BLUE REACH SERVICES LTD v SPARK NEW ZEALAND TRADING LTD [2018] NZHC 847

BLUE REACH SERVICES LTD v SPARK NEW ZEALAND TRADING LTD [2018] NZHC 847 [30 April2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-2514[2018] NZHC 847BETWEEN BLUE REACH SERVICES LIMITED andBLUE REACH WIRELESS LIMITEDPlaintiffsAND SPARK NEW ZEALAND TRADINGLIMITEDDefendantHearing: 23 April 2018Appearances: M B Wigley for PlaintiffsZ G Kennedy and J Hambleton for DefendantJudgment: 30 April 2018JUDGMENT OF LANG J[on application to strike-out claim and dismiss proceeding]This judgment was delivered by me on 30 April 2018 at 3.30 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate[1] In this proceeding Blue Reach Services Limited and Blue Reach WirelessLimited (Blue Reach) allege that Spark New Zealand Trading Limited (Spark) hasbeen guilty of misleading and/or deceptive conduct in terms of s 9 of the Fair TradingAct 1986 (FTA). That conduct is said to have occurred when Spark provided theCommerce Commission (the Commission) with information in support of anapplication for clearance of a transaction under s 66 of the Commerce Act 1986 (theCommerce Act). The application sought clearance for Spark's proposed acquisitionof the management rights to spectrum within the 2300 MHz band.[2] The Commission gave clearance for the transaction to proceed on 23 March2016.1 Spark has now deployed the spectrum to expand its fixed wireless accessservices across New Zealand.[3] Blue Reach contends the Commission would not have granted clearance ifSpark had provided material that was not false or misleading. Furthermore, it allegesthat it would have been the likely acquirer of the rights if the Commission had declinedclearance of the sale to Spark. Blue Reach seeks remedies against Spark under s 43of the FTA. These include an order that Spark transfer the management rights to BlueReach and/or pay Spark monetary compensation.[4] Spark has applied for an order that Blue Reach's claim be struck out on thebasis that it discloses no tenable cause of action and amounts to an abuse of the Court'sprocess. It advances three arguments in support of the application. They are:1. Section 106(9) of the Commerce Act provides Spark with immunity toany civil suit that is based on the material it provided to the Commissionin support of its application for clearance.2. The Commerce Act is a code and prescribes exclusive sanctions andremedies for any misleading or deceptive statements that parties maymake to the Commission.1 Re Spark New Zealand Trading Ltd [2016] NZCC 7.3. Blue Reach is endeavouring to mount an impermissible collateral attackon the Commission's decision to grant clearance.Strike out: relevant principles[5] There is no dispute regarding the principles to be applied in the present context.They are to be found in decisions of the Court of Appeal and Supreme Court inAttorney-General v Prince2 and Couch v Attorney-General.3[6] In short, the Court is required to proceed on the basis that the plaintiff canprove the pleaded facts. The Court will only strike out a proceeding when the causeof action is so clearly untenable that it cannot succeed or is "so certainly or clearlybad" that it should not be permitted to proceed.4[7] Although the jurisdiction to strike out a proceeding is to be exercised sparingly,the Court may exercise the power under both r 15.1(1)(d) of the High Court Rules2016 and its inherent jurisdiction.5[8] The Court should be slow to strike out claims in areas of the law that aredeveloping.6 It should also obviously exercise caution where the facts upon which theplaintiff's claim is based need to be determined at trial.1. Does s 106(9) of the Commerce Act 1986 provide Spark with immunityfrom civil suit based on the material it provided to the Commission?[9] Section 106(9) provides as follows:106 Proceedings privileged(9) Anything said, or any information furnished, or any documentproduced or tendered, or any evidence given by any person to theCommission, shall be privileged in the same manner as if thatstatement, information, document, or evidence were made, furnished,produced, or given in proceedings in a court.2 Attorney-General v Prince [1998] 1 NZLR 262 (CA).3 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725.4 Couch v Attorney-General, above n 3, at [33].5 Bradbury v Judicial Conduct Commissioner [2014] NZCA 441, [2015] NZAR 1 at [100]-[105].6 Couch v Attorney-General, above n 3, at [33].[10] Spark argues that the word "privileged" in s 106(9) should be interpreted asmeaning "immune from civil suit". It contends s 106(9) places a party applying to theCommission for clearance of a proposed transaction in the same position as a witnessgiving evidence in court. Witnesses who give evidence in court enjoy the privilege ofbeing immune from any form of civil action based on the evidence that they give. Asa result, a party who provides the Commission with material in support of anapplication for clearance enjoys the same privilege.[11] Blue Reach disagrees. It contends the word "privileged" in s 106(9) does notrender parties in Spark's position immune from all civil claims based on material theyprovide to the Commission. It argues the privilege extends only to immunity fromliability in defamation for comments made in such material.[12] I accept that the courts have been cautious to uphold claims to immunity,particularly in a strike-out context. Mr Wigley reminded me that the majorityjudgment of the Supreme Court in Lai v Chamberlains begins with the followingparagraph:7[1] Access to the Courts for vindication of legal right is part of the rule oflaw. Immunity from legal suit where there is otherwise a cause of action isexceptional. Immunity may be given by statute, as in New Zealand in respectof personal injuries where other, exclusive, redress is provided. An immunitymay attach to status, such as of diplomats or heads of state. All cases ofimmunity require justification in some public policy sufficient to outweigh thepublic policy in vindication of legal right.(footnote omitted)[13] Mr Wigley also referred to the fact that the House of Lords described immunityas being "granted grudgingly" in the following passage in Darker v Chief Constableof the West Midlands Police:8Absolute immunity is in principle inconsistent with the rule of law but in afew, strictly limited, categories of cases it has to be granted for practicalreasons. It is granted grudgingly, the standard formulation of the test forinclusion of a case in any of the categories being Sir Thaddeus McCarthy P'sproposition in Rees v Sinclair [1974] 1 NZLR 180, 187, "The protection7 Lai v Chamberlains [2006] NZSC 70, [2007] 2 NZLR 7.8 Darker v Chief Constable of West Midlands Police [2001] 1 AC 435 (HL) at 453.should not be given any wider application than is absolutely necessary in theinterests of the administration of justice." Many other authorities containlanguage to similar effect.[14] During the hearing both counsel referred me to other statutes in whichParliament has sought to provide a degree of protection for persons dealing with orappearing before judicial and quasi-judicial bodies. In some cases the statute providesfor such persons to enjoy the "privileges and immunities" afforded to those who appearin court and in others affords only the "privileges" enjoyed by those persons. It isimpossible to see any pattern in the words used. This probably explains why a FullCourt of this Court accepted in De Bres v McCully that, while there are undoubtedsimilarities between the wording used in such provisions, there is "nothing to indicateany coherent legislative intent in the use of one formula as opposed to another indifferent statutes".9 I share the same view. For that reason I do not derive anyassistance from the wording used in other statutes.[15] In Lai v Chamberlains the Supreme Court was required to decide whether, asa matter of policy, the immunity from civil liability barristers had previously enjoyedshould remain in its current form. Before making that decision the Court was requiredto interpret s 61 of the Law Practitioners Act 1982, which provided:61 Status of barristers – subject to this Act, barristers of the Court shallhave all the powers, privileges, duties, and responsibilities thatbarristers have in England.[16] The majority10 did not consider it necessary to consider it necessary to considerthe extent to which there may be differences between "privileges" and "immunities"in other contexts. They held that the term "privileges" as used in successive LawPractitioner Acts "is apt to cover any immunities which attached to barristers inEngland".11 Tipping J reached the same conclusion having regard to dictionarydefinitions of the word "privilege".12[17] I take a similar view in the present case notwithstanding the fact that s 106(9)of the Commerce Act 1986 does not have a legislative history comparable in any way9 De Bres v McCully [2004] 1 NZLR 828 (HC) at [19].10 Elias CJ, Gault and Keith JJ.11 At [81].12 At [111]-[113].with s 61 of the Law Practitioners Act 1982. Furthermore, it is not necessary in thepresent case to determine whether parties who deal with the Commission enjoy anyimmunity from civil liability because both parties acknowledge s 106(9) provides adegree of immunity. The area of disagreement relates to the scope of the immunity.[18] The wording used in s 106(9) persuades me that a party who providesinformation to the Commission in support of an application for clearance is in ananalogous position to that of a witness who gives evidence and produces documentsin court. It follows that s 106(9) is designed to provide such parties with the samedegree of immunity as that provided to witnesses who give evidence and producedocuments in court.[19] The law as to witness immunity in New Zealand is settled. In New ZealandDefence Force v Berryman the Court of Appeal described the principle and the policyreasons on which it is based in the following terms:13[67] Those who give evidence or make submissions to a court enjoyimmunity from suit. The purpose of this immunity is not to encouragedishonest or defamatory submissions or perjury; rather it is to protect partiesto litigation, along with their counsel and witnesses, from vexatious litigation.There is also an associated purpose of limiting the scope for re-litigation. Allof this, along with the metes and bounds of the immunity, is discussed at lengthin Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435(HL) and Meadow v General Medical Council [2007] 1 All ER 1 (CA).[20] The Court of Appeal went on to confirm that witness immunity is not openended. It applies only to evidence given in court and necessary preliminaries to that.Furthermore, it provides protection only in relation to civil liability:[68] We recognise that the immunity is limited. It is confined to what issaid in court and necessary preliminaries to that (see Darker). It is also merelyan immunity from civil suit. Thus an expert witness may face professionalsanctions in respect of evidence, see for instance Meadow. And obviouslycriminal prosecution for perjury may result from the deliberate giving of falseevidence. Claims of malicious prosecution are maintainable even though sucha claim might necessarily involve impugning the evidence given during thepreceding criminal proceedings. Likewise these principles do not now preventcounsel being sued for negligence, see for instance, Chamberlains v Lai[2007] 2 NZLR 7 (SC). In marginal cases, where there is uncertainty as towhich side of the line a particular claim falls, the courts should be slow toresort to the strike out or summary judgment jurisdiction.13 New Zealand Defence Force v Berryman [2008] NZCA 392.[21] There is currently some debate regarding the extent to which the immunity maynow apply to expert witnesses. The Court of Appeal has recently described the law inthat area as being unsettled.14 I do not consider the present case to be analogous to acase involving expert witnesses. Rather, it relates to the material provided to theCommission by an applicant for clearance. I consider that to be analogous to aclaimant or applicant giving evidence and producing documents in support of theclaim or application.[22] Mr Wigley for Blue Reach draws my attention to ss 106(1) and (2), whichprovide as follows:106 Proceedings privileged(1) No proceedings, civil or criminal, shall lie against the Commission foranything it may do or fail to do in the course of the exercise orintended exercise of its functions, unless it is shown that theCommission acted without reasonable care or in bad faith.(2) No proceedings, civil or criminal, lie against any member of theCommission, or any officer or employee of the Commission, or anymember of a committee of the Commission, for anything that personmay do or say or fail to do or say in the course of the operations of theCommission, unless it is shown that the person acted in bad faith.[23] Mr Wigley submits that Parliament was obviously concerned to ensure theCommission and its staff have complete immunity against claims by persons withwhom they deal in carrying out their duties. He contends this supports the argumentthat the immunity afforded to persons who provide material to the Commission ismuch more limited.[24] I agree with this submission to the extent that the subsections provide immunityfor the Commission and its staff in relation to both civil and criminal liability. Theonly exceptions are where it is shown a Commission member has acted withoutreasonable care or in bad faith, or a staff member has acted in bad faith. Section 106(9)provides a more limited form of immunity because it does not protect persons whoprovide material to the Commission from criminal sanction. They may be prosecuted14 EBR Holdings Ltd (in liq) v McLaren Guise Associates [2016] NZCA 622, [2017] 3 NZLR 589 at[38].for providing the Commission with false or misleading information under either theCrimes Act 1961 or s 103 of the Commerce Act.[25] I do not accept, however, that the inclusion of ss 106(1) and (2) means thatpersons who provide material to the Commission are only immune from claims indefamation. There is nothing in s 106(9) to suggest the scope of the immunity shouldbe restricted in that way. I consider Parliament intended such persons to enjoyimmunity from civil liability to the same extent as witnesses who give evidence incourt.[26] Mr Wigley also referred me to several English cases in which the courts haveheld that immunity did not extend to defamatory statements made to tribunals orbodies other than courts.15 He also referred me in the same context to the decision ofthe New Zealand Court of Appeal in Tertiary Institutes Allied Staff Association Incv Tahana.16 I do not derive any assistance from these cases because none of theminvolved a statutory provision equivalent or similar to s 106(9).[27] Mr Wigley placed considerable reliance on observations made by Heath J inNorbrook Laboratories Ltd v Bomac Laboratories Ltd.17 In that case the plaintiffissued a claim under the FTA in relation to allegedly false or misleading statementsmade by the defendant to the Agricultural Compounds and Veterinary MedicinesGroup when seeking approval under the Agricultural Compounds and VeterinaryMedicines Act 1997 to sell prescription animal remedies. Heath J upheld the claimand in doing so observed:18 It is important that the Courts support the desirability of accurateinformation being conveyed to regulatory authorities required to makedeterminations. In this case the ACVM's determination impinged upon bothanimal welfare and public health (in the sense that milk or meat from treatedcows are likely to enter the food chain) considerations.15 Hasselblad (GB) Ltd v Orbinson [1985] QB 475 (CA); O'Connor v Waldron [1935] AC 76 (PC);Trapp v Mackie [1979] 1 All ER 489 (HL).16 Tertiary Institutes Allied Staff Association Inc v Tahana [1998] 1 NZLR 41 (CA).17 Norbrook Laboratories Ltd v Bomac Laboratories Ltd HC Auckland CP241/SW02, 2 December2002.18 At [217].[28] Again, however, the legislation with which Norbrook was concerned did notcontain a provision comparable to s 106(9). It therefore provides little assistance forpresent purposes.[29] I consider there are obvious policy reasons underpinning Parliament's desireto grant immunity to parties who provide material to the Commission. TheCommission is a specialist body with acknowledged expertise in discharging itsfunctions under the Commerce Act.19 It has wide powers to investigate matters withinits jurisdiction and to compel persons to provide information or documents.20 It isresponsible for approving or declining trade practices and acquisitions that may affectcompetition within the market place. It is also responsible for enforcing compliancewith the requirements of the Act.[30] To enable the Commission to carry out these functions Parliament has providedit with the ability to require applicants for clearance to furnish such documents andinformation as the Commission may specify.21 It is obviously important that anapplicant for clearance is candid and fulsome in the information it provides to theCommission.[31] Furthermore, the Commission may consult with any person who, in the opinionof the Commission, may be able to assist it in making a determination as to clearance.22This means the Commission is not required to rely solely on material supplied to it byan applicant for clearance. Many applicants are in any event likely to have a limitedor imperfect knowledge of the ramifications of the proposed transaction within thewider market in which they operate. The Commission may therefore seek furtherinformation regarding the effects of the proposed transaction from those who are likelyto hold it. These may include the applicant's competitors as well as customers orconsumers within the relevant market. It is imperative that such persons know theycan respond to the Commission's requests for information free from the fear ofsubsequent civil action by the applicant or any other party who may be adverselyaffected by such disclosure. Immunity from civil action provides that reassurance.19 Unison Networks Ltd v Commerce Commission [2007] NZSC 74, [2008] 1 NZLR 42 at [55].20 Commerce Act 1986, s 98.21 Commerce Act, s 68(1).22 Commerce Act, s 68(5).This necessarily comes at a cost. That cost is the removal of any ability to obtainredress for any loss that might be caused as a result of the material being provided tothe Commission.[32] For these reasons I consider the position in the present case to be clear. Section106(9) prevents Blue Reach from bringing any claim against Spark based on thematerial Spark provided to the Commission in support of its application for clearance.It is not necessary for the facts to be adduced at trial because Blue Reach depends onthat material as the basis for its claim. The claim must therefore be struck out asdisclosing no tenable cause of action.[33] This conclusion is sufficient to dispose of the application and the proceeding.In case I am wrong, however, I propose to deal very briefly with Spark's other twoarguments.2. Is the Commerce Act a code that provides exclusive sanctions andremedies relating to misleading or deceptive statements made to theCommission?[34] In this context Mr Kennedy for Spark referred me to the following observationsmade by a Full Court of this Court in Dickson Livestock Associates Ltd v WrightsonLtd:23In our view the Commerce Act and the Fair Trading Act fall into the third classof statutes referred to by Willes J. The Acts are a code each of which provideswhat conduct is prohibited in the interests of promoting competition inmarkets or generally in trade, what remedies are available by way ofsubstantial monetary penalties for breach at the suit of the regulatory authority,and for monetary recompense to any individual injured by the breach, and forlimitation of time. The statutory intention to provide exclusive remedies is inour view clear. The difficulty of demonstrating why another remedy by wayof general tort law with a different time limitation should be available tends tosupport this interpretation of the statute.[35] I do not consider these observations to be of great assistance once they areunderstood within their context. The plaintiff in Dickson advanced a tortious claimalleging the defendant had interfered with the plaintiff's economic interests byunlawful conduct. The unlawful conduct relied upon were breaches of the Commerce23 Dickson Livestock Associates Ltd v Wrightson Ltd (1999) 6 NZBLC 102,806 (HC) at 102,816.Act and the FTA. The Court's observations were directed to its view that theCommerce Act and the FTA were exclusive codes and that the plaintiff could onlyobtain redress for any breaches of them through the remedies contained within them.Blue Reach is not advancing a claim in tort for breach of the FTA It alleges insteadthat Spark has engaged in conduct that breaches s 9 of the FTA. It also seeks remediesunder the FTA.[36] Next, Mr Kennedy points out that the FTA and the Commerce Act differ in themental element required to establish breach. A party can engage in misleading ordeceptive conduct even where the conduct is unintentional.24 An applicant forclearance can only be guilty of an offence under s 103 of the Commerce Act, however,where it knowingly provides the Commission with false or misleading information.[37] I do not consider this argument supports the proposition that an action will notlie under the FTA where the misleading or deceptive conduct relied upon relates toactions taken under the Commerce Act. It merely reflects the fact that a claimant in acivil proceeding bears a lesser onus than does the party who brings criminalproceedings for breach of an enactment.[38] I accept, however, that practical issues may arise where a claim is advancedunder the FTA alleging liability in respect of conduct relating to the Commerce Act1986. By way of example, it may in some cases be difficult for the Court to determinewhether the Commission would have decided the application for clearance differentlyif Spark had provided it with different information. In other cases, however, theposition may be straightforward. I do not consider this issue should result in a claimbeing struck out prior to trial.[39] Similarly, I acknowledge it is difficult to see how the Court could make anorder under s 43 of the FTA requiring Spark to transfer the management rights to BlueReach when that might itself be a transaction requiring clearance from theCommission. I am prepared to accept for present purposes, however, that the issue ofremedy would generally be determined at trial and not in a strike out application.24 Norbrook Laboratories Ltd v Bomac Laboratories Ltd, above n 17, at [214].[40] I therefore consider it remains theoretically possible for a plaintiff to bring aclaim under the FTA for misleading or deceptive conduct towards the Commissionbut, for the reasons already given, not where the claim is based on material thedefendant has provided to the Commission. In practical terms, however, the scope forsuch claims may be extremely limited.3. Does the claim amount to a collateral attack on the Commission's decisionto grant clearance to the proposed acquisition?[41] Mr Kennedy submits that Blue Reach's claim amounts to a collateral attack onthe Commission's clearance process and the clearance itself. He bases this argumenton the proposition that the claim will require the Court to examine the processundertaken by the Commission in considering Spark's application. In particular, theCourt will need to examine the material the Commission took into account in order todetermine whether it may have come to a different conclusion if Spark had notprovided it with information that was false or misleading.[42] The principles relating to abusive collateral challenge have their origin in therules of public policy based on fairness to litigants and the need to bring litigation toan end.25 Among other things they give rise to rules relating to estoppel and resjudicata that prevent a party to a final judgment challenging the decision in otherproceedings between the parties or their privies.26[43] I accept that Blue Reach's claim would require the Court to undertake theprocess that Mr Kennedy describes. Assuming Blue Reach can show that Sparkprovided the Commission with misleading or false information, it will also benecessary for Blue Reach to establish on the balance of probabilities that theCommission would have reached a different view if it had been given the correctinformation.[44] Although this creates other issues I do not consider it amounts to a collateralattack on the Commission's decision. Blue Reach does not contend the Commissionerreached the wrong decision based on the material Spark provided. Rather, the claim25 Lai v Chamberlains, above n 7, at [58].26 Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 (HL) at 909 and 946.focuses on what the Commission is likely to have done if Spark had not engaged inmisleading or deceptive conduct. For that reason I do not consider Blue Reach's claimamounts to a collateral challenge to the Commission's decision to grant clearance tothe transaction.[45] Mr Kennedy acknowledges that not all collateral challenges have been held tobe abuse of process. They have been successfully advanced in both criminal and civilproceedings where, for example, the validity of an administrative act or subordinatelegislation have been called into question.27 Mr Kennedy submits, however, that thecourts have been reluctant to permit a collateral challenge where there are other moreappropriate means of challenging an administrative decision. In the present case BlueReach had no right of appeal against the Commission's decision to give clearance butMr Kennedy submits it ought to have sought judicial review if it wished to challengethe decision.[46] I do not consider this to be an appropriate ground on which to strike theproceeding out. It would normally be considered following trial, when the Courtwould have the benefit of any explanation Blue Reach might advance for failing totake action earlier.[47] Mr Kennedy also submitted that the claim would undermine the commercialcertainty ss 66 and 69 of the Commerce Act were designed to achieve. Where theCommission has given clearance to an acquisition under s 66, s 69 provides thatnothing in s 47 of the Act applies to it. Section 47(1) prohibits any person fromacquiring assets or a business that would have, or would be likely to have, the effectof substantially lessening competition in a market.[48] I agree that this could be a side effect of permitting the claim to proceed. Theobjective of promoting commercial certainty once clearance has been given may wellbe one of the reasons why Parliament enacted s 106(9). It may also underlie the factthat the Commission has no power to subsequently revoke a clearance given under27 See the examples cited by Blanchard J in P F Sugrue Ltd v Attorney-General [2004] 1 NZLR 220(CA) at [47]-[48].s 66.28 Without more, however, I do not consider this argument to be sufficient to strikethe claim out.Result[49] The claim is struck out because it is based solely on material provided to theCommission that is subject to immunity from civil suit by s 106(9) of the CommerceAct.Costs[50] Spark is the successful party and is entitled to costs. My initial impression isthat costs should be calculated on a Category 2B basis. If either party takes a differentview and counsel cannot reach agreement, I will deal with costs on the basis of concisememoranda to be filed as soon as possible.Lang JSolicitors:Wigley and Company, AucklandMinter Ellison Rudd Watts, Auckland28 Compare Commerce Act, s 65D (revocation of clearance given under s 65A relating to cartels).