on it. We therefore say nothing more about it.
An obliquely challenged decision: November 1998
[73] In one sentence of her submissions, Ms Grey for Saxmere appears also to have challenged the Board’s decision in November 1998 to formalise its agreement with Merino New Zealand. We do not accept that the lawfulness of that decision is properly on the table. It is clear from Miller J’s judgment that the challenge to the Board’s failure to appoint Saxmere as the promoter of Saxon wool focused on the Board’s actions on two dates, May 1998 and June 2002.[36] In this Court first time round, the discussion centred on the four challenged decisions to which I have referred. Before us, the Board concentrated on the first three decisions to which I have referred, since it believed only those three decisions were properly alive. Ms Grey did not suggest that the Board’s counsel had overlooked a challenged decision. In those circumstances, it is not within our remit to embark on an enquiry into the lawfulness of what the Board did in November 1998. It would be unfair to do so in circumstances where no one has concentrated on what the evidence was at that point in time.
The Merino New Zealand decision
[74] The 1997 Act came into force on 17 December 1997. It was therefore critical how the Board proposed to proceed with respect to a scheme for the marketing of New Zealand wool thereafter. A practical difficulty however was that the future was distinctly clouded by the past. I first deal with the factual context in greater detail; then the actual decision; and I will then address its lawfulness.
Factual context
[75] It will be recalled that there had been a fractious relationship between the Board and MNZI, and a mediation between the Board and MNZI. Arising out of that there had been an agreement recommending that all Merino wool and other wool up to 24 microns was to be the responsibility of what became Merino New Zealand. That would operate as the fine wool division of the Board. In essence it would be a subsidiary of the Board, but growers would elect the majority of its directors.
[76] It was this background which led to the Heads of Agreement dated 20 February 1998. Merino New Zealand would have access to the levy stream for wool less than 24 microns after allowing for the Board’s other funding requirements and Merino New Zealand would have “sole responsibility” for marketing such wool. Merino New Zealand was to be funded in the Board’s discretion from reserves and investment income. Clause 6 of the agreement provided that the process of “agreeing absolute funding from year to year” would be done under a principle of contestable service delivery and transparency. Merino New Zealand required a level of contractual certainty but the Board wished to ensure Merino New Zealand remained accountable for its performance. That point became of considerable significance for the High Court Judge. I will return to it shortly. As the High Court Judge recorded, “... it became common ground in closing that the decision to appoint MNZI had been taken when the Heads of Agreement had been signed”.[37] In other words, the Board had made up its mind at that point.
[77] What happened thereafter was further development and refinement of the basic principles enunciated in the Heads of Agreement. The final joint venture agreement in 1998 included a marketing and industry development agreement. This contracted out to Merino New Zealand the marketing and industry development of Merino wool and consultation with Merino growers on its behalf. There was a funding agreement as to the levies to be received by Merino New Zealand (with room to apply for additional reserves funding).
[78] The Board agreed that before appointing anyone else to carry out a marketing or industry development function it would give Merino New Zealand the opportunity to present its case to the Board for its continuing performance of that function, and would consider the interests of the Merino section as a whole. The agreement had a term, including automatic renewals, of 30 years. There was provision for termination in the event that Merino New Zealand failed consistently to achieve its objectives, marketing plan, business plan or budget.
[79] In practical terms, the Board firstly divided wool marketing into three broad categories: fine, mid-micron and coarse wool elements. This was a continuation of the status quo, notwithstanding the passage of the 1997 Act. Secondly, in economic terms, it did not decommodify wool. The effect was to leave innovative niche growers very much to their own devices.
The impugned decision
[80] At this point it is necessary to interpolate something about the pleadings relating to this claim.
[81] There is a general averment in paragraph 37 of the Third Amended Statement of Claim, on which the proceeding went to trial, that the Wool Board “... acted unlawfully, unreasonably, unfairly and/or with procedural impropriety” in ways which are particularised, but pleaded widely enough to encompass this initial decision to appoint Merino New Zealand.
[82] And as the Judge correctly noted, “When considering Saxmere’s application for funding in May 1998” (the second challenged decision, to which I will come in due course), “the Board undoubtedly proceeded on the basis that the decision [relating to the Merino New Zealand appointment] had been made”[38] in February 1998.
[83] The issue then becomes: was that initial decision – which was extremely important because it would patently determine the shape of marketing of fine wools for a long time to come – lawful?
Was the decision lawful?
(i) Introduction
[84] Despite the centrality of s 6(6) (reproduced at [52] above) to the proceeding, and the fact that the interpretation of the section is likely dispositive of the three claims, neither the High Court nor this Court in the first appeal entered into extensive interpretive analysis of its terms. The analyses in the High Court and this Court on the first appeal, although they reached different conclusions, were both closely tied to the factual context. In the circumstances, I think it important to traverse the various arguments as to its construction as they have evolved throughout the proceeding.
[85] First however, for convenience, I summarise the general effect of s 6. It prescribed the Board’s functions, which were broadly about promoting and marketing wool.[39] Then, s 6(2) gave the Board some discretion as to how it performed those functions: it could perform them itself, it could enter into a joint venture or partnership, or it could contract them out. These options were described as “mechanisms” or “entities”. However it did so, the functions were to be performed in a manner consistent with the Board’s objects as set out in s 5.[40] The Board was also to report regularly to the Minister,[41] and in exercising its functions had to have regard to the need for it have adequate financial reserves.[42] Subsection (6), the crucial provision, provided that before determining which mechanism or entity was to be adopted in performing a function or element of a function, the Board was to consider the reasonable alternatives and choose that which was likely to be the most efficient and effective.
(ii) The plaintiffs’ submissions in the High Court
[86] Mr Cooke QC for the plaintiffs (Saxmere) commenced his interpretive analysis of s 6(6) by reviewing the policy behind the 1997 Act, as derived from the parliamentary materials. He first sought to establish the “mischief” the Act was to remedy. According to his argument, there was recognition in the primary industries that the role of producer boards had to change in a global context of increasingly liberalised trade and a correspondent reduction in state intervention in marketing primary produce. Producer boards were to become facilitators rather than directors of private endeavour. In general the Board was to adopt a flexible stance as to how it could best serve the needs of industry players. It was submitted that Saxmere’s programmes were exactly the type of activity the reform was designed to encourage.
[87] Mr Cooke’s argument emphasised two features of the parliamentary debates. The first feature was the dispute between Merino New Zealand and the Board, which s 6(6) was to resolve by forcing decisions about fund allocation to be made on a disciplined commercial basis, for the benefit of producers. The second feature was the evidence in the debates at various stages of the Bill’s passage that members considered Saxon’s proposals were an example of how s 6 would allow the Board to divest its functions where appropriate and for the benefit of the producers concerned.
[88] Turning to the construction of s 6(6) itself, Mr Cooke submitted that a four-stage analysis was required to comply with what he termed “the s 6(6) duty”. The first stage was to identify the scope of any evaluation to be conducted under s 6(6). The Board had to apprise itself of what exactly was required of it to comply with s 6(6). In this respect there were two possibilities: either the Board was required to conduct a complete review of all its functions upon the Act coming into force, or it was only required to conduct a s 6(6) evaluation whenever it was contemplating making a decision as to how one of its functions should be carried out. The latter implied an incremental approach to industry reform. For the plaintiffs it was submitted there was no difference in terms of its claims which approach was correct because on the facts each of the challenged decisions independently triggered s 6(6).
[89] The second stage was to identify which of the Board’s functions were subject to evaluation. That is, of those functions listed in s 6(1), which were touched by the decision facing the Board? Mr Cooke submitted that characterising the Board’s role broadly as “marketing and promotion” was a relic of the old regime and failed to give effect to the carefully defined functions of the Board under the 1997 Act. A disciplined analysis of the precise functions to be performed by another mechanism or entity was necessary because without such analysis the comparative effectiveness and efficiency of that mechanism or entity under s 6(6) could not be properly assessed.
[90] Section 6(6) referred to “function or elements of a function”, so that in some cases stage two would require the Board to identify the element of the function. In Mr Cooke’s submission “element” meant simply “a smaller part of the activities incorporated within the functions”. For example, an “element” might be the marketing and promotion of all wools less than 24 microns. One consequence of this interpretation is that identifying elements of functions goes beyond the words of the statute. The practical effect, in Mr Cooke’s submission, was that identifying the element could have a decisive impact on the effectiveness and efficiency analysis. Identifying the element in an expansive way would exclude small players, an approach, as shall be seen, accepted by this Court in the first appeal as within the Board’s discretion.
[91] Having identified the scope of analysis required and the precise functions or elements thereof to be allocated, the third stage was to identify the mechanisms or entities that might reasonably be expected to be able to perform the function or element efficiently and effectively. This was a precursor to the comparative exercise fundamental to the operation of s 6(6).
[92] That comparative exercise was the fourth stage. It required a comparison between or among the alternative mechanisms or entities to determine which was the most efficient and effective. By s 6(6) the Board had to satisfy itself that the mechanism or entity it selected was the most efficient and effective. In Mr Cooke’s submission efficiency was a matter of cost/benefit analysis and in the case where comparators were each able to achieve the objective, that which could do so at the least cost was to be preferred. Effectiveness was concerned with a mechanism or entity’s capacity to achieve the desired outcome. Assessing effectiveness involved asking how the objective was to be achieved and, necessarily, whether it could be achieved.
(iii) The defendant’s submissions in the High Court
[93] Mr Dobson QC (as he then was), commenced his analysis by setting little store to the parliamentary history to the enactment of s 6(6). He considered there was “something in the debates for everyone” and so they were not to be relied on as disclosing any clear parliamentary intent.
[94] Aside from that, the key difference in approach to the question of what s 6(6) required, was that it was for the Board to determine the scope and nature of the task (or in the statute’s words “the function or element”) before the obligation arose to consider all the options to perform that function or element. As the Board retained this discretion, an “aspirant” could not force the Board to redefine the function or element it was considering. In the present context, that meant that Saxmere was excluded as an alternative because the Board was considering as a class all wool of 24 microns or less without further breaking that class down.
[95] The Board thus perceived the alternatives to be retaining responsibility for promoting merino wools; contracting out the responsibility to Merino New Zealand; and entering into a joint venture with Merino New Zealand. Saxmere was clearly not in a position to carry out the function or element so defined (promotion of all Merino wool). This part of the argument was in a sense the administrator-centric take on the same point Mr Cooke had made.
(iv) The High Court Judge’s treatment of the construction of s 6(6)
[96] There is no distinct analysis devoted to the meaning of s 6(6) in the judgment appealed from. Rather, there are conclusions on its application to certain factual findings.
[97] As s 6(6) was applied to the Merino New Zealand decision of February 1998, the Judge considered that the Board did consider that Merino New Zealand would be the most efficient and effective marketer of all merino fine wool.[43] Although the Board did not conduct a comprehensive comparative exercise including Saxmere, it did not have to, as Saxmere’s business plan at that point demonstrated it was not a reasonable alternative to Merino New Zealand, even in relation only to the marketing of Saxon wool.[44] However the Judge accepted Mr Cooke’s submission that the Board, “having decided to contract out fine wool marketing, ... could not confine itself to only those groups capable of performing the entire task alone”.[45]
[98] Then, applying s 6(6) to the May 1998 decision declining Saxmere’s application, the Judge found that the Board simply did not conduct any s 6(6) analysis. Instead, he found that the Board, in applying its own criteria to assess the Saxmere application, declined the application predominantly on the basis of an irrelevant consideration: namely, that Saxmere was a commercial entity rather than a grower group.[46] Saxmere was subsequently told to approach Merino New Zealand, instead of the Board, for funding. By implication Saxmere’s application did trigger the requirement that the Board undertake a s 6(6) analysis.
[99] The capitalisation in 2001 of the NZMCL following the recommendation of the McKinsey Report was found by the Judge to be a decision taken with s 6 firmly in mind. The Judge records that the various resolutions of the Board giving effect to that decision were couched in the language of s 6(6).[47] However, in deciding to capitalise NZMCL, the Board did not consider Saxmere as an alternative. This was in clear breach of s 6(6), in the same way the previous challenged decision had been: the Board was “prohibited ... from making the decision to appoint NZMCL without first examining alternatives”.[48]
[100] It seems clear that the Judge preferred a construction of s 6(6) more closely resembling that put forward by Mr Cooke. That is apparent from the fact that for each of the decisions the Judge considered unlawful his Honour found that the Board had failed to conduct a s 6(6) comparative exercise. On the Judge’s reasoning therefore, Saxmere could trigger the s 6(6) requirements simply by way of application. However the failures to consider Saxmere would have been lawful on the approach taken by Mr Dobson, because that approach essentially reserved to the Board the power to define for itself the scope of a function or element, to the exclusion of some aspirants.
(v) The first appeal
[101] This Court, in allowing the first appeal, impliedly rejected the analysis of s 6(6) advanced by Mr Cooke (although without any reference to it) and seemingly accepted by the Judge. William Young P, for the Court, considered that the Board had a wide discretion as to the performance of its functions. It was “for the Board to decide to what extent it should promote wool or particular classes of wool on a generic basis”.[49] If Saxmere could initiate the s 6(6) process then that “would in effect be the sort of opt out mechanism which the legislature rejected when the Act was passed”.[50] That was because on that view “any trading organisation in the wool industry” would be able to nominate its sphere of activity as a function or element of a function and, assuming that the nominated sphere was sufficiently well-defined, it would be a natural consequence that the organisation would be the most efficient and effective provider.[51] This was, in the Court’s judgment, contrary to the scheme of the Act reserving strategic decisions to the Board.[52]
[102] In addressing the cross-appeal on the first challenged decision, the Court elaborated on the application of s 6(6):[53]
In our view, the Board was entitled to make a decision that treated fine wool as a discrete class of wool for marketing and promotion. The “element” of the Board’s functions under consideration was, accordingly, the promotion of fine wool. When making a decision under s 6(6) as to how that particular element of its functions could be most efficiently and effectively performed, the Board was not required to engage in further subdivision of this element (ie the promotion of Saxon wool and the promotion of other fine wools). Instead it was entitled to look for an efficient and effective mechanism for the marketing of fine wool generally.
[103] The Court further elaborated on this when dealing with the second challenged decision. In that instance the Board was not bound to conduct a s 6(6) analysis: “Because the Board had not decided to engage in specific promotion of Saxon (or Saxmere’s) wool, such promotion was not itself an element of a function.”[54] Much the same analysis was applied in the Court’s treatment of the third challenged decision.[55]
[104] In general, this Court’s approach to s 6(6) on the first appeal can be summarised thus: (1) the Board had a broad discretion in respect of strategic decision-making; (2) identifying functions or elements of functions for which it would consider alternative provider mechanisms or entities was a strategic decision for the Board alone; (3) s 6(6) was only “engaged” when the Board drilled down to the operational level, that is, after it had identified for itself the function or element and was considering how to perform that function or element; (4) as a consequence other organisations or persons could not initiate the s 6(6) process because step (2) was exclusively within the Board’s competence.
(vi) The Supreme Court
[105] The Supreme Court said, on the leave application, “There is no obvious error in the judgment of the Court of Appeal giving rise to an apparent miscarriage of justice”.[56]
(vii) Summarising the competing arguments
[106] Although it risks setting up a false dichotomy, essentially the arguments can be split into two. The first, advanced by Mr Cooke and apparently accepted by the High Court Judge, is that Saxmere triggered the s 6(6) comparative exercise when it advanced itself as an alternative to the Wool Board or Merino New Zealand for promoting Saxon wool. That was an exercise to be conducted with due diligence by the Board.
[107] The second, advanced by Mr Dobson in the High Court and effectively accepted by this Court on the first appeal, is that identifying functions and elements of functions was a discretionary power exclusive to the Board and that Saxmere could not in effect force the Board’s hand merely by way of application.
[108] However, even on the latter view, it was accepted for the Board by Mr Kos QC before us that in deciding how to go about performing its functions under s 6, the Board was subject to a standard of “reasonableness” at administrative law. Although it was ultimately at the Board’s discretion to identify the function or element of the function before reviewing the comparative merits of potential providers, that discretion was not unconstrained. Before discussing how this reasonableness standard applied to the challenged decisions of the Board, Mr Kos submitted that a sliding scale applied, and that, consistent with the Board’s composition of elected and expert members, the Board was near the bottom of the scale and was therefore due greater judicial deference. He cited a number of authorities which he said demonstrated such a judicial approach to producer boards in general.[57]
[109] Although the respective courts in each of those cases may be said to have adopted a measure of deference, at least by inference, and with NZI Financial Corporation v New Zealand Kiwifruit Authority being the clearest example, whether those authorities support taking that approach in general is another question. The proper approach to be taken surely rests on construing the particular statute and so the authorities are only persuasive to the extent that the relevant statutory scheme is analogous. In that respect it is sufficient to note that the 1997 reform of producer boards represented a significant change from previous policy, which most of the authorities cited were concerned with.
[110] Mr Kos also cited the Supreme Court’s broader statement of principle in Unison Networks Ltd v Commerce Commission:[58]
Often, as in this case, a public body, with expertise in the subject matter, is given a broadly expressed power that is designed to achieve economic objectives which are themselves expansively expressed. In such instances Parliament generally contemplates that wide policy considerations will be taken into account in the exercise of the expert body’s powers. The courts in those circumstances are unlikely to intervene unless the body exercising the power has acted in bad faith, has materially misapplied the law, or has exercised the power in a way which cannot be rationally be regarded as coming within the statutory purpose.
[111] Given the Board’s submission that it had what practically amounted to an exclusive discretion, absent maladministration, its next submission was unsurprising: that the High Court ought to have deferred to the Board’s own judgment that a programme of promotion for all fine wool was to be preferred over an atomistic approach which may have involved funding some niche providers. The allied argument was that absent such deference, the Board would be lumped with the apocalyptic administrative burden of dealing with many applications for funding, some of them perhaps downright quirky.
[112] The submission, leaving the suggested downstream administrative consequences aside, rests on a construction of s 6(6) making it entirely a matter for the Board as to how it was to divide up its functions. But on the alternative construction, under which the Board was required to conduct a s 6(6) analysis when faced with a reasonable alternative, that exclusive discretion disappears. On this construction the Board was tightly constrained to allocate the function to the mechanism or entity it considered most efficient and effective. If it failed to do so, then there is an argument that the Board materially misapplied the law, even in the terms of Unison Networks, above.
Evaluation of the construction arguments
(i) Who is to decide?
[113] An important preliminary point is: is the construction of s 6(6) for the Board, or this Court? This raises difficult issues. Who is to decide the application and operation of the statute or its “reach”, as it might be put? And how much, if any, deference should be accorded to the regulatory or governing body in construing its governing legislation?
[114] The argument that the definition of a function or element of a function under s 6(6) of the 1997 Act is a matter for the Board (ie, absent irrationality) would at one time have gained considerable support from the philosophy behind what in the United States is known as the Chevron doctrine. In 1984, in Chevron USA Inc v Natural Resources Defence Council Inc[59] the United States Supreme Court announced a simple rule: courts must defer to reasonable agency interpretations of administrative statutes.[60] That philosophy has dominated American administrative law ever since. In the now vast Chevron literature, four justifications are given as to why the judiciary should thus defer:[61] first, because Congress intended the courts to do so; second, agencies (or Boards) exercise delegated legislative power when they issue interpretations; third, such bodies are more politically accountable than courts; fourth, they have the necessary technical expertise that courts often lack. Against those arguments there are the ever-present problems of potential agency capture and executive aggrandisement.
[115] In more recent times concerns have arisen about that approach to administrative law. The United States Supreme Court has been steadily narrowing the overbroad Chevron doctrine. Perhaps the most important case is United States v Mead Corp[62] where the Court held that the application of Chevron should be limited to agency or board interpretations which are issued with the force of law.[63] To put this in its simplest terms, there is not to be any deference to the agency or Board unless the particular statute expressly, or perhaps (although there is much argument about this) impliedly, says so.
[116] This has brought the broad and exemptive type Chevron doctrine of public law much closer to the fundamental and constitutionally important position under Anglo-New Zealand administrative law: what the statute means is always a question of law for the courts. Unless that approach is adopted the rule of law itself is subverted.
[117] This argument rests on proposition two in the late Lord Bingham’s recent little monograph, The Rule of Law: “Questions of legal right and liability should ordinarily be resolved by application of the law and not the exercise of discretion”.[64]
And:[65]
The rule of law does not require that official or judicial decision makers should be deprived of all discretion, but it does require that no discretion should be unconstrained so as to be potentially arbitrary. No discretion may be legally unfettered.
[118] For a judicial expression of this viewpoint, see Lord Hoffman in R (ProLife Alliance) v British Broadcasting Corporation:[66]
My Lords, although the word “deference” is now very popular in describing the relationship between the judicial and the other branches of government, I do not think that its overtones of servility, or perhaps gracious concession, are appropriate to describe what is happening. In a society based upon the rule of law and the separation of powers, it is necessary to decide which branch of government has in any particular instance the decision-making power and what the legal limits of that power are. That is a question of law and must therefore be decided by the courts.
(ii) The proper construction and its application
[119] In my view it is for the courts, not what the Board thought or did, that determines what the statute required. On the construction of the relevant legislation (set out at [52] above) the Board was clearly entitled to subdivide its functions. How could it not? But it was not unconstrained in making such a determination. It had to have regard to the purposes of the statute. As I read it, s 5(1) required the Board to have regard to the interests of all growers – not just some. Plainly by s 6(3) any subdivision of functions had to be consistent with the objects of the Board [67] s 5.67 And even on a literal interpretation of s 6(6) – let alone a purposive one – in defining a function or subset or element of its function the Board had to have regard to the fact that there were other interests or other ways of subdividing that function. To read s 6(6) down to only the performance of a self-pre-determined function is, in Lord Bingham’s terms, to encourage the sort of arbitrariness that the statute itself did not envisage. It is quite wrong to say that Parliament’s concern as to the position of minority groups could be disregarded. Further, s 5 of the Interpretation Act 1999 requires that a statute is to be construed having regard both to its terms and its purpose. Thus even if the strict terms of the statute do compel a construction along the lines contended, and it is not at all clear to me that such is the case here, yet still Parliament’s “sufficiently obvious purpose” in legislating m[68]t win out.68
[120] On this view of the legislation, the Board had an obligation, from the coming into force of the 1997 Act, to review (even absent a specific application) how it was going to divide up “wool” for marketing purposes. The existence of a specific application would have lent sharper focus and impetus to such an obligation, but was not a sine qua non of it.
[121] It is necessary to traverse what the Board did and why as the 1997 Act came into force.
[122] It is clear that well before 1997 there was considerable, but not unanimous, resistance to delegating Board functions to MNZI. At the Board meeting on 20 November 1995, the Chief Executive expressed considerable doubt to the Board about MNZI’s capacity to deliver on a promotional plan for Merino wool. He proposed a joint decision-making body, but that implementation of marketing plans would remain with the Board.
[123] Mr Grainger, who was the Group Manager of Product Marketing for the Board, was also in attendance. He seems to have been a close adviser to the Chief Executive through until after the Act was passed, and was for a time himself Acting Chief Executive in 1996.
[124] MNZI put its case to the Board on 5 and 6 December 1995. Its plan was to reserve implementation of a marketing strategy to MNZI. There was still doubt from Board members as to whether MNZI could deliver. The Board resolved that the Board should implement the plan, but that an oversight body with evenly split membership should be established.
[125] There is evidence in the minutes of the 17 December 1995 Board meeting of the political pressure, in favour of MNZI’s position, being brought to bear on Mr Morrison, the Chairman. There was concern expressed that the Board was changing its stance as a result of this pressure. The language of some Board members expresses incredulity as to MNZI’s antagonism towards the Board. The Chief Executive, Dr Sinclair expressed his view that the MNZI proposal was not commercial. MNZI members were invited to speak to the Board. Included amongst them was Mr Radford. The Board’s previous plan was again proposed, but the vote was tied and the resolution did not pass. Another motion was passed to contract the implementation of the Merino plan to MNZI. Dr Sinclair expressed his disappointment, and subsequently resigned as Chief Executive.
[126] As Miller J accepted on the facts, MNZI then struggled in its implementation of the March 1996 marketing and industry development agreement. In the Board’s view, its reporting on its performance under the agreement was not up to scratch, nor was its performance. Two of the problems identified were its lack of capacity and its cannibalisation of the “Fernmark” brand, which in Mr Grainger’s view, had confused overseas markets.
[127] Mr Grainger’s draft report dated 24 March 1997 is instructive as to the Board’s view of its relationship with MNZI. Generally, it provides a contextual background before deconstructing MNZI’s efforts under the agreement and its capacity to improve. The report advocates a return to a much stronger role for the Board in marketing fine wool.
[128] It is also worth noting that in the history leading up to the 1997 Act other groups of growers (eg, Romney, Drysdale and Perendale) had proposed to be recognised as service providers. These persons were dealt with by Wools of New Zealand (WONZ) – the Board’s marketing arm, not the Board, on the basis that it was WONZ that had the marketing expertise. Mr Grainger describes how in 1999–2000 the Board agreed to advance Romney $500,000 to explore setting up a new company. He considered that the Saxmere business plan was actually more detailed than the Romney proposal which was approved. Mr Grainger supported in principle the approach of superfine wool producers such as Saxon because they did truly offer a niche product. But that was not the approach of MNZI, which was unable to differentiate the Merino product in a market dominated by other countries competing on price, not quality.
[129] Mr Kos argued strenuously before us that Saxmere did not even get to a starting point where it was worth consideration at the time the 1997 Act came into force, or was somehow a body that did not have to be considered at that time as being too small and insignificant. In that respect it is worth recalling the lead-up to the enactment of the new Act.
[130] In the second half of 1997 the Primary Production Select Committee invited submissions on the Producer Boards Acts Reform Bill. Mr Radford’s evidence – and this was not challenged in cross-examination by Mr Dobson – was that he personally called everyone on the Select Committee to explain Saxmere’s position, and its desire to be able to market its own fibre. On 21 July 1997 Mr Radford sent each Committee member and indeed the Prime Minister, the Rt Hon Jim Bolger, a copy of the paper he had presented at Massey University’s 30th Wool Conference on 7 June 1997 on this very topic. The Prime Minister by correspondence indicated his acceptance of the place for niche marketing and boutique production. In late August 1997 Mr Radford called the Hon Jim Sutton (then the Chairman of the Committee), explained Saxmere’s position and subsequently set out his submissions in writing. Mr Radford presented an oral submission to the Select Committee. New Zealand Wool Board representatives were present when his oral submissions were presented to the Committee. These emphasised that the Saxmere interests wanted access to their portion of the levy for marketing; to be able to maintain the historical price of Saxon wool by linking it to increased garment performance; and a mechanism included in the Act that would allow Saxon growers to market their fibre differentially.
[131] By early November Mr Radford was pressing for the Committee’s assurance that the Bill would cater for Saxon growers’ needs. There were at that time some other parties, including Merino New Zealand and one or two service providers (including a polytechnic) who were also asking for consideration to be given to them to perform aspects of the Wool Board’s function. Saxmere was clearly calling – and on the Parliamentary record – for it to be able to be designated as a distinct player with identifiable interests of its own. In short, even before the statute was enacted the position of Saxmere was plain. It was no shadowy figure; it had clearly signalled its view that the division of fine wools should be different than the old order the Board had utilised. What it did not have was a fully developed business plan.
[132] Turning to the attempt to bring forward a plan, in October 1997 Mr Jackson became aware (through Mr Radford) of the Saxon value proposition and what potential this had to assist New Zealand superfine wool growers. He was favourably disposed to a meeting, but this did not take place until 17 December 1997. It is quite true that Mr Radford wanted confidentiality. But it seems to be common ground that they discussed the new Wool Board legislation. Mr Radford showed Mr Jackson letters from growers as evidence of a grower network and Deloitte Touche Tomatsu’s scoping document of September 1997 applying for funding by Merino New Zealand to assist in the preparation of a detailed Saxon business plan. The argument for Saxmere was of course that directing the Saxon levy stream to Saxon marketing was just what had been done for Merino. Certainly a business plan would have to be provided to show that the Saxon project had its own unique value characteristics and grower support. Thereafter work started on a business plan. But things were complicated when Dr Mukergee, Mr Radford’s consultant, fell ill. Mr Radford thereafter put forward what was admittedly a very rudimentary draft.
[133] The central problem is that the Board then chose to divide up “wool” artificially in a way that meant that Saxmere was sidelined, and left at the mercy of Merino wool interests at large. It was, whether inadvertently or deliberately, defined out of existence. This is yet another illustration of age-old problems in the law: the problem of recognition of minorities, and the difficulties organisations have in reacting to (often unwelcome) new legislation which cuts across their old ways of doing things. If the Board had taken advice (and it did not) it should have appreciated that the unblinking adoption of its old scheme was not sufficient. There was a new statute which had to be observed, even if that was awkward for the Board, given its prior dealings with Merino New Zealand. There could not here be a one-horse race with the only permissible entrant being a horse called Merino.
[134] It also appears to me that on the evidence the passage of the 1997 Act, in the form in which it was enacted, came as a distinctly unpleasant surprise to the Board. The Chief Executive, Mr Jackson, referring to the passage of the 1997 Act and s 6(6) in particular, explicitly describes how s 6(6) was a “surprise to us all”. But as Mr Grainger said in evidence:
... the law changes did not seem to make any real difference to the way the Board operated. The Board carried on as before, trying to justify why the Board should continue to collect levies and be the provider. I am not aware of any Board meeting where the implications of the new law were considered. Nor am I aware of the Board taking any steps to reconcile its contractual arrangements with MNZI and the new law.
[135] The Board was in a difficult position. It was caught between a rock (the new legislation) and several hard places, with the Merino interests being a particularly hard place. But that was no reason not to recognise and deal with what the Board was confronted with in the new legislation.
[136] It follows that I do not agree with this Court in the first appeal that the Board correctly applied its legislation. Neither do I agree with Miller J who (seemingly accepting that the legislation did apply) held that:[69]
A comprehensive comparative analysis would have been required in the circumstances only if the decision precluded the Board from appointing Saxmere instead of deferring that decision until the Saxmere proposal had been developed.
[137] Even independently of Saxmere there was an obligation to look at matters afresh. There was also a question whether Saxmere’s particular proposition as to how wool should be considered (the generic problem) should be entertained. It could not just be put to one side. It was not considered in the way that s 6(6) required. The question of whether Saxmere would then have got the nod would then have arisen. But it was not the primary issue: the Board declined to re-evaluate how “wool” should be divided up (if at all) for marketing purposes. In short, it did not (or would not) recognise the sea-change the legislation had brought about.
(iii) Relief
[138] If the Board did not correctly observe its legislation in relation to the Merino New Zealand decision in February 1998, should Saxmere have a declaration to that effect? In my view, the answer to this question is “yes”.
[139] The making of a declaration was clearly within the competence of the Court on the facts of this case.[70]
[140] There has been some debate in recent times in New Zealand and elsewhere as to the making of declarations in public law cases. In New Zealand, there has been a curious reluctance to make declarations in New Zealand Bill of Rights Act 1990 cases[71] and there have been mixed views in other areas of administrative law.[72]
[141] It may be worth reiterating the fundamental principles. First, there must be an actual controversy between the parties (or as it is sometimes put, a real and not a theoretical question to be answered).[73] As part of that concern there must be a proper contradictor.[74] That is, there must be someone before the court with a true interest to oppose the declaration sought. Secondly, there is the question of whether a declaration may have a practical effect on non-parties.[75] Thirdly, it is generally accepted that a declaration must have utility,[76] which can encompass a wide range of factors. Fourthly, declarations should not normally pre-empt or somehow supplant findings which would need to be made in a criminal prosecution.[77] Fifthly, the availability of other remedies is a relevant factor.[78] But sixthly, and perhaps most importantly, the rule of law itself requires that if a law has been contravened that should be publicly enunciated and formally made known.[79] In that respect it is to be noted that the emphasis in the discretionary exercise has recently shifted somewhat to a consideration of whether there are grounds to refuse relief following a finding of error of law.[80]
[142] In this case the utility of a declaration, even if there was a breach, was distinctly questioned by Mr Kos. It is true that events have moved on. The force of Saxmere’s arguments have been recognised (for instance, in the McKinsey Report) and Mr Radford’s broad proposition about the establishment of this wool and the recognition of the way it needs to be marketed has turned out to be right.
[143] Ms Grey strongly urged on us that vindication – not vindictiveness – is a strong concern for Saxmere. One view of Mr Radford is apparently that he is in a sense a rabid outsider who took a view which was unpopular within the wool industry generally. Hence the fact that he was within his lawful rights to have complained should be recognised.
[144] I pressed Ms Grey in argument as to why an application had not been made for interim relief under the Judicature Amendment Act 1972 by Saxmere in 1998, challenging the way in which the Board had defined the relevant functions or elements of functions. She said there were two principal factors. First, realistically, Saxmere had to live with an ongoing relationship with the Board which it did not want to prejudice by legal proceedings. Secondly, there was the question of expense, in a preliminary application of that kind. The first of those factors, in particular, has some distinct force in the factual context of this case.
[145] In my view, this is a case for a declaration. The issue at stake went to the heart of what has produced an extraordinary series of downstream consequences. There is a real dispute. And, I think, there is a sufficient measure of utility for the making of a declaration. Finally, the matter is not moot – s 6(9) of the Pork Industry Board Act 1997, still in force, is in terms identical to s 6(6). Whether the Supreme Court, on the leave application, appreciated that the provision has more general application is not clear to me.
The May 1998 decision
The factual context
[146] The issue here relates to the preparation of a business plan by Mr Radford and its presentation to the Board in early May 1998.[81]
[147] The evidence the High Court Judge accepted on this incident is traversed at [52]–[59] of the judgment under appeal. It need not be repeated here. The business plan was before us. It has to be said, in fairness to the Board, that it was at best a rudimentary document. It was also overwhelmingly optimistic. Then too the levies to be paid in respect of Saxon wool were, as the Judge rightly said, “substantially less than the funding requested”.[82] For instance, in 1998–1999 the estimated gross levies were $22,720 but the funding requested was $100,000. The same imbalance was apparent for 2002–2003: levies of $116,408 against requested funding of $200,000. The Judge found that in all, funding of $800,000 was sought for the years 1998–2003, which was well above the likely levies. The short point is that Saxmere was seeking well in advance of what it would have been contributing in levies.
[148] What the Board did with the request, when it was to hand, was to adopt funding criteria on the basis that it was to be reviewed by the Board’s legal advisors to confirm compliance with the Act. Those criteria were as follows:
- Applicants must establish an organisation which represents the collective interests of a specific group of New Zealand wool growers (the grower group).
- The Board must be able to establish the viability of the proposal and the likelihood of success. The Board will require a business plan to be prepared by a reputable organisation. The Board may assist with the funding of the business plan.
- In the opinion of the Board, the organisation must be representative of the grower group, have critical mass and be able to demonstrate the skill base to deliver the business plan.
- The applicant must demonstrate to the satisfaction of the Board an ability to be more efficient and effective than other delivery options available to the Board.
- The Board must be satisfied that the proposed activities will not be in conflict with those of any other party contracted by the Board to deliver services in the same or a related field.
- Funding assistance will be limited to market development and research and development and under levy streaming rules will be limited to the levy generated by the grower group less core costs.
- Ownership of intellectual property can be shared by the parties. In general the proportions held by the Board and the grower group will depend upon the level of contribution of the parties and the policy of the Board with respect to other areas of Board involvement.
- All requests over $50,000 will be required to be approved by the Directors of the New Zealand Wool Board.
[149] What happened then was that the Board addressed the Saxmere proposal. Concern was expressed that Mr Jackson had offered assistance to support the business plan but without having been told that two-thirds of the fibre was Tasmanian. Further, the Board was greatly constrained because Mr Radford had imposed a confidentiality obligation that the directors not be allowed to view the business plan. He was concerned about his “plans” coming to the notice of the Merino people.
[150] At a meeting on 19 May, Mr Radford was told that the Saxmere proposal had been rejected as it did not meet the Board’s criteria, which had never been shown to him. He was advised that fine wool marketing had been contracted to Merino New Zealand. Mr Radford was to deal with that organisation. Then, on 22 May Mr Jackson wrote advising that the Board’s directors had determined that the most efficient and effective means to deliver marketing services to the Merino sector was through Merino New Zealand.
[151] After its May meeting and decision, the Board took legal advice as to the criteria, which were amended as a result. The first criterion now provided that applicants must establish an organisation representing the collective interests of a specific group of New Zealand wool growers, with the volume representing a critical mass for the programmes proposed. Thereby, the Board was now starting to inch towards differentiation of grower groups. Funding would now be limited to the levy generated by the grower group less the cost of industry good programmes commissioned by the Board. Yet the Board did not revisit the Saxmere application. Saxmere remained on the outside.
A lawful decision?
[152] Miller J found as a fact, the dominant reason for rejecting the application was that Saxmere was not a grower group. The Board had made no comparative analysis at all of Saxmere and Merino New Zealand’s efficiency and effectiveness. Rather, because Saxmere was not a grower group, it was told to work with Merino New Zealand.
[153] The Judge held:[83]
The Board’s decision to require commercial entities to work through [Merino New Zealand] meant that it failed to perform the comparative analysis of efficiency and effectiveness that was required by s 6(6).
The Board had “eschewed analysis in favour of referring the Saxmere proposal to Merino New Zealand”.[84] Effectively, it held that the Saxmere scheme looked promising, but it was still going to have to work through the Merino body.
[154] The Judge also took the view that it was a material error to limit funding in its criteria by reference to levies generated by the particular grower group, less costs. It was true that Australian growers would benefit from any cross-subsidies. On the other hand, any “start up” might require what amounted to seed capital. The Judge was concerned that the Board “elevated the subsidy from a relevant consideration to a prohibition on funding”.
[155] In the result, the Judge was of the view that there was a failure to comply with s 6(6) of the Act and also that it had not acted fairly, in administrative law terms. Mr Radford should have known the criteria on which the application was to be assessed. Indeed, he may well have wished to make submissions about them.
[156] The submissions for the Board before us fall into two parts. The first, or legal aspect, relates back to the arguments already addressed under the first claim. It is said that:
... the Saxmere business plan, confined as it was to an almost infinitesimally tiny proportion of a total wool production, and with doubtful differentiation from other Merino fine wool, was not an ‘element of a function’ of the Board which engaged s 6(6) at all.
The Board was an expert body with a very broad discretion conferred on it by Parliament. This is the same argument as I have already canvassed.
[157] The second limb of the argument is essentially factual. It is that Saxmere would not and perhaps could not have succeeded in getting that which it was pursuing at that time. Its proposal was incomplete, compromised by Saxmereimposed secrecy requirements, and “founded on fundamental market misrepresentations”.
[158] To deal with the factual and outcome question first, it was a matter for the Board whether it would or would not grant the funding. We cannot of course substitute our own judgment on that.
[159] The question we do have to deal with is whether the Board went about things in a lawful manner. In my view, Miller J was quite right to say that s 6(6) was not complied with, when it ought to have been. I have already given my views on the question of construction of the legislation. Further, in an administrative law sense, the Board did not act fairly over the matter of criteria. I agree with the Judge’s conclusion on this point, which was a necessary consequence of the facts as he found them:
[114] Apart from these errors of law, I accept Mr Cooke’s submission that the Board was also guilty of a material procedural error. It evaluated the application against funding that had never been disclosed to Mr Radford. It compounded that error by not disclosing the revised and significantly altered criteria that it adopted following the May 1998 meeting. A body such as the Board attracts a duty to act fairly when making a decision of this nature: de Smith, Woolf & Jowell Judicial Review of Administrative Action (5 ed 1995) at 8-001-12. I accept that the requirements of fairness in this case required that Mr Radford be told of the criteria against which the application was to be assessed and given an opportunity to make submissions about them.
[160] It might be said that the real complaint about the criteria is that the Board was moved by an irrelevant consideration or misconstrued the statute in formulating criteria, and that therefore giving notice of the criteria would not in itself have cured the defective criteria. But had the Board given Mr Radford notice of the criteria he would then at least have had an opportunity to make submissions on how the criteria could be corrected. In a sense the procedural unfairness cemented the unlawfulness of the decision.
Relief
[161] Mr Kos correctly maintains that, in the normal course of a dispute of this kind, the remedy would be to send the matter back to the Board for reconsideration as to the precise criteria. That is now not possible. But again, and for much the same reasons as I expressed with respect to the first claim, it seems to me that Saxmere is entitled to appropriate declaratory relief.
The capitalisation decision
[162] The unhappy history of this matter continued. It is summarised in short form at [69] above.
[163] It is appropriate however to add some further factual particulars on this distinct issue. The McKinsey Report had been commissioned by the Board to consider the future options for the wool industry in terms of improving returns, and reducing costs. Its final report was delivered in June of 2000. As it transpires, McKinsey saw Saxmere as being “an example of success”:
6.3 Escorial as an example of success
Escorial provides one example of how a commercial marketing company can succeed by targeting a market niche. Escorial has established an ingredient brand based on accredited source of fibre from Saxon sheep growers. Quality assurance measures ensure all fibre is consistent with the quality expectations for the Escorial brand.
Escorial markets the fibre and has also developed and manufactured a range of finished products for major fashion houses in Europe and North America by partnering with a network of spinners and weavers. Fashion labels involved include Brioni, Chanel of Paris, Hermes, and Yves Saint Laurent.
Through managing public relations, product development and customer relationships, Escorial has developed a valuable brand image combining both tangible and intangible attributes of the fibre.
The niche market filled by Escorial has enabled growers who supply to Escorial to achieve a premium for their wool. This supply arrangement with a consistent price premium has been possible because of relationships with fashion houses such as Brioni. Brioni has obtained rights to use Escorial in menswear, and consumes approximately 5,000 kilograms a year to produce ultra-fine suits.
[164] Ironically, the fact that the status quo had not worked, but Saxmere’s approach had, was one of the props for the principal recommendation in the McKinsey Report: that levy-funded promotion be discontinued and that the assets of the Board and Merino New Zealand be used as a foundation for new commercial wool marketing companies. Essentially, growers should be given the option to invest a portion of their share of reserves in the proposed companies or have their share of reserves.
[165] There was extensive consultation with growers, who were by now in support of the McKinsey recommendation. The Board resolved to cease levying growers for commercial purposes. The levy for the year from 1 July 2001 was set at 2 per cent instead of 5 per cent. That levy was to be reserved for funding “industry good” initiatives. It was explained to us that “industry good” connoted things of benefit to the industry generally, for example research. That in turn led to the formation of the newer grower-oriented company and its capitalisation. It was this capitalisation which is the challenged decision under this head.
The lawfulness of the decision
[166] Miller J found that the Board had breached s 6(6) of the 1997 Act insofar as it had not given consideration to the appointment of Saxmere (or another) to perform the elements of the functions which were contracted to NZMCL.
[167] To a significant extent this issue simply retraverses ground already traversed: the historic thesis that “Merino wool” was the appropriate element of its functions. Mr Kos contended that the relevant element of the Board’s function was the promotion, in a generic sense, of all Merino wool. He said there was no reason to differ from that proposition, although the vehicle which was to give effect to it was changing.
[168] On the first appeal this Court accepted the argument that “the element of the Board’s function which was in issue was generic promotion of Merino wool”.[85] I have already given my reasons for not accepting that interpretation. It is unnecessary to repeat them. But this too needs to be added in relation to this claim: in April 2001, in the settlement relating to the levy dispute, the Board had accepted that the promotion of Saxon wool was an element of its functions. It could not, with respect, blow hot and cold.
[169] In my view, the Judge was right to conclude that the Board had acted unlawfully in this respect. Indeed, his concern under this head was greatly strengthened by the fact that the Board was positively engaged at the time of the capitalisation decision by looking afresh at who and how to fund the entity on a fundamental reconsideration. To have left the Saxmere interests out of that consideration appears to me to have been particularly egregious.
A summary on the public law claims
[170] It may be useful at this point to briefly recapitulate the position I have reached on liability on the public law claims.
[171] The Board was subject to the provisions of s 6 of the 1997 Act and in particular, s 6(6). It eventually defined “an element of its function” in such a way that it defined Saxon wool out of existence, and without proper consideration. It treated Saxon as Merino.
[172] This was a fundamental flaw in the way in which the Board proceeded. In my view, the Saxmere interests had to be properly taken into account, from the outset. The 1997 Act had overtaken the old order of things. It would have been quite possible, and perhaps may even have been the likely outcome, that had the exercise been done appropriately the Board would have reached the position that the Saxmere interests would not have succeeded. There may have been no particular reason why Saxmere should have been given a privileged position over Merino interests (unless the Board decided it needed to be kick-started). The failure in my view, however, was properly to address the position of minority interests, such as Saxmere, in the principled way which Parliament itself had laid down.
[173] I have agreed with Miller J that declarations should be made with respect to the May 1998 decision and the capitalisation of NZMCL. I have also agreed with Ms Grey that there was a breach, and should be a declaration, on the initial appointment of Merino New Zealand. To that extent, as to the public law liability, the cross-appeal should succeed.
Restitution of levies
[174] Saxmere’s claim under this head rests on the proposition that the Board acted unlawfully in some respects, with which I have agreed. However I again emphasise that the unlawfulness I have articulated lies in a failure to recognise and take into account Saxmere’s interests. I have not determined what the outcome might have been. Indeed that is not the Court’s function. It follows that, at the outset, there is a factual impediment to the claim for restitution.
[175] Leaving those difficulties to one side, it is difficult to see how the present claim might come within the so-called Woolwich principle.[86] That was a case in which a building society challenged the validity of certain transitional provisions in income tax regulations under which it had to pay tax in respect of dividends and the interest that it had paid to its members. It paid tax without prejudice to its right to recover it. Ultimately the regulations were held to be ultra vires and void; therefore, the levying of the tax was unlawful. The narrow issue before the House of Lords was whether the Revenue Commissioners were liable to pay interest in respect of the money that had been paid pursuant to the unlawful demand.
[176] In Waikato Regional Airport Limited v Attorney-General[87] the Judicial Committee of the Privy Council ultimately held that the Woolwich principle is not confined to taxes, but extends to charges levied under statutory power.
[177] In the High Court, Mr Cooke endeavoured to suggest that the decision maker in the Waikato Regional Airport case had been charged with considering equity and efficiency. But as Miller J rightly observed, in that case those considerations related to the raising of the levy, not its expenditure. Miller J was not prepared, even assuming a claim could otherwise be made out, to extend the Woolwich principle to a situation where a tax or levy has been lawfully raised, but there had been non-compliance with statutory obligations relating to its expenditure.
[178] There is considerable force in Mr Kos’s argument that Woolwich-type restitution constitutes a form of strict liability: making out the unlawfulness of the demand creates an automatic entitlement to repayment. That rests on a constitutional bedrock: money cannot be demanded as if there is a statutory compulsion, unless the power exists and has been properly exercised.
[179] There is also a fundamental logical problem in the argument for Saxmere. This relates to the connection – if any – between collection and expenditure. Neither the scheme of the 1997 Act, nor the way the Board proceeded nor any discretionary considerations required a linkage between the levy and the services performed. Indeed, there were a number of features of the Act which counted against such a direct linkage.
[180] Finally, the Limitation Act 1950 problems to which Mr Kos referred seem to me to be insurmountable in this case. Woolwich type restitution was treated by the Supreme Court of Canada in King Street Investments Ltd v New Brunswick[88] as falling within the traditional Limitation Act prescription (as in New Zealand) of categories of claims not otherwise provided for, that is, as limited to commencement within six years after the cause of action arose.[89] Here, the Third Amended Statement of Claim set up restitution. It was dated 26 May 2005. Such a claim had earlier been abandoned. Hence, levies could not be reclaimed before May 1999; and, as I apprehend it, the matter of levies was settled pursuant to the April 2001 agreement, which covered the period from April 1999 to June 2001.
[181] I agree with Mr Kos that this claim faced insurmountable difficulties. In my view, it is a discordant and unsuccessful attempt to sing the same tune (that Saxmere had not been properly assisted by the Board) with a different set of lyrics. The song falls on deaf ears.
Breach of statutory duty
[182] By its second cause of action the Saxmere interests sought an inquiry into damages suffered by reason of the Board’s failure to comply with s 6.
[183] The High Court Judge held that:[90]
I have no hesitation in concluding that the duty in s 6(6) was intended to benefit growers who might benefit from performance of the Board’s functions in the most efficient and effective manner. That is evident when s 6 is read with subsections 4(3) and 5(1), and the legislative history confirms it. They comprise an identified and limited class - the membership of which varied - according to the functions that the Board was determining to perform or to contract out. The legislation established the respects in which performance of the duty in s 6(6) should benefit them; by increasing volumes sold and margins.
[184] Miller J found that there had been a breach of the duty in the following respects:[91]
For reasons already outlined, the Board breached its statutory duty on two occasions, by failing to carry out the comparative analysis required by s 6(6). The first was in May 1998, when considering the Saxmere application and the second was in August 2001, when contracting NZMC to carry out marketing of Merino wool pursuant to s 6(6).
[185] On the first appeal to this Court, that panel did not need to resolve this issue because of its view that s 6(6) was not in any event in play. It did however express distinct reservations as to whether this cause of action could be relied upon at all, saying that the Judge’s propositions “are not self-evidently correct”.[92]
[186] In my view, the Judge was in error on this point. Ultimately, what is at issue here is the construction of the particular statute. The Court has to be able to ascertain a Parliamentary intention to confer a private law right of this character.[93]
[187] In passing, for myself, I would much prefer that Parliamentary drafters would seek express drafting instructions on whether such a right is intended or not. The technique of leaving the matter to the courts generates, with respect, much unnecessary litigation under this prospective cause of action.
[188] That said, the first point is that a court will not lightly imply such a right, for it requires the Court to read the statute as if such a private law right should exist, and in a sense is obvious. As was I think made plain enough in X (Minors) v Bedfordshire County Council[94] the reviewing Judge must be driven to the view that something is necessary to achieve the purpose of the statute, and therefore objectively within the intention of the legislature, yet was not provided for.
[189] In this case, although the objects of the Board were in broad terms to advance the interests of growers by achieving the best possible returns,[95] it is drawing a long bow to imply a statutory duty to protect growers from harm. The only potential “harm” in this case is the effect the loss of an opportunity to achieve the best possible returns had. As put by the Judge, s 6(6) created “an opportunity to do business with the Board”.[96] The cases cited by Ms Grey do not support more than a general proposition that the law does compensate for economic loss arising from breach of statutory duty. That is, that the type of loss is not a bar to imposing a private right of action founded on breach of statutory duty. But they do not necessarily extend to the type of loss that would be claimed here.
[190] Secondly, in this connection it has to be recalled that what is effectively being recognised is a tort of strict liability, which is a matter of no little moment.
[191] Thirdly, the scheme of this Act is patently that the substantive decision is to be made by the Board. I have endeavoured not to infringe on that principle so long as the Board has done what it has to, as to process, and has taken into account those things it was required to by Parliament. This is especially important given that the s 6(6) obligation lives on in the context of the Pork Industry Board and the statute constituting it.
[192] Fourthly, there is the question of alternative remedies. As I have already endeavoured to suggest at various points of this judgment, what the Board did was always going to be challengeable by way of judicial review as the exercise of a statutory power.
[193] In my view, the holding in the High Court was in error. On this point, the appeal should succeed.
Negligence
[194] The third cause of action raised was that of the common law tort of negligence. For the reasons he gave, Miller J concluded that the Board owed a duty of care, as at May 1998 and August 2001, to those growers who were able in the short term to supply Saxmere with wool suitable for the elite Escorial fabric, and to Saxmere. He held that the duty “in both cases is confined to a duty to comply with its obligations under s 6(6) which obligations were triggered” at those dates. The Judge went on to say:[97]
... it is clear that the Board breached [that] duty by wholly failing to undertake the analysis that s 6(6) required of it in May 1998 and August 2001. I am satisfied that the Board acted carelessly in so doing, in circumstances where the duty was clear and imperative and the Board was aware of the interests of Saxmere and those who might supply wool to it.
[195] For reasons already noted, the panel on the first appeal did not need to address this issue.
[196] In my view, the Judge was plainly wrong. This appeal point should be allowed.
[197] The first point to note is that the Judge seems to have run an entirely parallel common law obligation with the statutory obligation. That alone should give rise to considerable concern: careless performance of a statutory obligation has always been held not of itself to give rise to liability for common law negligence.[98]
[198] Secondly, it is hard to see what particular features would justify the imposition for the need of a common law duty having regard to the usual principles of foreseeablility, proximity and policy. This case is a long way from the sorts of categories where common law duties have been recognised. And any loss here is economic and indirect. Then too, as Mr Kos urged on us, generally speaking our courts have set their face against the imposition of a common law duty upon an administrative decision of the kind which was in issue here, confining a challenge instead to judicial review or the tort of misfeasance in public office.[99] There is also the distinct alternative of judicial review and a scheme of accountability imposed within the statute:[100] ultimately this Board was under the surveillance of the Minister.
[199] In my view, this appeal point succeeds, and the holding of Miller J should be set aside.
Some points in response
[200] I have now seen drafts of the judgments prepared by my colleagues. I make some points in relation to the difference between Ellen France J on the one hand and Chambers J and I on the other, with respect to the interpretation of s 6; and on the difference between Chambers J and I in relation to the three claims I would allow.
The proper approach to s 6
[201] Ellen France J considers that s 6 envisages that the Board will make two quite different types of decisions: those of a strategic character, and those relating to mechanisms for providing for those strategic choices. This view appears to rest on two considerations.
[202] First, her Honour suggests that the Board’s functions in s 6(1) are expressed “broadly”. But to my mind the functions listed in that provision are highly particularised. The consequence of that for Ellen France J’s argument is that there is a much reduced scope for her “first category” of strategic decisions.
[203] Secondly, Ellen France J is troubled (as was this Court on the first appeal to it) that somehow Saxmere can “opt out” of the Act simply by “putting its hand up for consideration”, as it were. That is not the case. Saxmere is not opting out of the scheme of the Act, let alone the Act. It would still have to show it was the most efficient and effective entity or mechanism to perform the function or element thereof. Saxmere could not have complained at all if the analysis had been undertaken and it was turned down, unless perhaps that decision was unreasonable. The complaint has always been the straightforward one that the Board simply never undertook the requisite analysis.
[204] If the argument is that an applicant can effectively initiate the s 6(6) process, and then an applicant such as Saxmere can define itself as a function or element such that it is necessarily the most efficient and effective mechanism or entity and thereby opt out, there is more force in the argument. But that argument is entirely abstract insofar as it implies that the Board’s hands would be tied. There is no evidence that every single farmer or even a significant number of individual farmers were going to set themselves up as the producer of a distinct product and seek to do as Saxmere did. In short, the fragmentation argument does not bear out on the facts, and could not have been in Parliament’s contemplation. Secondly, it would patently not be in the interests of most farmers to do so: most farmers produce reasonably generic products and would benefit from the economies of scale arising from those products being sold abroad through the Board or Merino New Zealand. And thirdly, even after a period of “fragmentation” there would come a time when the Board could decline an application that would result in further fragmentation, even if that application satisfied the s 6(6) test, on the grounds that to do so would be contrary to an object of the Act (ie, not achieving the best net ongoing returns).
The Merino New Zealand decision
[205] I accept this is the most difficult of the three areas of public law claims. The danger in Chambers J’s approach lies in concentrating on whether Saxmere would actually have been appointed. The deeper concern, in my view, is a rule of law concern. At the risk of repetition, the legislation had changed, and very significantly. What Saxmere was contending was that ultra-fine wools should be treated differently from Merino wool, at large. It had gone to considerable trouble to persuade Parliament itself that this possibility should be seriously contemplated, and that possibility had been enacted in the legislation. But Saxmere was simply seen as a somewhat remote possibility for the future, rather than a present argument for dividing up “wool” another way. This was an issue of principle. Saxmere did not get the protection of the statute, as it should have.
The May 1998 decision
[206] The trial Judge found that the reason the Board was in breach of s 6(6) was because it considered funding should be limited to grower groups. It has not been demonstrated that that factual finding was wrong. Chambers J develops what might be termed a “jurisdictional theory” that the Board could not have supported Saxmere because a lot of the wool at issue was Australian wool. So it was, but this is an argument which has been developed as an ex-post justification, on the appeal. It does not seem to have been a central concern to the Board at the time. Nor am I convinced that it is necessarily correct that there could not be an intertwined connection with Australia, particularly in a small niche market, where that connection was of benefit to the New Zealand growers. It is the applicant who had to have the New Zealand connection, and that was satisfied.
[207] Ellen France J appears to prefer to deal with this claim on the basis of a discretion to grant relief. The principal thrust of my concern here is, as discussed earlier, that the Board should not be permitted to have simply turned its back on the problem posed for it by the statute, without Saxmere having a formal remedy.
The capitalisation decision
[208] We are all agreed that the Board had to carry out a s 6(6) analysis in this instance. Given that it did not do so, what is pressed into service for the Board’s salvation is the McKinsey Report. This is a surrogate argument, again of an ex-post variety, when challenged. The trial Judge’s concern, in my view correct, was that no consideration was given to Saxmere, or for that matter anyone else, performing an element of marketing services. This notwithstanding that in the settlement agreement it had been recognised that Saxmere was the most effective and efficient agent of that character in its market. Yet the Board nonetheless capitalised NZMCL to perform those functions soon after the settlement agreement expired. The agreement expired on 30 June 2001, the Board’s resolution was on 1 August 2001. Again, with respect, the Board is distinctly open to the criticism that it had its eyes focused on only one runner.
Conclusion
[209] It is my responsibility as presiding Judge to draw the outcome of the various judgments together so that the appropriate orders may be made.
[210] First, I observe that notwithstanding the various differences between the Judges there is in fact a great deal of common ground. We are all agreed that the private law causes of action do not succeed.
[211] On the three Board decisions which are still live, Chambers and Ellen France JJ agree as to the outcome – although their reasons are not always identical. I have differed from my colleagues as to the outcome on those three decisions.
[212] The judgment of the Court will therefore be:
A The appeal is allowed.
B The cross-appeal is dismissed.
C The declarations made in the High Court are quashed.
D The finding that the appellant was liable in damages for breach of statutory duty and in negligence is quashed.
E The finding that the respondents were entitled to costs in the High Court is quashed. Costs in the High Court are remitted to that court for consideration by it in light of this Court’s judgment.
F In respect of costs in this Court, the respondents must pay to the appellant costs for a complex appeal on a 2B basis with usual disbursements. We certify for second counsel. The respondents’ liability is joint and several.
[213] We were told that we do not need to resolve the costs on the abortive first appeal. The sum to be paid to Saxmere for its costs as a result of the first appeal in this Court going off on account of the recusal issue are being settled between the Crown and Saxmere.
ELLEN FRANCE J
Introduction
[214] As will be seen, I take a different view from Hammond and Chambers JJ as to the construction of s 6 of the Wool Board Act. In terms of the appropriateness of granting relief in relation to the first three of the challenged decisions, I reach the same conclusion as Chambers J. I write separately to explain my reasons on these points and then set out my conclusions on the remaining issues.
The approach to s 6
[215] I consider s 6 envisaged that the Board would make two different types of decisions. The first category involved decisions of a policy or strategic character relating to the Board’s functions. The second category related to consideration of the mechanisms for providing the various services.
[216] Whether to promote wool or a class of wool generally or on a more specialised basis was a decision of the first kind. Having made that decision, for example, to divide up wool marketing into the marketing of fine, mid-micron and strong wool elements, the Board in deciding whether to carry out that function itself, as part of a joint venture, or by contracting out, had to undertake the analysis in s 6(6).
[217] In my view, this analysis best reflects the statutory scheme for the following reasons. First, the functions in s 6(1) are expressed broadly. This suggests that what is required is an evaluative assessment by the Board of matters such as how the various functions and their elements are to be prioritised, and what funding should be allocated to those functions or elements of functions. Subsections (6)(2) and (6)(3) are consistent with that analysis.
[218] Secondly, the text of s 6(6) focuses on the mechanism or entity, that is, the means of achieving the selected function or element of functions. The Board has to assess the ability to “perform” the relevant function.
[219] Finally, this approach is consistent with the legislative purpose. The legislative history shows a move away from the Board’s monopoly in the provision of services towards more flexibility and the opportunity, as Ms Grey put it, for niche marketing. As it happens, the 1997 Act can also be seen as something of a staging post along the path to restructuring further with the eventual dis-establishment of the Board. But it was also plain at the time of enactment of the 1997 Act that the legislature wanted to avoid fragmentation. If, at what I see as the policy stage, the Board was required to consider the promotion of Saxon wool as a separate class that would lead to the ability to opt out of levy obligations. Parliament rejected this as an option.
[220] Hammond J is critical of the outcome of this approach to s 6(6) on the basis that the decision to promote fine wools up to 24 microns sidelines Saxmere. I am not convinced that is necessarily so. For example, if Saxmere had been able to show sufficient grower support at an earlier stage and meet other concerns about its enterprise, it may well have been able to dislodge Merino New Zealand’s foothold. But if Saxmere’s approach is adopted, the effect is to allow Saxmere a voluntary exit option[101] when that was not the object of the Act. The logical extension of this approach, as Mr Kos submits, is that a single farm could claim distinctive features (“the finest virgin wool from the shores of Lake Wakatipu”). The Board could then be required to consider the separate promotion of the finest virgin Lake Wakatipu wool. The farm in question would invariably be the most efficient and effective means of promoting virgin Lake Wakatipu wool and would be allocated its levies.
[221] The fact that the Board may not always have acted in a manner consistent with this analysis is not, of course, decisive.
[222] This does not mean that the Board could operate unchecked. If the Board acted unreasonably in these matters, the decision would be amenable to review. Obviously, for example, the Board would have to act consistently with the object of the Act and if it did not, its decision would have been reviewable. The Supreme Court in the extract from the Unison decision referred to by Hammond J recognises that some bodies with expertise are given broadly-expressed powers and the courts respect that in the sense of applying rather more light-handed review.[102]
[223] Further, the Act itself provided a number of accountability mechanisms. A majority of the Board’s directors were elected.[103] The Board was required to prepare, review and maintain a statement of strategic and consultative intent[104] which was to be available to any grower.[105] The Board’s annual report had to be presented to the House of Representatives.[106] There were requirements on the Board to consult growers and representative organisations[107] and to subject itself to performance and efficiency audits.[108] In performing its functions, the Board had to take account of grower concerns.[109]
[224] I do not see my approach as invoking a Chevron analysis because the issue in my view is not about who has the responsibility to decide on the construction of the Act but rather how one characterises the nature of the decisions being made as a matter of statutory interpretation.[110]
[225] My approach would provide the answer to the challenged decisions. But, in any event, I consider whether relief should be granted in relation to the first three decisions on the basis that the approach of Hammond and Chambers JJ to statutory interpretation is correct. As will be seen, I would still decline to grant relief.
The first of the challenged decisions – The Merino New Zealand decision
[226] For the reasons given by Miller J, I consider that even if a comparative exercise was required in terms of s 6(6) what the Board did in making this decision was sufficient to meet the statutory requirement.
[227] The first point to note is that Miller J found as a matter of fact that the Board had turned its mind to the question of Merino New Zealand’s efficiency and effectiveness and the alternatives during the period December 1997 to February 1998.[111] Nothing advanced in argument before us persuades me a different approach should be taken to that factual conclusion.
[228] Secondly, as Miller J accepted, while the Board’s analysis was not comprehensive that was not fatal. Saxmere’s proposals were still “embryonic”[112] and the Board expressly reserved the right to appoint others and to terminate the arrangement with Merino New Zealand subject only to giving the latter an opportunity to present its case to the Board. The Joint Venture Agreement, although post-dating the decision to appoint Merino New Zealand, provided the detail of what was agreed in February 1998 when the heads of agreement were signed. In particular, cl 4.3 of Schedule 5 (Marketing and Industry Development Agreement) of the Joint Venture Agreement acknowledged that Merino New Zealand was the preferred supplier but went on to provide that Merino New Zealand acknowledged the Board’s statutory responsibility “to use the most efficient and effective mechanism and entity”. And, “accordingly”, provided:
... if it is proven to the satisfaction of [the Board] acting reasonably and after consultation specified in Clause 4.4, that another mechanism or entity could perform the Services or any element thereof, more efficiently and effectively than the Company [Merino New Zealand] the [Board] may elect to use that alternative mechanism or entity to perform the Services or element thereof and/or reduce the annual amount payable to the Company at any time, without payment of compensation to the Company.
[229] It follows that at the point when Saxmere was able to put forward its case in a more developed form, the joint venture did not foreclose either consideration or acceptance of that. The Board was not taking Merino New Zealand’s status as a marketer as a given.
The second challenged decision – May 1998
[230] Miller J found that the Board was in breach of s 6(6) as it declined Saxmere’s application for funding primarily because it considered funding should be limited to grower groups.[113]
[231] Chambers J takes a different view on how the Board’s approach should be construed and its legitimacy.[114] I see the force of that argument but would decline to grant the declaratory relief sought on another basis. The Board did not close the door on Saxmere. The Board’s letter of 22 May 1998 advising Mr Radford of its decision to decline funding made it plain that the Board would revisit the matter. It is in this context that delay is relevant. At this point, by then having been made aware of the Board’s criteria, Saxmere had three options. First, it could have gone back to the Board as it in fact did in 2000.[115] (The ability to have the matter revisited is the answer to any procedural impropriety arising from the initial failure to provide Saxmere with the criteria.) Secondly, it could have applied to Merino New Zealand for funding as Mr Radford accepted that he was advised to do. Finally, Saxmere could have brought its proceedings then. Instead, as I discuss shortly, in 2001 Saxmere reached an agreement with the Board. While it may be good reasons can be advanced for taking a course other than litigation, nonetheless a choice was made.
[232] The effect of the delay in bringing proceedings is that reconsideration was no longer an option. It does seem likely that, without further development, Saxmere’s business plan was such that even on reconsideration funding would have been refused. There were also the difficulties arising from the lack of detail provided to the Board given Saxmere’s concern about confidentiality. It is also undoubtedly the case that, at least in May 1998, the Board attached some weight to the need for critical mass.[116] Without evidence of grower support the Board could not have been satisfied the Saxmere plan would achieve that. I add that Ms Grey questions the relevance of that factor in this context but I do not see it as an irrelevant consideration in terms of the statutory scheme.
The third challenged decision – the capitalisation decision
[233] Miller J set out a number of reasons why his decision that the Board acted unlawfully in its decision to capitalise might seem “harsh”, namely:
[120] ... The Board was in transition, and took the decision to fund [NZMCL] in that way only after exhaustive analysis and grower consultation. The reforms of which the decision formed part were effectively endorsed under the 2003 Act. The decision to fund [NZMCL] also made clear commercial sense, preserving grower assets and setting the company up to continue the progress that had been made. By reducing the levy, the Board had released growers’ own funds to support Saxmere and other niche providers if they wished.
[234] The combination of these factors does in my view lead to the conclusion the Board acted lawfully. In this respect I emphasise that, by July 2001, the Board had stopped levying to fund market activities. Further, the Board minutes record that the Board did turn its mind to s 6(6) issues in making this decision. More importantly, in doing so, the Board had the benefit of expert assistance in the form of the McKinsey report. That report in turn had the “strong” support of growers.[117]
[235] As Miller J noted, the principal recommendation of the report was that levy-funded promotion cease and the assets of Wools of New Zealand and Merino New Zealand be used as the basis for new commercial wool marketing companies. Growers should be able to invest some of their share of reserves in the proposed companies or have their share of reserves returned in cash. As Hammond J notes,[118] the report spoke positively of the achievements of Saxmere as an example of how a commercial marketing company can succeed by targeting a market niche but it is also positive about the achievements of Merino New Zealand in terms of the benefits it had delivered to a majority of fine wool growers. Interestingly, in view of the debate about the division of functions, the report divides New Zealand’s wool into three broad categories: strong, including lambswool (26–42 microns); mid-micron (23–31 microns); and fine (14–23 microns). The Board was able, in my view, to treat the McKinsey report as providing the information necessary for its s 6(6) analysis.
[236] In any event, even if the Board had acted unlawfully I would decline to grant relief for two reasons. First, because of the delay in bringing the proceedings as I have discussed. In this context, it is relevant that Miller J was satisfied that the Board would have reached the same decision had it undertaken a comparative analysis in August 2001. Specifically, the Judge found the Board would have concluded that Saxmere was the most effective marketer of the wool it sold but that the rationale for capitalising NZMCL did not apply to Saxmere and Saxmere could reach an arrangement with its growers for ongoing payment of the money previously levied for marketing purposes.[119]
[237] Secondly, I would decline relief because in 2001 Saxmere chose instead to settle its dispute with the Board. The context of the agreement was that in 1999 Saxmere began to withhold levies payable on the wool it acquired. The dispute was settled by an agreement entered into on 2 April 2001 between Saxmere, the Board and Merino New Zealand. The agreement was for a fixed term which ended on 30 June 2001. That was expressed to be necessary because the circumstances “governing wool promotion in New Zealand are in transition”.[120]
[238] The agreement recited that the Board would engage Saxmere to provide promotion and marketing services for “accredited” Saxon merino suppliers to Saxmere’s programmes. The agreement also said the Board had satisfied itself that Saxmere was the “most efficient and effective delivery mechanism” for marketing services for the accredited Saxon merino suppliers of fibre into Saxmere programmes.[121] (That acknowledgement must be of some relevance to the claim a declaration is now necessary to vindicate Saxmere’s position.)
[239] The Board paid Saxmere the levies payable on Saxon fibre, net of common costs. While the agreement did not mean Saxmere got back all of the levies it had paid, it is relevant to the discretionary grant of relief in this case. As Mr Kos put it, the agreement was an election by Saxmere to take what was then offered. The Board and Merino New Zealand had given Saxmere the opportunity to provide them with any information it thought fit and had made a considered response. That process and the associated reconsideration of Saxmere’s proposal cured the consequences of any prior procedural inadequacy.
Other matters
[240] For the reasons set out by Hammond J,[122] I consider that the causes of action based on restitution, breach of statutory duty and negligence fail.
[241] It follows that I would allow the Board’s appeal and dismiss the cross-appeal.
CHAMBERS J
Introduction
[242] I have had the advantage of reading the opinions of Hammond and Ellen France JJ. Unfortunately, I find it necessary to write separately because, although in broad terms I agree with Hammond J’s interpretation of the crucial section (s 6) of the Wool Board Act 1997, I do not agree with his application of that interpretation to the facts of this case. It is my view that Saxmere’s claims against the Board fail factually. My view of the facts is broadly in line with Ellen France J’s, even though we differ on the law.
The correct interpretation of s 6
[243] Section 5 of the Act set out the Board’s object:
- (1) The object of the Board is to help in the attainment, in the interests of growers, of the best possible net ongoing returns for New Zealand wool.
- (2) In pursuing its object, the Board must have regard to the desirability of the wool industry’s making the best possible net ongoing contribution to the New Zealand economy.
[244] Section 6(1) then set out the sorts of activities the Board should undertake in fulfilment of its object. Before it decided how to undertake any of those things, subs (6) required the Board to think laterally as to what would be the most efficient and effective means of fulfilling a particular function. There was no one way to undertake a s 6(6) analysis. What was required would depend on the nature of the function and on whether there were other entities (apart from the Board) keen to assist the Board in its fulfilment of the particular function.
[245] Like Hammond J, I cannot accept Mr Kos’s submission as to the role of s 6(6), even though his submission faithfully follows this Court’s interpretation of the section at the first hearing. It seems to me significant that the Board, at the time it made the three decisions under challenge in this appeal, considered a s 6(6) analysis was required. Indeed, even before Miller J it appears to have been “common ground” that the Board’s decisions in 1998 triggered the need for a s 6(6) analysis. For instance, Miller J said at [42] of his decision:
It was also common ground that the decision to appoint MNZI triggered the Board’s duty to comply with s 6(6), as it was a determination that an element of a Board function (in this case, increasing the demand for New Zealand wool in new and existing markets with a view to increasing both volumes and margins) be performed by MNZI. Accordingly, the Board was clearly prohibited from making the decision unless it had considered other mechanisms or entities “that might reasonably be expected” to be able to perform the element or function concerned, and determined that the chosen mechanism or entity was “likely to be the most efficient and effective means” of doing so. Because the decision encompassed the entire fine wool sector, it also engaged the interests of Saxmere and others, such as Forest Range, which could not perform the entire element themselves but could perform part of it in conjunction with existing agencies such as Wools of New Zealand. I accept Mr Cooke’s submission that, having decided to contract out fine wool marketing, the Board could not confine itself to only those groups capable of performing the entire task alone.
[246] The suggestion that s 6(6) was not even engaged in this case seems to have arisen only when the case reached this Court on the first occasion. I am not sure whether the analysis arose from the Board’s submissions on that occasion or whether it was an argument developed by the panel hearing that appeal.[123] In my view, the legislative history is strongly against the interpretation which found favour last time. Mr Kos’s argument effectively makes the Board’s actions unchallengeable. It cannot have been Parliament’s intention that the Board could decide the sorts of matters raised in this proceeding without undertaking a s 6(6) analysis. It is clear to me that the Select Committee inserted subs (6) as a result of concerns for, among others, MNZI and Saxmere.[124] The Select Committee was well aware of the dispute between MNZI and the Board about how Merino wool had been and should be marketed and promoted. It was also aware, though perhaps only to a limited
extent,[125] of Mr Radford’s wish to take over responsibility for Saxon wool promotion. These conflicting aspirations were the very things Parliament expected the Wool Board to grapple with by means of a s 6(6) analysis. That is exactly how the Wool Board saw it at the time too. The question to my mind is whether the Wool Board properly undertook the statutory analysis.
[247] It follows that I do not accept, with respect, Ellen France J’s view that s 6 envisages “two different types of decisions”, the first category involving “decisions of a policy or strategic character” and the second involving “consideration of the mechanisms for providing the various services”.[126] Section 6(6) was, in my view, a restraint applicable to all decision-making by the Board. Before the Board decided how to carry out any of its functions, it needed to stop and consider what was the most efficient and effective means of doing what it was considering doing. In particular, it needed to consider whether it was the entity best placed to undertake the task or whether it would be better to arrange for the task’s performance by someone else or by means of a partnership or by means of a joint venture. If someone else, was it better to subcontract or to invest in that company? There was no clear dividing line between policy decisions and operational decisions. The practicalities would inform the strategic decision and vice versa.
Decision 1: the Merino New Zealand decision[127]
[248] Miller J found that the Board had acted lawfully when making the Merino New Zealand decision. On Ellen France J’s analysis, this question does not even arise. But she considers that, even if a s 6(6) analysis was required, what the Board did in making this decision was sufficient to meet the statutory requirement.[128]
[249] Hammond J on the other hand considers that the Board did not carry out a proper s 6(6) analysis and that there should be a declaration to that effect.[129]
[250] I agree with Miller and Ellen France JJ. It is vital that the Merino New Zealand decision be put in context. Since 1996, the old Wool Board and MNZI had worked in tandem in the promotion and marketing of New Zealand Merino wool. Friction developed. Merino wool prices continued to languish. MNZI blamed the Board. The Board considered MNZI had failed to deliver on its promises. In 1997 the parties entered into a detailed mediation. At this stage, Mr Radford was a director of MNZI, although he was not one of the MNZI negotiators at the mediation. The mediation, under the guidance of Dr David Cullwick of Ernst & Young, was conducted against the backdrop of proposed legislative reform of the industry. The Producer Board Acts Reform Bill was before the House. Both MNZI and Mr Radford, wearing his Saxmere hat, lobbied Parliamentarians, hoping to achieve an “opt-out” regime. But, by the time the mediation was drawing to its close, it was clear their wishes in that regard were not fulfilled: most Parliamentarians thought that would lead to fragmentation within the primary industries. What the Parliamentarians did eventually come up with, however, was a solution which required the producer boards to consider how best to undertake their functions, including the possibility of joint ventures and the like, as I have discussed already. The addition of the subclause which became subs (6) was the means by which that fetter on producer board decision-making was achieved.
[251] The parties at the mediation considered a number of options as to how the promotion of fine wool should be undertaken. Eventually the negotiators reached a consensus that a joint venture structure was the best way forward. They appreciated that that was one of the options Parliament was proposing to approve under the new Act governing the wool industry. The negotiators did not expect all Merino growers would approve of the recommended structure when it became public. There is nothing surprising about that; farmers are individualists and no structure will ever command unanimous support. It was also envisaged there would be opposition to the proposed structure on the Wool Board’s side, probably with some executives, and possibly too among the directors.
[252] Within days of the passage of the Wool Board Act 1997 on 17 December 1997, an outline of the proposed structure came before the new Wool Board’s board of directors.[130] The board, according to Bruce Munro, at that time the Chairman of the Board, was well aware of the new s 6 and of the need for the Board to satisfy itself that the proposed joint venture was the most efficient and effective means of promoting fine wool. The board satisfied itself that the proposed structure, which had been thrashed out by representatives of the two main players in the “fine wools” area, satisfied the s 6(6) test. In my view, that decision was unimpeachable. It is quite true that Saxmere was not at that stage considered, but that was because there was no proposal from Mr Radford on the table. They had seen no business plan from him. It is true he had met several days before with Jeff Jackson, the Board’s chief executive, but that was to secure funding for the purpose of preparing a business plan. What form that might take was quite unknown to the Board and was not a matter that it could reasonably take into account at this stage. In any event, all Mr Radford wanted to deal with was Saxon wool and its promotion. Saxon wool was a tiny proportion of even the “fine wool” clip. The 22 December decision, which did not commit the Board even as far as Merino wool was concerned, certainly did not exclude Saxmere from later consideration.
[253] By February 1998, negotiators for MNZI and the Board had drafted, for consideration by their respective organisations, a document comprising heads of agreement. This document fleshed out more details as to how the joint venture would operate. But the agreement was still provisional. The document expressly acknowledged that it was “not a legally binding agreement at law”. It was also described as “an important first step in finalising a definitive agreement” but “not an end in itself”. Further, the heads of agreement expressly acknowledged that annual funding, when eventually fixed, was to be subject to “the principle of contestable service delivery and transparency”. Matters were not set in concrete by the heads of agreement, as is shown by various amendments finally agreed in December that year.
For example, as Ellen France J has
observed,[131] the Board
specifically acknowledged, in its marketing agreement with Merino New Zealand of
16 December 1998, its responsibilities under s 6(6). The Board
reserved to itself the right to use an “alternative mechanism
or
entity” should it ultimately conclude such mechanism or entity could more
efficiently or effectively carry out the marketing
and industry development of
Merino wool.
[254] The heads of agreement document was signed on 20 February 1998. I have no doubt the Board’s decision to sign that document was both lawful and reasonable. The Board had, over many months, weighed up all sorts of mechanisms with a view to resolving tensions which had developed between it and MNZI and indeed between Merino growers themselves, they being far from unanimous as to the best way forward. It is true that Saxmere was not directly considered either in December 1997 or February 1998, but that was for good reason. It had still not put forward a proposal even by February. Mr Radford was insisting upon complete confidentiality about his plans.
[255] I do not agree with Hammond J that the Board had chosen by February 1998 “to divide up ‘wool’ artificially in a way that meant that Saxmere was sidelined, and left at the mercy of Merino wool interests at large”.[132] Nor do I agree that the Board “defined [Saxmere] out of existence”.[133]
[256] As to the first contention, it ignores the provisional nature of the February decision. If Saxmere came up with a sensible alternative model, it was entirely possible the Board would consider it and, if convinced, change course. Indeed, later that year, the Board did consider a proposal from Saxmere. It decided, reasonably in my view, not to accept it and not to change course, but that was not because the February 1998 decision had definitively, and for all time, cut Saxmere out of the picture. The Saxmere proposal failed on its merits, not because of predetermination that necessarily excluded Saxmere.
[257] With respect to Hammond J’s second assertion, the Board did not rule out a future role for Saxmere. The Board had only incomplete knowledge of what Mr Radford proposed at that stage. So far as I have been able to ascertain from the evidence, the Board had not been told anything definitive about Saxmere’s shareholders and capital structure or been given any details about its contracts with overseas customers and its contracts with growers. The Board could not afford to wait around while Mr Radford completed his plans. At the same time, the Board did leave open the possibility that a different arrangement would ultimately be adopted for his part of the “fine wool” clip.
[258] It is important to recognise that the Board’s “decision”, such as it was, did not prevent Saxmere from doing anything. Saxmere could continue to market and promote the wool under its control in any manner it saw fit. It is true that it did not at that stage have access to funding from the Board, but that is scarcely surprising: it was yet to make a formal application, although the Board had granted funds to help it to do so, hardly the act of a Board bent on defining it “out of existence”. The Merino New Zealand decision did not foreclose the possibility that it might get funding if it could establish a viable business plan.
[259] Even if I thought there was merit in Saxmere’s complaint about this first decision, I would not grant Saxmere declaratory relief for two reasons, which overlap. The first is the settlement agreement subsequently reached between Saxmere and the Board, a factor which has also weighed heavily with Ellen France J.[134] Although the agreement did not expressly state that it was in full and final settlement of past disputes between Saxmere and the Board, it implicitly did that, with the consequence that now to grant relief, even by way of a declaration, would seem inappropriate.
[260] The second reason I would in any event decline relief is Saxmere’s extraordinary delay in bringing the proceeding. It did not issue its proceeding until December 2003, almost six years after the impugned decision, and indeed after the Board had been disestablished. If an entity considers a statutory body has acted unlawfully and harmed its interests, it is incumbent on that entity to act promptly so that the statutory body has an opportunity to reconsider its stance.
[261] Hammond J discounts the factor of delay on the basis that “Saxmere had to live with an ongoing relationship with the Board which it did not want to prejudice by legal proceedings”.[135] But, with respect, I do not consider that excuses the delay at all. Obviously, it would have been premature to complain about the Merino New Zealand decision in February 1998, because of its provisional nature – but that is precisely why I consider the decision, such as it was, neither unlawful nor unreasonable. There was, however, no reason why, following the May 1998 decision, Saxmere could not have taken action if it considered the Board was acting unlawfully. There is no evidence, in any event, that Saxmere was “scared” of the Board. After all, Mr Radford the following year unlawfully withheld levies from it.
[262] For these reasons, I would dismiss Saxmere’s cross-appeal with respect to this decision.
Decision 2: the May 1998 decision
[263] In May 1998, the Board declined Saxmere’s application for funding. Miller J held that the Board, in making that decision, failed to comply with s 6(6). He considered the Board had undertaken “no comparative analysis at all of Saxmere and [Merino New Zealand’s] efficiency and effectiveness”.[136] He made a declaration to that effect. Hammond J essentially agrees with Miller J’s finding. He too would grant declaratory relief.
[264] With respect to them, I do not agree. The first point to note – and it is most important – is that Saxmere’s application did not fail because the Board considered itself already committed to Merino New Zealand. But, quite apart from that, in my view, the Board would have been acting outside its powers had it approved the application for funding. That was because it had now emerged for the first time that most of the wool Saxmere was planning to promote with the Board’s money was Australian wool, not New Zealand wool. Miller J acknowledged this difficulty but found “the Board did not take the view that this consideration precluded funding”.[137] I do not accept that. It was the fundamental objection noted – rightly so – in the Board’s minutes:[138]
2240 PROPOSAL FROM SAXMERE INTERNATIONAL LIMITED
Mr Jackson spoke to his memo to directors dated 28 April, included with his report (BP98/22). He outlined the background to the Board’s relationship with Saxmere and its principal, Mr Peter Radford, and advised that he had offered financial support to the development of Saxmere’s business plan without having been advised that two-thirds of the fibre embraced by Saxmere is Tasmanian.
The Chairman said he felt the Board had been placed in an impossible position by Saxmere and that directors had not been allowed to view the business plan. Directors expressed concern that the true situation regarding the composition of Saxmere International was not revealed prior to soliciting the Board’s support. The Chairman proposed that support for the Board’s response be obtained from Merino New Zealand before communicating with Saxmere.
[265] The Board, with the assistance of its lawyers, had drafted criteria to assist it in undertaking a s 6(6) analysis. There was nothing wrong with the Board adopting a set of criteria. Obviously any decision made would have to be scrutinised against s 6(6) itself, but it is often good administrative practice to set out the sorts of issues a decision-maker should consider when applying statutory tests or criteria. Courts do it all the time. It assists consistent and fair decision-making. Miller J considered the first criterion effectively breached s 6(6).[139] The first criterion, at the time the Board made the May 1998 decision, read as follows:
Applicants must establish an organisation which represents the collective interests of a specific group of New Zealand wool growers (the grower group).
[266] Miller J considered this criterion to be in breach of s 6(6) because it eliminated funding other than for grower groups: Saxmere was thereby automatically excluded. I do not accept that criticism of the criterion. It did not restrict the kind of “organisation” which could apply for funding: it could be any company or any incorporated society. What it did do, however, was require that the organisation applying for funding should “represent”, in some way or other, the “interests of a specific group of New Zealand wool growers”. The crucial words are “New Zealand” and “wool growers”. The Board’s object was to provide help in the attainment, in the interest of growers, of the best possible net ongoing returns for New Zealand wool. The statute specifically provided that the Board’s assets belonged “ultimately to wool growers” and that they were for the time being to be “held and administered for the benefit of growers”.[140] “Grower” was defined in the Act as meaning a “person engaged in New Zealand in the business of farming sheep”.[141] The first criterion therefore was not only entirely consistent with the Act: it was required by the Act. Saxmere’s application, as presented, had to fail as the money it was seeking – compulsorily paid by New Zealand growers – was going to benefit primarily a New Zealand company and Australian growers.
[267] It was quite unclear from the business plan, which Mr Radford allowed Mr Jackson only to summarise for the Board, the extent to which any funding would benefit New Zealand Saxon growers as opposed to the company and Australian growers. Indeed, who exactly were the New Zealand growers? How much were they contributing by way of levy? On a view most favourable to Saxmere, what was being sought by way of funding had to be far in excess of what these unnamed growers had contributed. What commitment did these growers have to Saxmere?
[268] Ms Grey submitted that the Board’s concern, had it been raised, could have been “readily addressed ... by seeking equivalent support from [the] Australian Board”. First, contrary to her submission, the Board did raise the point. It was made clear in the first criterion that applicants had to represent “a specific group of New Zealand wool growers”. Saxmere was not such a representative. Further, in the letter Mr Jackson sent to Mr Radford on 22 May 1998, advising of the Board’s decision on Saxmere’s request, he specifically referred to the Board’s concern as to the provenance of the Saxon wool.
[269] Further, although arguably the New Zealand Board might have considered some form of joint venture with the Australian Board, that suggestion has, so far as I am aware, never been made prior to these submissions.
[270] I can quite understand Mr Jackson’s concern that he had been misled when he offered financial support to Mr Radford for the development of a business plan. Had Mr Radford disclosed that most of the wool was Tasmanian, the cost of preparing the business plan would, at the very least, have had to be shared in some way which was fair to New Zealand growers, who were the ultimate owners of these funds. I can also fully understand the Board’s frustration in being expected to fund a proposal when it had not been allowed to view the business plan. Saxmere had put the Board in an impossible situation.
[271] I am clear that the Board’s consideration of s 6(6) when considering Saxmere’s funding application was lawful and reasonable in the circumstances. Indeed, no decision other than the one the Board made would have been appropriate. In the circumstances, since Saxmere’s proposal, as presented, was not viable, there was nothing at that stage to cause the Board to be diverted from the course that had been provisionally agreed with MNZI in February.
[272] At the same time, Mr Jackson explained to Mr Radford that, if Saxmere were to change its proposal so that it met the Board’s criteria, the Board would “be happy to revisit the matter upon request”. In my view, nothing could have been fairer. This offer was repeated by Mark O’Grady, by then the Board’s Chief Executive, in a letter dated 25 January 2000, after the finalisation of the marketing agreement with Merino New Zealand. That letter made clear that the Board’s association with Merino New Zealand did not preclude it also having a relationship with Saxmere.[142] Contrary to Hammond J’s view, the Board’s mind was not closed, Saxmere had not been “sidelined and left at the mercy of Merino wool interests”, and Saxmere had not been “defined out of existence”.
[273] For these reasons, for the reasons set out at [259]–[261], and also for the reasons Ellen France J gives at [231]–[232], I would allow the Board’s appeal with respect to this decision and would quash the declaration Miller J made in Saxmere’s favour with respect to it.
Decision 3: the capitalisation decision
[274] At its meeting on 1 August 2001, the Board resolved to carry out a restructuring of Merino New Zealand to establish a new grower-owned company, the New Zealand Merino Company Limited (NZMCL). That decision followed the recommendations of a report prepared by McKinsey & Co, which had been commissioned by the Board to consider the future options for the wool industry in terms of improving returns and reducing costs. Its final report had been delivered in June 2000. Its principal recommendation was that levy-funded promotion be discontinued and that some of the assets of the Board and Merino New Zealand be used as a foundation for new commercial wool-marketing companies. The report recommended that growers should be given the option to invest a portion of their share of the Board’s reserves in the proposed companies or to have their share of those reserves. The reserves were at that stage very substantial.
[275] McKinsey & Co was well aware of what Saxmere had been achieving. Indeed, it was very complimentary and held Saxmere up as an example of successful niche marketing.
[276] The McKinsey report was the subject of extensive consultation with growers, who strongly supported its recommendations. Nearly 70 per cent of Merino growers supported the use of reserves to provide capital for the new company. Such consultation was a statutory requirement.[143] In addition, the Board was required to take account of grower concerns when performing its functions.[144] In line with the views of the overwhelming majority, the Board resolved to cease levying growers for promotional purposes. The levy for the year from 1 July 2001 was set at two per cent instead of five per cent. The reduced levy was reserved exclusively for funding “industry good” initiatives.
[277] The Board also resolved, in line with the McKinsey recommendations, to pay to NZMCL by way of seed money more than $2 million.[145] Effectively, the Board was returning to Merino growers some of the levies those growers had over time paid to the Board.[146] Henceforth, it was to be NZMCL’s job to promote Merino wool. No further money from the Board could be expected in that regard, as the Board had determined, in advance of its foreshadowed demise, to get out of the business of wool promotion. For the short time the Board expected to remain, its focus was to be on research and development.
[278] Saxmere’s complaint about the capitalisation decision is strange. It did not at that stage have a specific application for funding before the Board. There is no reason to think, however, that a Saxmere application was precluded by the capitalisation decision: the Board after all at 30 June 2001 held growers’ reserves of about $109 million.[147] Of course, Saxmere would have been hard pressed to persuade the Board that more should be paid to it, given that, by this stage, pursuant to an agreement entered into earlier that year, the Board had repaid to Saxmere $91,000, being a refund of “the total of levies paid on Saxon Merino fibre purchased by and on which levies [had been] paid by Escorial”. (Escorial Co Ltd had by this stage taken over Saxmere’s business.) In a sense, the capitalisation decision achieved a similar refund of levies for Merino growers. The sum paid under the capitalisation decision was very much greater because there were many more Merino growers, who had paid over the years substantially greater levies than Saxon growers had. In fact, Saxon growers in one sense did better than Merino growers, as the Saxon growers would have been eligible for shares in NZMCL, which they could sell if they did not wish to be part of the new Merino promotional structure.
[279] Miller J found that the capitalisation decision was unlawful in that the Board had failed to carry out a proper s 6(6) analysis. There was no dispute that the Board had purported to carry out a s 6(6) analysis, but the Judge found it defective because “the Board gave no consideration to appointment of Saxmere or anyone else to perform an element of marketing services”.[148] I cannot accept that criticism. It ignores the fact that the decision was in line with the McKinsey report’s recommendations, which were the product of detailed consultation and expert analysis. The criticism ignores the fact that growers had been consulted about the plan and overwhelmingly approved it. It ignores the fact that what the Board was effectively doing was giving back to Merino growers some of their past levies so that the new marketing company had sufficient capital from which to continue Merino New Zealand’s promotional and marketing efforts, in much the same way that the Saxmere interests had had returned to them all their levies since 1999 so that they could promote, as they saw fit, Saxon wool. It was fundamental to the decision that the Board would not in future be levying for promotional purposes: how promotion was to be undertaken in future was very much up to NZMCL and Saxmere and their respective growers. They would have more money in their pockets with which to undertake promotion of the kind they thought best.
[280] Miller J went on to criticise the Board for giving “no consideration to the question whether Saxmere ought to receive reserve and investment funding in respect of Saxon wool that it acquired from its accredited growers”.[149] With respect, that is not correct. It overlooks the refund Saxmere interests had got earlier that year. Secondly, the Board’s Merino capitalisation decision did not preclude further decisions in favour of Saxmere or anyone else. A s 6(6) analysis did not require that all wool interests be treated equally and at the same time.
[281] For these reasons, I would allow the Board’s appeal with respect to this decision and would quash the declaration Miller J made in Saxmere’s favour with respect to it.
Private law causes of action
[282] I now turn to consider Saxmere’s private law claims, on some of which it was successful. All these claims were dependent on findings that the Board had acted unlawfully or unreasonably. Like Ellen France J, I have found that the Board’s actions were at all times lawful and reasonable. All the private law claims must therefore fail.
[283] In the circumstances, I prefer to express no view on the interesting issues of law which fell to be considered by Miller J, given his different findings as to the lawfulness of the Board’s actions. In choosing to say nothing on the law, I adopt the approach that commended itself to this Court on the first hearing.[150]
Solicitors:
Quigg Partners, Wellington for Appellant
Sue Grey
Lawyer, Nelson for Respondents
[1] I refer to the respondents
compendiously as Saxmere.
[2] I
refer to the appellant as the Board.
[3] Saxmere Company Ltd v The Wool Board Disestablishment Company Ltd HC Wellington CIV- 485-2003-2724, 6 December 2005.
[4] A judgment was not sealed in the High Court until 22 June 2010. This panel insisted that a judgment be sealed, prior to the hearing of this appeal.
[5] Wool Board Disestablishment
Company Ltd v Saxmere Company Ltd [2007] NZCA
349.
[6] Saxmere Company Ltd v
Wool Board Disestablishment Company Ltd [2007] NZSC 88.
[7] Saxmere Company Ltd v Wool
Board Disestablishment Company Ltd [2009] NZSC 122, [2010] 1 NZLR 76 at
[20].
[8] See Pratt v Wanganui
Education Board [1977] 1 NZLR 476 (SC).
[9] R v Bow Street Metropolitan Stipendiary Magistrate, Ex parte Pinochet Ugarte (No 3) [1999] UKHL 17; [2000] 1 AC 147 (HL).
[10] R v Bow Street Metropolitan Stipendiary Magistrate, Ex parte Pinochet Ugarte [2000] 1 AC 61 (HL).
[11] As only some examples see Lord Browne-Wilkinson at 200 referring to Lord Slynn’s dissenting speech; likewise the Senior Law Lord referred to Lord Lloyd’s dissenting speech at 194 and Lord Nicholls’ speech at 206. Lord Hope referred to Lord Steyn’s prior speech at 242. The report of counsel’s speeches at 152-188 also suggests that counsel had proceeded on the basis that it was proper to refer to the earlier judgment.
[12] Bill Carter and John
MacGibbon Wool: A History of New Zealand’s Wool Industry (Ngaio
Press, Wellington, 2003) at
Introduction.
[13] Carter and
MacGibbon at 339.
[14] At [49]–[59].
[15] The facts informing this
part of the judgment are set out in greater detail at [1]–[6] of the High
Court judgment.
[16] At [4].
[17]
At [4].
[18]
At [5].
[19]
See also [15]–[29] of the High Court
judgment.
[20] Wool Industry Act
1977, s 16.
[21] At [22].
[22]
At [25].
[23] Primary Production
Committee “Report on the Producer Board Acts Reform Bill”
[1996–1999] LXIV AJHR I at
526.
[24] (9 December 1997) 565
NZPD 6363.
[25] Carter and
MacGibbon at 340.
[26] Section
13(2).
[27] Section
20(1)(a)–(b).
[28] Section
20(1)(c).
[29] Section
20(2)(b)–(c).
[30] Section
39(2).
[31] Schedule
3.
[32] Section
39(8).
[33] Section
4(4).
[34] Section
39(4).
[35] At [194].
[36]
At [10].
[37] At [42].
[38]
At [42].
[39]
Section 6(1).
[40] Section
6(3).
[41] Section
6(4).
[42] Section
6(5).
[43] At [46].
[44]
At [47].
[45]
At [42].
[46]
At [65].
[47] Wool Board
Disestablishment Company Ltd v Saxmere Company Ltd [2007] NZCA 349 at
[91].
[48] At [120].
[49]
At [46].
[50]
At [45].
[51]
At [47].
[52]
At [47].
[53]
At [56].
[54]
At [60].
[55]
At [65].
[56]
Saxmere Company Ltd v Wool Board Disestablishment Company Ltd [2007]
NZSC 88 at [1].
[57] NZI Financial
Corporation v New Zealand Kiwifruit Authority [1986] 1 NZLR 159 (HC);
Stevenson v New Zealand Apple and Pear Marketing Board HC Christchurch
CP63/87, 6 November 1987; ABC Containerline NV v New Zealand Wool Board
[1980] 1 NZLR 372 (HC); Ferens v Game Industry Board HC Wellington
CP133/89, 7 April 1989; and Truong Mushroom Farm Ltd v British Columbia
(Mushroom Marketing Board) [1999] BCJ 1079
(BCSC).
[58] Unison Networks
Ltd v Commerce Commission [2007] NZSC 74, [2008] 1 NZLR 42 at
[55].
[59] Chevron USA Inc v
Natural Resources Defence Council Inc [1984] USSC 140; 467 US 837
(1984).
[60] At
842–43.
[61] See Note “Justifying
the Chevron doctrine: insights from the rule of lenity” (2010) 123
Harv L Rev 2043 at 2044.
[62]
United States v Mead Corp [2001] USSC 54; 533 US 218
(2001).
[63] Above, (2010) 123
Harv L Rev 2043 at 2049.
[64]
Tom Bingham The Rule of Law (Allen Lane, London, 2010) at
48.
[65] At 54.
[66] R (ProLife Alliance) v
British Broadcasting Corporation [2003] UKHL 23, [2004] 1 AC 185 at
[75].
[67] See [51]
above.
[68] McKenzie v
Attorney-General [1991] NZCA 105; [1992] 2 NZLR 14 (CA) at
17.
[69] At [47].
[70] Judicature Amendment Act 1972, s 4(1); Declaratory Judgments Act 1908, s 3.
[71] Perhaps for the reason given by Cooke P in Temese v Police [1992] NZCA 190; (1992) 9 CRNZ 425 (CA). In contrast see R v Poumako [2000] NZCA 69; [2000] 2 NZLR 695 per Thomas J at [86]–[106] and Manga v Attorney-General [2000] 2 NZLR 65 (HC).
[72] See, for example GXL
Royalties Ltd v Minister of Energy [2010] NZCA 185, [2010] NZAR 518
at [63] and [67], which goes close to a presumption that relief follows a
finding of error of law, as against Baragwanath J’s dissent
urging
restraint, albeit in the context of a “trivial” breach of rights to
natural justice, in Combined Beneficiaries Union Inc v Auckland City COGS
Committee [2008] NZCA 423, [2009] 2 NZLR 56 at
[105]–[115].
[73]
Attorney-General v Refugee Council of New Zealand Inc [2003] 2 NZLR 577
(CA) at [45].
[74] Russian Commercial and
Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 (HL) at
448.
[75] See for example
London Passenger Transport Board v Moscrop [1942] AC 332 (HL).
[76] Turner v Pickering [1976] 1 NZLR 129 (HC) at 141–142; Simpson v Whakatane District Court (No 2) [2005] NZHC 210; [2006] NZAR 247 (HC).
[77] Imperial Tobacco Ltd v Attorney-General [1981] AC 718 (HL). See also R v Sloan [1989] NZHC 406; [1990] 1 NZLR 474 (HC); and Auckland Area Health Board v Attorney-General [1993] 1 NZLR 235 (HC), in which an exception was made to the rule.
[78] See the discussion in Philip Joseph Constitutional and Administrative Law in New Zealand (3rd ed, Brookers, Wellington, 2007) at 1098–1101.
[79] See for example New
Zealand Employers Federation Inc v National Union of Public Employees [2001] NZCA 315; [2002]
2 NZLR 54 (CA), at [125]–[126] per McGrath
J.
[80] GXL Royalties
above; Berkeley v Secretary of State for the Environment [2000] UKHL 36; [2001] 2 AC 603
(HL).
[81] See [65]
above.
[82] At [57].
[83]
At [112].
[84]
At[112].
[85]
At [65].
[86]
Woolwich Building Society v Inland Revenue Commissioners (No 2)
[1993] AC 70 (HL).
[87]
Waikato Regional Airport Limited v Attorney-General [2003] UKPC 50; [2004] 3 NZLR 1
(PC).
[88] King Street
Investments Ltd v New Brunswick 2007 SCC 1, [2007] 1 SCR
3.
[89] A new Limitation Act has
recently been enacted in New Zealand: Limitation Act
2010.
[90] At [146].
[91]
At [153].
[92]
At [74].
[93]
R v Deputy Governor of Parkhurst Prison, Ex parte Hague [1992] 1 AC 58
(HL) at 159.
[94] X (Minors) v
Bedfordshire County Council [1995] UKHL 9; [1995] 2 AC 633 (HL) at 730–731 per Lord
Browne-Wilkinson. See also Morrison Sports Ltd v Scottish Power [2010]
UKSC 37.
[95] Wool Board Act
1997, s 5(1).
[96] At [147].
[97]
At [171].
[98]
X v Bedfordshire CC at
732–735.
[99] Takaro
Properties Ltd v Rowling [1987] 2 NZLR 700 (PC).
[100] Bella Vista Resort Ltd v Western Bay of Plenty District Council [2007] NZCA 33, [2007] 3 NZLR 429 at [60].
[101] Other entities also wished for an opt-out clause, including the Federation of Maori Authorities. See Producer Board Acts Reform Bill 1996 (207-2) (select committee report) at xi.
[102] Hammond J at [110] and see also CREEDNZ Inc v
Governor-General [1981] 1 NZLR 172 (CA) at 198 per Richardson
J.
[103] Section
13(2).
[104] Section
7(1).
[105] Section
7(2).
[106] Section
29.
[107] Sections 8 and
9.
[108] Section
30.
[109] Section 10.
[110] See the discussion of
the Chevron approach in Professor Taggart’s essay “The
Contribution of Lord Cooke to Scope of Review Doctrine in Administrative
Law—A
comparative common law perspective” in Paul Rishworth (ed)
The Struggle for Simplicity in the Law: Essays for Lord Cooke of Thorndon
(Butterworths, Wellington, 1997) 189 at 209 and Fulcher v The Parole Board
(1997) 15 CRNZ 222 (CA) at 245–246 per Thomas J.
[111] At [46].
[112]
At [108].
[113]
At [65] and [109].
[114]
At [266]–[271].
[115]
In the context of negotiations to attempt to settle their dispute: see Miller J
at [72].
[116] See
Miller J at [62].
[117]
Miller J at [88].
[118] At
[163].
[119]
At [194].
[120]
Clause 7.1–7.2 of the Agreement to Contract the Escorial Company
Ltd.
[121] Ibid cl
1.2.
[122] At [174]–[199].
[123] We have not been shown
the Wool Board’s submissions on the first appeal. We were given the Wool
Board’s High Court
submissions and I accept the argument which ultimately
found favour with this Court on the first appeal is raised in one paragraph
of
those submissions. It was, however, very much a subsidiary argument in the High
Court, not the Board’s key argument as
it has now become.
[124] (9 December 1997) 565
NZPD 63636366 and 6369.
[125] Mr Radford’s
intentions at this stage were still not completely clear, at least so far as the
outside world was concerned.
This was no doubt partly a consequence of what he
saw as the need for confidentiality. As well, he was still a director of MNZI,
a post he did not give up until December 1997.
[126] At [215].
[127] In describing the three
decisions under review, I have used Hammond J’s
terminology.
[128] At [226].
[129] At [137]–[138].
[130] Existing directors of
the old Board continued in office by virtue of s 59 of the Wool Board Act 1997.
[131] At [228].
[132]
At [133].
[133] At [133].
[134] At [237].
[135]
At [144].
[136]
At [65].
[137]
At [67].
[138] Given what is stated in
the Board’s minutes, I cannot accept Hammond J’s assertion that
“this is an argument which
has been developed as an ex-post justification
on the appeal”: at [206].
[139]
At [69].
[140]
Section 4(4).
[141] Section 2
(emphasis added).
[142] That
letter set in train the process leading to the settlement agreement in
2001.
[143] Section
8.
[144] Section 10.
[145] The structuring of the
sum invested does not matter for current purposes.
[146] According to the
McKinsey report, $2 million of reserves, which it recommended should be
allocated to the new entity, was “the
equivalent of six months levy
funding”; see further Miller J’s judgment at
[87].
[147] Some of that was
committed.
[148] At [93].
[149]
At [95].
[150] Wool Board Disestablishment Company Ltd v Saxmere Company Ltd [2007] NZCA 349 at [73]–[74].
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