Ipsofactoj.com: International Cases [2002] Part 10 Case 14 [NZCA]



Land Transport Safety Authority

- vs -





26 FEBRUARY 2002


Randerson J

(delivered the Judgment of the Court)


  1. This appeal arises from a decision delivered in the High Court on 18 May 2001 in judicial review proceedings brought by the respondent, Mr Casey, against the appellant, the LTSA. Under s 166 of the Land Transport Act 1998, the Director of the LTSA, acting by his delegate, had granted an exemption from certain safety standards otherwise applicable to a second hand Mercedes Benz motor vehicle brought into New Zealand by Mr Casey when he emigrated from South Africa to New Zealand in 1999.

  2. The central issue in the case was the validity of one of the conditions the Director imposed on the exemption which prevented any change in ownership of the vehicle for a three year period starting from the date of the exemption, 19 August 1999. The Judge found that the condition was invalid because the condition imposed did not relate to road safety but rather reflected the concern of the Director that the grant of the exemption without such a condition created a loophole which would be exploited by commercial importers and would lead ultimately to the undermining of the statutory scheme for the regulation of vehicle safety.

  3. Put shortly, the essential issue was the scope of the discretion available to the Director under s 166.


  4. As the Judge did, we commence with a brief summary of the legislative framework which includes both primary and subordinate legislation in the form of regulations and rules.

  5. The starting point is that a motor vehicle imported into New Zealand may not be operated unless it has been certified as complying with all applicable safety standards under the Land Transport Rule: Vehicle Standards Compliance 1998 (the 1998 Rule). Nor may the vehicle be registered under the Transport (Vehicle and Driver Registration and Licensing) Act 1986 until the vehicle has been certified as compliant with the safety standards. The relevant provisions are ss 2.2 and 2.3 of the 1998 Rule and ss 5 to 7 of the 1986 Act.

  6. It is common ground that among the applicable requirements for compliance under the 1998 rule are the Land Transport Rules: Interior Impact 1997, the Land Transport Rule: Door Retention Systems 1997, the Land Transport Rule: Steering Systems 1997, and the Transport Vehicle Standards Regulations 1990 (the 1990 Regulations).

  7. As the Judge explained, these regulations and rules set safety requirements and standards for systems and components in motor vehicles operating in New Zealand. Rather than operating its own standards regime, New Zealand requires importers of vehicles to demonstrate that their vehicles comply with one of four specified overseas regimes. Under those regimes (in a procedure known as the homologation process) standards are fixed after rigorous testing and procedures are specified to ensure compliance by manufacturers with the required standards. As a part of this process, certification bodies are appointed by the controlling jurisdictions to conduct audits of the manufacturers’ production facilities.

  8. The system is described as being complex but cost effective. Compliance costs per the vehicle are low because of the large number of vehicles produced for each type approval issued.

  9. The Director is empowered to grant an exemption from compliance with the applicable standards under s 166 of the Land Transport Act 1998 (the 1998 Act) and under r 36 of the 1990 Regulations.


  10. Upon the arrival of Mr Casey’s vehicle into New Zealand, the vehicle was registered on the strength of a compliance certificate issued by the manufacturer of the vehicle in South Africa. Shortly afterwards, it was discovered that the certificate of compliance was invalid because, in terms of s 4.4(2)(a) of the 1998 Rule, the Mercedes Benz manufacturing plant in South Africa was not covered by the production requirements laid down under the relevant safety standard, a European regime described as UN/ECE. In the absence of documented verification from the relevant certification bodies to ensure compliance with the standards, it was not possible for a vehicle compliance certifier in New Zealand to certify that the vehicle had met the required standards under s 4.4(1) of the 1998 Rule.

  11. As a result of the discovery of the defect in the documentation, the LTSA revoked the vehicle compliance certificate originally issued. This meant that the vehicle could no longer validly be registered and Mr Casey was not permitted to use the vehicle on the road.

  12. After further submissions were made to the Director, an exemption under s 166 of the 1998 Act was issued for the vehicle subject to five conditions including the disputed one. The earlier notice of revocation was withdrawn. That enabled Mr Casey to register the vehicle and to operate it but prevented him from selling the vehicle until 19 August 2002. Subsequent attempts by Mr Casey to persuade the LTSA to withdraw the disputed condition were unsuccessful.


  13. For present purposes, the critical provision is s 166 of the 1998 Act which provides:


    Director may grant exemptions


    The Director may, if he or she considers it appropriate and upon such conditions as he or she considers appropriate, exempt a person, vehicle, or land transport related service from a specified requirement in a rule made under this Part.


    Before granting an exemption under this section, the Director must be satisfied in the circumstances of each case that the risk to safety will not be significantly increased by the granting of the exemption and that—


    The requirement has been substantially complied with and that further compliance is unnecessary; or


    The action taken or provision made in respect of the matter to which the requirement relates is as effective or more effective than actual compliance with the requirement; or


    The prescribed requirements are clearly unreasonable or inappropriate in the particular case; or


    Events have occurred that make the prescribed requirements unnecessary or inappropriate in the particular case.


    The number and nature of exemptions granted under subsection (1) must be notified in the Gazette at intervals not longer than 3 months.


    Nothing in this section applies in a case where a rule specifically provides that no exemptions are to be granted, but in other cases nothing in the rules limits or affects the Director's powers under this section.

  14. The exemption provision in the 1990 Regulations is somewhat broader:


    Exemptions from equipment requirements

    The Director may from time to time, by notice in the Gazette, exempt any vehicle or class of vehicles from any provision of these regulations that requires any specified equipment to be fitted or any vehicle standard to be complied with, either wholly or partially and either unconditionally or subject to conditions specified by the Director.


  15. In his judgment, the Judge focused on s 166(2) which requires the Director to be "satisfied in the circumstances of each case that the risk to safety will not be significantly increased by the granting of the exemption ...". The Judge correctly reasoned that if the Director granted an exemption, then he must have been satisfied that the risk to safety would not be significantly increased. Before us, Mr Liddell accepted that the vehicle probably met the relevant safety standards.

  16. The Judge then concluded that the disputed condition was invalid because, he found, it had "nothing whatever to do with safety". The Judge considered that safety considerations were the only relevant ones with respect to the registration of imported vehicles. Where the relevant documentation was not available, then the applicant was required to satisfy the Director that, notwithstanding the lack of documentation, the vehicle was "as safe, or almost as safe" as a vehicle with the relevant certificate.

  17. As to the Director’s concerns that the condition was necessary to prevent commercial importers from seeking to exploit the concession to bring in non-complying vehicles in significant numbers for immediate re-sale, the Judge stated in a critical passage:

    Those passages reveal, with respect, muddled thinking. Under s 166(1), the Director is required to turn his mind to the question of whether he should exempt a particular vehicle. That vehicle should be exempted from a specified requirement in a rule only if the criteria in subs (2) are complied with. If the Director concludes that they are, then, of course, the exemption should be granted. So too it should be granted to everyone else who imports a similar vehicle. It matters not whether the person importing is a private person or a commercial importer. The focus is on the vehicle, not the identity of the importer. An unsafe vehicle should not be exempted because it is being imported by a private individual. Nor should a safe vehicle not be exempted because it happens to be imported by a commercial importer. It is irrelevant whether the importer intends to keep the vehicle or to sell it.

  18. The Judge went on to state that the "floodgates fear is illusory". He considered that no additional burdens would be placed on the Director. His decision merely required the Director to treat like vehicles alike.

  19. As to the 1990 Regulations, the Judge accepted that the Director was required to turn his mind to compliance with the 1990 Regulations before determining whether a vehicle complied with all applicable requirements for the purposes of the 1998 rule. It appeared that the Director had not turned his mind to an exemption under reg 36 of the 1990 Regulations but the issue was not material because had he done so, he would have granted an exemption for the vehicle for the same reasons he exempted the vehicle from compliance with the 1998 rule.

  20. In view of his findings, the Judge declared that the disputed condition was invalid and struck it out.


  21. The nub of the appellant’s case is that the Judge took too narrow a view of the discretion available to the Director under s 166(1). It was submitted that the Director was entitled, in imposing conditions on the exemption, to have regard to the overall efficacy of the system for ensuring that only safe vehicles lawfully operate on New Zealand roads. It was further submitted that a condition which discouraged resort to the exemption process as a back-door means of obtaining certification without demonstrating full compliance with the requirements, was legitimate. The same argument applied, it was submitted, to the Director’s power to impose conditions on exemptions granted under reg 36 of the 1990 Regulations.

  22. Mr Liddell took issue with the Judge's conclusion that if the Director concludes that the requirements of subs (2) are met, then "the exemption should be granted". He submitted that this approach overlooks the broad discretion given to the Director under s 166(1) which entitles him to consider broader matters not necessarily directly related to the safety issues affecting the vehicle in question. Mr Liddell emphasised that the use of the word "appropriate" in subs (1) in relation both to the grant of an exemption and any conditions imposed. He submitted that the word "appropriate" where it first appears in subs (1) was not an abbreviated reference to the requirements of subs (2). If that had been intended, he submitted the words "if he or she considers it appropriate and" would have been unnecessary.

  23. In supporting the submission that conditions imposed on any exemption granted under s 166 need not be related directly to the safety of the exempted vehicle, Mr Liddell drew attention to a number of other provisions in the 1998 Act. He referred to paragraph (a) of the long title which described one of the primary purposes of the Act as being "to promote safe road user behaviour and vehicle safety". He submitted that one of the means by which that purpose was achieved was by providing a system of rules for the technical aspects of land transport (itself part of the Act’s purpose: long title paragraph (b)). That purpose was given effect by Part XI of the Act including the power available to the Minister under s 152 to make rules for the purposes of safety, including technical requirements and licensing.

  24. It was submitted that the provisions of Part XIV of the Act describing the objectives and functions of the LTSA and its Director, were also relevant in determining the scope of the discretion available to the Director under s 166. The overall objective of the LTSA under s 189 is to undertake activities that promote safety in land transport at a reasonable cost. In addition, under s 190, the LTSA has the functions (inter alia) of establishing safety standards under the land transport system, monitoring adherence to safety standards within the land transport system, and ensuring regular reviews of the land transport system are taken to promote the improvement and development of its safety.

  25. Under s 197, the Director may generally act for the LTSA and also has such other functions and powers as may be conferred by the 1998 Act or any other Act. Under s 197(2), the Director "must take such action as may be appropriate in the public interest to enforce the provisions of this Act and of any other enactment conferring functions or duties on ...." him. As well, the Director "must exercise control over entry into the land transport system through the issuing of land transport documents under this Act or any other enactment".

  26. Against that background, Mr Liddell submitted that the Director was entitled to consider under s 166(1) the integrity of the exemption process and to take into account the possible precedent effect which could follow from the grant of an exemption without the disputed conditions. He submitted, in reliance upon affidavit evidence from Mr S T Whiteley (the manager for safer vehicles policy for the LTSA) that if exemptions were granted as a matter of course solely by reference to the safety of the particular vehicle, then the LTSA predicts that commercial importers would seek to exploit the power to grant exemptions under s 166 in order to import non-complying vehicles in significant numbers for re-sale. It was submitted that if exemptions were granted for large numbers of vehicles, the increased risk to safety, which in the context of single exemptions might be insignificant, would be multiplied to an unacceptable level, weakening and possibly leading to the collapse of, the standards regime. The LTSA’s concerns in that respect were reflected in certain policy principles which it has adopted.

  27. To use Mr Whiteley’s own words, the grant of unconditional exemptions would "rapidly lead to an increase in the number of non-complying vehicles imported, and a strict enforcement of standards would collapse, leading to a major loss of safety".

  28. As to exemptions granted under reg 36 of the 1990 Regulations, Mr Liddell submitted that the discretion to impose conditions under that regulation was broader than under s 166 of the 1998 Act. There was no requirement for "appropriateness". He submitted that if a three year ownership condition were valid under s 166, then it would also be appropriate and lawful under reg 36.


  29. Mr Strauss for the respondent submitted that there may be good reasons why the granting of exemptions should be issued sparingly but that did not justify the disputed conditions. He submitted that if there were a flaw in the system, it ought to be addressed by legislation. It was submitted that the Judge was correct in determining that a condition unrelated to the safety of the particular vehicle was outside the scope of the discretion given to the Director under s 166. He was prepared to accept that the word "appropriate" under s 166(1) might enable the Director to consider broader matters but not such things as the risk that exploitation by others would lead to the collapse of the system as a whole.

  30. Mr Strauss referred to the decision of this Court in Fiordland Venison Ltd v Minister of Agriculture & Fisheries [1978] 2 NZLR 341, 347 in which the view was expressed that while the relevant official had acted with the best of motives, he had gone about it in the wrong way. Finally, Mr Strauss submitted that if the Director had taken into account irrelevant matters or had imposed a condition for a purpose not permitted by the legislation, then it was invalid: citing the decision of this Court in Rowling v Takaro Properties Ltd [1975] 2 NZLR 62, 67


  31. We accept the appellant’s submissions that the Judge has taken too narrow a view of the scope of discretion available under s 166. We consider that the disputed condition was within the Director’s discretion. We reach that conclusion from an analysis of s 166 in the context of the purpose of the Act and the relevant subordinate legislation, as well as the objects and functions of the LTSA and its Director.

  32. We accept Mr Liddell’s submission that s 166(1) confers a broad discretion on the Director both as to the appropriateness of granting an exemption and the imposition of conditions. Of course, the Director may not take into account matters not related to road safety considered in a broad sense. If Parliament had intended that the section be construed in the way urged on behalf of the respondent, then Parliament could easily have achieved that by providing that an exemption must be granted upon the Director being satisfied that the conditions of subs (2) were met. Fiordland Venison was such a case. There, the Minister was obliged under the relevant regulations to grant a game packing house licence upon being satisfied that certain specified requirements were met. The present case can readily be distinguished.

  33. We consider that the Judge has been led into error by focusing on subs (2). Under that provision, before granting an exemption the Director must first be satisfied that, in the circumstances of each case, the risk to safety will not be significantly increased by the granting of the exemption. We see that as a threshold issue and a prerequisite to the grant of any exemption. Then, the Director must be satisfied that one of the following subclauses (a) to (d) is also met before an exemption could be granted.

  34. However, contrary to the finding of the Judge, we find that the Director is not obliged to grant an exemption upon being satisfied of the matters in subs (2). The discretion to grant an exemption is conferred by the broad language of s 166(1). Under it, the Director retains a discretion both as to the grant of the exemption and the terms of any conditions imposed. He was, we find, quite entitled to take into account the potential precedent effects of granting an exemption without the disputed condition, including in particular the risk of exploitation of the exemption process by commercial importers and the impacts the Director considered could follow. Those potential impacts related to the integrity of the vehicle safety standards regime and ultimately on the safety of vehicles imported into this country. Those were, we think, legitimate considerations and within the Director’s statutory mandate.


  35. The appeal will be allowed and, in place of the declaration made by the Judge, there will be a declaration that the disputed condition is valid. The order made by the Judge striking out the condition is vacated. Costs are reserved.


Fiordland Venison Ltd v Minister of Agriculture & Fisheries [1978] 2 NZLR 341; Rowling v Takaro Properties Ltd [1975] 2 NZLR 62


Land Transport Act 1998: s.166

Transport Vehicle Standards Regulations 1990: Reg.36

Land Transport Rule : Vehicle Standards Compliance 1998


W G Liddell and J S McHerron for Appellant (instructed by Crown Law Office, Wellington)

J S Strauss for Respondent (instructed by George Deeb, Auckland)

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