Ipsofactoj.com: International Cases  Part 4 Case 6 [NZCA]
COURT OF APPEAL, NEW ZEALAND
Select 2000 Ltd
- vs -
19 MARCH 2002
This is an appeal from a decision delivered by Master Thomson in the High Court at Wellington on 11 July 2001 declining the appellants’ application for summary judgment in proceedings brought against them by the respondent.
The respondent (ENZA) had filed a claim for damages alleging three breaches by the appellants (Fresh) of the terms of export permits granted under Part 5 of the Apple and Pear Export Marketing Regulations 1999 (the 1999 Regulations). It was alleged the breaches had occurred by the export of fruit by Fresh contrary to the terms of the permits.
At the heart of the case was regulation 3 of the 1999 Regulations made under the Apple and Pear Restructuring Act 1999 (the Act). The Regulation provides:
No person may export apples or pears except as authorised by the Board or permitted by the Committee in accordance with these Regulations.
In its statement of claim, ENZA stated its central allegations as follows:
On a proper construction of the Act and the Export Regulations, a duty was imposed on Fresh not to export apples or pears [overseas] except as permitted by the Export Permits Committee in accordance with the Export Regulations.
Such duty was owed to ENZA.
ENZA has suffered losses that have been caused by Fresh’s breach of statutory duty as, but for the breach of duty by Fresh, there would have been no other New Zealand apples for sale on the wholesale market in [the relevant country].
On a proper construction of the Act and the Export Regulations, ENZA has suffered an injury that the Act and the Export Regulations were designed to provide protection against.
On that basis, ENZA claimed unspecified damages representing lost sales and losses arising from the reduced price for fruit sold by it overseas. Alternatively, ENZA sought an accounting for profits received by Fresh.
Fresh filed a statement of defence denying the central allegations and also applied for summary judgment asserting:
That it owed no duty to ENZA under either the Apple and Pear Export Regulations 1999 or the Apple and Pear Industry Restructuring Act 1999 and in particular it owed no duty that can found an action for damages by ENZA.
It was common ground at the hearing before the Master that the onus in the summary judgment application was on Fresh to satisfy the Court that none of the causes of actions in ENZA’s statement of claim could be established.
The key issue for determination by the Master was whether, as a matter of construction, a civil claim for damages was intended to lie at the suit of ENZA for the alleged breach of statutory duty under regulation 3.
The New Zealand Apple and Pear Marketing Board (the Marketing Board) was established under the Apple and Pear Marketing Act 1948. It functioned as a single-desk exporter of apples and pears and was required to purchase apples at prices fixed in accordance with that Act.
The Apple and Pear Marketing Act 1971 maintained the Marketing Board’s essential role although there was provision for some exporting with the Marketing Board’s consent.
Major changes to the legislative regulation of the export of apples and pears were implemented by the Apple and Pear Industry Restructuring Act 1999 (the Act) and the 1999 Regulations.
Under Part I of the Act, ENZA was established as a company and registered under the Companies Act 1993 to take over certain of the functions of the Marketing Board.
Part II of the Act provided a new regulatory and organisational framework. It empowered the making of regulations under which the regulatory role which the Marketing Board had previously performed would be separated from the marketing function and conferred on a new Board.
Part 4 of the 1999 Regulations established the New Zealand Apple and Pear Board (the Board) which had two functions. First, Part 2 of the Regulations provided that that the Board was obliged to grant ENZA an authorisation to export apples and pears. The Regulations included detailed provisions designed to mitigate costs and risks associated with ENZA’s position as the principal exporter under the authorisation granted by the Board. Under the scheme, the Board and ENZA were distinctly separate entities.
The Board’s second function was to appoint the Export Permits Committee (the Committee) which was also an entirely separate entity. The Committee was to decide applications for export permits upon a basis stipulated.
It is within this statutory regime that this case comes to be determined and the nature, effect and consequences of the regulation 3 ban assessed.
HEARING BEFORE THE MASTER
In the High Court, Fresh argued that it owed no justiciable duty to any person and certainly not to ENZA because of the nature and role of export permits. Alternatively Fresh argued that if there were duties they arose only under the permits themselves and not by virtue of the provisions of the Act or the Regulations.
The appellants in the High Court placed particular reliance on the approach of the joint judgment in the High Court of Australia of Brennan CJ, Dawson and Toohey JJ in Byrne v Australia Airlines Ltd (1995) 69 ALJR 79. The Court was considering whether industrial legislation giving statutory effect to an award could give rise to a statutory duty enforceable by a civil action for damages. At 802, it was held:
The [plaintiffs’] argument tended to focus upon the award itself rather than the Act. But an award is not a statute and if a duty imposed by an award is to be regarded as a statutory duty enforceable by way of a civil action for damages, then the necessary intention that it should be so regarded must ultimately be found in the Act and not the award. The Act discloses no such intention and, indeed, cannot do so in the absence of any specification of the duties, which might be imposed by an award. On the other hand, the Act can and does disclose a contrary intention in providing a means for the enforcement of awards which does not contemplate the existence of private rights enforceable by way of an action for damages.
The Master concluded that this argument missed the point in that ENZA was not arguing that the duty arose from the permit but from regulation 3.
The Master accepted that although a breach of statutory duty often arises from the failure of a person or body to act positively in accordance with a duty, that is not always necessary and a duty may arise from an obligation not to do something: Garden Cottage Foods Ltd v Milk Marketing Board  AC 130. That proposition was not in dispute before us.
The Master considered whether a duty arose out of regulation 3 noting that in all cases it is fundamentally an issue of parliamentary intent. He assessed the so-called "identifiable class" and "alternative modes of enforcement" tests and considered the various competing arguments.
He concluded, having regard to the test enunciated by this Court in Westpac Banking Corporation v ANZ & MM Kembla NZ Ltd, (CA 50/00, CA 51/00), that the issue of a statutory duty could not, and should not, finally be determined on the available material in Fresh’s summary judgment application. He considered the proceeding should go to trial.
THE APPELLANTS' CASE
In summary Fresh’s case on appeal was:
The question whether there was an actionable statutory duty owed by Fresh to ENZA can and should be determined at the summary judgment stage;
It was not Parliament’s intention to confer on ENZA a cause of action for breach of statutory duty as:
No provision was made in the Act or Regulations for a cause of action;
The statutory regime, and in particular the export ban, were enacted in a complicated policy environment in which it cannot be said that ENZA satisfies the "identifiable class" test;
If there is an "identifiable class" it is made up of New Zealand’s pip-fruit growers. Consistent with this, the Regulations are focused on controlling, and protecting growers from, ENZA’s conduct, rather than on protecting ENZA;
There are alternative modes of enforcement under the Act and Regulations;
The legislature chose not to specify a statutory duty despite clearly being alert to remedial and compensation issues:
The legislative regime specifically provides for compensation in other circumstances ;
Dairy industry legislation passed at the same time as the Act specifically provided for an actionable statutory duty;
The adequacy of the statutory penalty was specifically debated in the House
Accordingly, Fresh did not owe a statutory duty to ENZA under either the Act or the Regulations;
Even if Fresh did owe a statutory duty to ENZA under either the Act or the Regulations, it was not a duty that could found an action for damages by ENZA.
As a consequence, none of the causes of action in ENZA’s statement of claim could succeed.
THE RESPONDENT'S CASE
ENZA, while accepting that a legal point such as this (i.e. whether the legislation allows a civil right of action) may in theory be determined on summary judgment, contended that as the particular issue is new and not easily decided on its face, the question should be determined with the perspective of context in a trial.
Alternatively ENZA contended that if the Master was in error on this first aspect, and if the legal point can be determined without trial, then a breach of the export ban did give ENZA a right of action because:
The Export Ban imposed a duty on Fresh not to export apples from New Zealand except as permitted by the Export Permits Committee.
The duty imposed on Fresh to abide the Export Ban was owed inter alia to ENZA. The purpose of the legislation was to establish and preserve ENZA’s position as the main exporter of apples and pears. To this end, ENZA, as the main exporter, received the protection of the Export Ban.
The legislative intention to be inferred is that breach of the Export Ban would give ENZA a civil right of action:
This inference is supported by application of the "identifiable class" test.
The "alternative mode of enforcement" test is not determinative against ENZA.
This inference is supported by other factors, including the size of the statutory penalty, the potential variation of offending to be met by the one penalty provision; and the absence of provision for reparation. Conversely, circumstantial (Hansard) indicators as relied upon by Fresh are ambiguous and unreliable.
THE SUITABILITY OF SUMMARY JUDGMENT
The first issue is whether the matter is suitable for determination by summary judgment. The issue is a pure question of statutory construction. What has to be determined is:
Whether there is a duty;
If there is a duty, is it owed to ENZA; and
Is it clear that the objective intention of Parliament is that a civil remedy should exist in addition to the penalty offence provision provided.
We respectfully differ from the Master in his view that there would be advantage or benefit from trial. The respondent submitted that the factual background created by the evidence would be useful "back-lighting" but in our judgment it is more likely to distort what must be an objective and rigorous construction exercise.
Although the point is novel and not without difficulty it can properly be grappled with and determined by way of summary judgment.
THE EXISTENCE OF A DUTY
It is not in issue that there is a clear Export Ban imposed by regulation 3. This includes an offence provision which makes a person liable on summary conviction to a fine not exceeding $50,000 who knowingly and without lawful excuse contravenes the regulation.
It is common ground that there is no articulated legislative reference to any duty but we are satisfied that the fact that no-one may export apples or pears without an export permit or authorisation in effect means there is a duty not to export without permission as well as a duty not to export contrary to the terms of any permit granted. For Fresh, Mr Fardell sought to persuade us that this was no more than an assertion that people are under a disability. However even if that is a possible categorisation we see no reason why it cannot also be equated with a duty. The law is clear that a duty can be expressed either negatively or positively and the fact that it arises under subordinate legislation does not exclude the possibility that a breach of duty may give rise to a claim for damages.
We therefore have no difficulty in concluding that Fresh (along with any other permit holder) was under a duty not to export fruit otherwise than in accordance with the terms of the permit.
THE POSITION OF ENZA
The second issue is whether that statutory duty was owed particularly to ENZA either alone or in concert with others. For ENZA, Mr McIntosh submitted that this was clearly the case because the Act and the Regulations established a controlled channel export model which put ENZA in the position of main exporter and marketer of New Zealand apples and pears abroad. He argued that the ban was an essential part of the preservation of its position and that, without the ban, there would be no constraint on others exporting and damaging ENZA’s activities.
In considering whether ENZA is entitled to the benefit or protection of the 1999 Regulations, the essential factors are:
The Regulations provide a prohibition on the export of pip-fruit;
ENZA has a right to an authorisation to export;
Others may obtain a permit from the Committee to allow export.
Regulation 45 gives clear directions to the Committee when it considers a permit application and is an important indicator of the significance of ENZA’s role under the statutory regime. It provides:
CITERIA FOR EXPORT PERMITS-
We are satisfied that ENZA has a special place in the statutory scheme. Although the Act and the 1999 Regulations were part of a movement away from an earlier statutory regime which was more intrusive and restrictive, towards a more open market policy, it is clear that in the granting of permits (which is the mechanism that enables a person to avoid the export ban) the critical issue was the effect of this on ENZA and its reputation. Indeed, those matters were expressed as the only criteria to be considered.
The point made by Vaughan Williams LJ in Groves v Lord Wimborne  2 QB 402 is clearly applicable. His Lordship said at 415-416:
… it cannot be doubted that, where a statute provides for the performance by certain persons of a particular duty, and some one belonging to a class of persons for whose benefit and protection the statute imposes the duty is injured by the failure to perform it, prima facie, and if there be nothing to the contrary, an action by the person so injured will lie against the person who has so failed to perform the duty.
Mr Fardell strenuously argued that it was wrong to concentrate on regulation 45 as being pivotal, and that careful regard must be had to the provisions of regulation 6 (which deals with matters that must not be included in the statutory authorisation to ENZA) and regulation 7 (which deals with discretionary possibilities in an authorisation). Particular emphasis was placed on provisions relating to compensation for others arising from of ENZA’s operations and remedies for people affected by ENZA’s activities. Fresh’s argument was that the Regulations were more concerned with placing obligations on ENZA which were designed to prevent abuse of its position rather than any notion that ENZA was given a protected role.
Such an approach ignores the clear words of regulation 45. However the regime is seen, it is clear that the position of ENZA and its activities were unique. ENZA undoubtedly was in a different position from others and was treated as a special body entitled to the benefit and protection of the regulation at issue. As it is a separate legal entity, it can be seen as separate from the pip-fruit growers who are its shareholders.
A BREACH SOUNDING IN DAMAGES
The third and critical issue is to determine the parliamentary intention as to the consequences of breach. Was there in addition to the penal liability of up to $50,000 for each offence, a right which ENZA enjoyed which meant a breach of the ban could also sound in damages?
Whether an enactment gives rise to a cause of action for breach of statutory duty, is a question of construction. As Lord Simonds put it in Cutler v Wandsworth Stadium Ltd  AC 398, 407 (HL):
The only rule which in all the circumstances is valid is that the answer must depend on a consideration of the whole act and the circumstances, including the pre-existing law, in which it was enacted.
More recently, Lord Browne-Wilkinson in X (Minors) v Bedfordshire County Council  2 AC 633, 731 (HL) recognised that a private law cause of action will arise:
.... if it can be shown, as a matter of construction of the statute, that the statutory duty was imposed for the protection of a limited class of the public and that Parliament intended to confer on members of that class a private right of action for breach of duty.
In Rowan v Attorney-General  2 NZLR 559, 570, Smellie J summarised the various factors relevant to the inquiry as including the purpose and scope of the statute, the mischief it was designed to remedy, and the circumstances in which the legislation was passed.
We agree with the learned authors of Todd, The Law of Torts in New Zealand, 3rd ed., paragraph 7.2.3, that while the two so-called tests of statutory intention ("ascertainable class" and "alternative modes of enforcement") may be helpful, they are not necessarily determinative and that "it cannot realistically be said that any presumptions exist one way or the other ...". In particular, while the protection of a limited class or section of the public has been regarded as a necessary pre-condition of the availability of a civil remedy in damages, it will not necessarily be sufficient, by itself, to establish the existence of such a remedy.
We take the same view about to the existence of alternative remedies. We see the presumption referred to by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd  AC 173, 185 (HL) as no more than a starting point which may be overcome or displaced in the particular circumstances of the case by contrary indicators. In Lonrho, the presumption discussed was that originally attributed to Lord Tenterden CJ in Doe d Murray v Bridges (1831) 1 B & Ad 847, 859 when he spoke of the "general rule" that "where an Act creates an obligation, and enforces the performance in a specified manner ... that performance cannot be enforced in any other manner".
In the present case, little reliable help is available from Hansard recording the relevant parliamentary debates. We also agree with the Master that no real assistance can be derived from a comparison of the provisions of the Dairy Industry Restructuring Bill which was before Parliament on the same day as the Apple and Pear Industry Restructuring Bill.
We prefer to focus our attention on the statutory scheme, the provisions of the 1999 Regulations, the existence of the criminal penalty for breach of the Regulations, and other alternative enforcement factors.
Dealing with the statutory scheme, we have already mentioned our conclusion that ENZA continued to enjoy a pre-eminent role in the export of apples and pears. While the Committee was authorised to grant permits to others, it could not do so unless satisfied that ENZA’s current marketing activities would not be undermined by the grant of the permit and that the application would not be likely to result in any adverse effect on ENZA’s reputation. That is a clear indication that the legislature intended that the statutory ban on exports (except in accordance with permits granted by the Committee), was for the purpose of protecting ENZA and for its benefit.
No doubt, the legislature had in mind that it was in the public interest that the economic wellbeing of ENZA and its reputation in the market place should be preserved. While that policy may have assisted others (including the pip-fruit growers themselves), the Act and the 1999 Regulations singled out ENZA as the entity entitled to the protection (amongst other things) of the export ban.
But we do not consider it necessarily follows from the identification of ENZA as the party entitled to the benefit of the export ban that a private action for damages was intended. It is evident in the present case that specific attention was given to compensation in the 1999 Regulations. For example, it was explicitly provided in regulation 6(1)(i) that the export authorisation granted by the Board to ENZA was not to provide for compensation for any person if the export ban were revoked. As well, regulation 7 provided that the export authorisation granted to ENZA was to include an enforcement regime to ensure reasonable compliance with the provisions of regulation 26(1)(b). The latter relates to rules known as the non-discrimination rule and the non-diversification rule as well as information disclosure requirements and "arms length rules". Regulation 7 also required the export authorisation to include remedies for persons affected through failure to comply with the rules identified in regulation 26(1)(b).
While it is true that these provisions do not address the export ban or remedies for its breach, they are clear indicators that matters of compensation and enforcement in other respects were considered and provided for in the 1999 Regulations. Their inclusion suggests that express provision would have been made for compensation or damages if it had been intended that a breach of regulation 3 would give rise to a civil remedy.
Next, we take into account the enforcement measures available, including the criminal penalty. It is worth noting that the maximum fine of $50,000 applies to any one breach of regulation 3. That cannot be regarded as inconsequential. Secondly, we have no doubt that the Committee would be entitled to take into account breaches of regulation 3 when considering any subsequent applications for permits. We were told that the relevant permits are issued only for limited time periods. A permit holder found to have been in persistent or significant breach of any previous permit, would plainly face potential difficulties in obtaining further permits.
As well, although the Regulations do not refer expressly to any right for the Committee to revoke a permit for breach, it seems to us to be at least arguable that such a right would exist. Similarly, it is distinctly arguable that the Committee could have imposed conditions of any permit requiring the permit holder to pay compensation in the event of breach.
Finally, we have considered the possible availability of injunctive relief to restrain a breach of the export ban. However, it was made clear by the Court of Appeal of New South Wales in Peek v New South Wales Egg Corporation  6 NSWLR 1 that intervention in equity to restrain breaches of the criminal law will only arise in exceptional circumstances which may be summarised as being where:
The criminal penalty provided was not effective or wholly ineffective to deter the unlawful conduct so that prosecution would not deter the party from continuing breaches;
The party whom it was sought to restrain had evidenced a clear and unequivocal intention to continue to flout the criminal law; or
There was a significant risk that unless the breaches were stopped widespread offending would be encouraged on the part of those resentful of the defendant’s activities or encouraged by their example.
In Land Transport Safety Authority v McNeil  1 NZLR 622 Barker ACJ was satisfied that this high test was met, as was Randerson J in Motor Vehicle Dealers Institute v Nationwide Vehicle Options & BH Paterson (CP 348/00, 28 July 2000).
We do not need to decide whether injunctive relief was available in the present case because, whatever the answer to that question, we are not persuaded that a civil remedy in damages was intended. That conclusion follows from the inferences to be drawn from the 1999 Regulations, the existence of a not insignificant monetary penalty, and the availability of alternative enforcement measures to achieve the statutory purpose.
It follows that the Master was in error in deciding that the matter could not be dealt with by way of summary judgment. On the view that we take of the Act and the 1999 Regulations, the claim by ENZA could not succeed, depending as it does on the existence on a civil right of action for damages which we have found is not available.
Accordingly the appeal is allowed. Judgment is entered for the appellants in the substantive proceedings. They are entitled to costs of $5000 together with disbursements as fixed by the Registrar.
Byrne v Australia Airlines Ltd (1995) 69 ALJR 79; Garden Cottage Foods Ltd v Milk Marketing Board  AC 130; Westpac Banking Corporation v ANZ & M M Kembla NZ Ltd, (CA 50/00, CA 51/00); Groves v Lord Wimborne  2 QB 402; Cutler v Wandsworth Stadium Ltd  AC 398; X (Minors) v Bedfordshire County Council  2 AC 633 (HL); Rowan v Attorney-General  2 NZLR 559; Lonrho Ltd v Shell Petroleum Co Ltd  AC 173 (HL); Doe d Murray v Bridges (1831) 1 B & Ad 847; Peek v New South Wales Egg Corporation  6 NSWLR 1; Land Transport Safety Authority v McNeil  1 NZLR 622; Motor Vehicle Dealers Institute v Nationwide Vehicle Options & B H Paterson (CP 348/00, 28 July 2000)
Apple and Pear Export Marketing Regulations 1999: Reg.3
Authors and other references
Todd, The Law of Torts in New Zealand, 3rd ed
JRF Fardell & DM Salmon for the Appellants (instructed by Macky & Co, Auckland)
H McIntosh & AS Olney for the Respondent (instructed by Russell McVeagh, Wellington)
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